The VHI, which has served the people of this State well for most of its existence, has been criticised increasingly in recent years as the old certainties of cover for medical expenses have dissolved. The annual wrangles between the board and its health service providers have become more confrontational and more difficult to resolve. The most recent financial returns of the VHI scheme have not been good. In the public mind, uncertainty and anxiety have, to a certain extent, replaced the security that a VHI subscription once signalled.
There is likely, therefore, to be a general welcome for the news that Britain's largest health insurance organisation, BUPA, is to enter the Irish market later this year, and already that welcome has been expressed by both the Minister for Health and the Irish Hospital Consultants' Association. But it would be a mistake for people to hold their breath in the expectation that BUPA's advent will do anything to decrease the anxieties and uncertainties in health insurance, or lessen the overall costs of medical care against which both BUPA and the VHI will offer varying degress of indemnity. The most likely change to arise from BUPA's arrival will be simply a greater diversity in the kind of health insurance packages available.
Health care costs are not determined by the efficiency or otherwise of health care insurers and, while a major insurer may be able to squeeze some reductions in the charges of health care providers, the actual cost of care is ultimately set by the level and complexity of the care provided. As the demand for high technology medical care rises, the cost of care goes up. The cost can be contained to a certain extent by the efficiency of the care providers, but this has not in the past been a striking feature of many Irish hospitals. And Ireland is not alone in this estimates world wide put medical inflation in recent years running at more than three times the rate of general inflation.
It is these inflationary tendencies which have sparked most of the uncertainties surrounding health insurance in Ireland and BUPA's arrival will not solve this. Those who may argue that BUPA's greater international scale and experience should lead it to be more cost effective than VHI may be surprised to learn that the VHI has been, and still is, one of the leanest of all health insurance organisations, with administration costs very much lower, as a percentage of turnover, than most of its international rivals - including BUPA. And while BUPA provides cover for 45 per cent of the private medical insurance market in the UK, VHI provides cover for more than 30 per cent of the whole population in this State - proportionately a very much larger share of the market, which includes many citizens who already have statutory entitlements to public hospital care.
It will be interesting to see how BUPA and the VHI eventually compete in Ireland. At least both are to be bound by the rules (now enshrined in relevant legislation here) of open enrolment and community rating which will prevent either from selecting subscribers on the basis of their likely profitability in terms of age or health. It could be a mistake to believe the competition will cause any significant change in either the costs or the structures of the Irish health care services, and those are the services which subscribers' payments will have to cover. People will still get, more or less, what they pay for.