It emerged at the weekend that the HSE is under severe pressure to curb its €82.6 million financial deficit recorded in the first two months of the year. Martin Wallreports.
THE HEALTH Service Executive (HSE) has blamed a higher-than-anticipated growth in the number of people receiving medical cards, unplanned increases in activity in hospitals and delays in introducing its controversial price reforms in the pharmacy sector for contributing to its €82.6 million financial deficit recorded in the first two months of the year.
In a financial report presented to its board last week, the HSE said it was facing significant service pressure at the end of the first quarter beyond that anticipated when its service plan for the year was prepared before last Christmas.
The key drivers were continued provision of services above target levels in the National Hospitals Office and growth in the community-based drug schemes, it stated.
The report said that by the end of February the deficit in its primary care reimbursement service, its spending on the various demand-led schemes including the medical card and the drug cost re-imbursement schemes had risen to €45 million.
It said this reflected both the financial cost of the delay in implementing the new pharmacy pricing arrangements, which were postponed from December to March, and an unexpected and significant increase in the number of people qualifying for medical cards over recent months.
The report described as a very worrying trend in cost terms the increase of 12,443 in the number of medical card-holders during January and February.
It said the delay in implementing the reduced margins for pharmaceutical wholesalers, the savings from which had been factored into its budget allocation from the Government for the year, would contribute €30 million to its deficit by the end of the first quarter.
The other principal contributors to the overrun within the primary care reimbursement service are variance against budget within the general medical service scheme and demand-led schemes such as the Drugs Payment Scheme (DPS) and the Long-Term Illness Scheme (LTI).
In keeping with the trends identified last month, the number of eligible persons on medical cards continued to grow. An additional 8,111 persons became eligible for a medical card in February which equates to a 0.6 per cent growth compared with January.
The number availing of LTI and DPS also increased during February. This trend is consistent with patterns of growth on the live register which saw an additional 8,500 people recorded as unemployed during February, it stated.
The report revealed that on the hospital side, the HSE had recorded a deficit of €27.7 million in the first two months of the year. The report blamed a growth in inpatient activity of 2.6 per cent and day-case admissions of 11 per cent above the HSE's target levels for contributing to the cost overrun.
The growth in day-case activity ahead of target is evident in all hospital groups. These activity levels would be managed in line with targets to year-end, it said.
Given the political row last winter over the HSE's unauthorised €240 million-plus deficit last year and the consequent pressure placed on it by the Department of Health and the Department of Finance, it was always likely that corrective action would be taken after the first-quarter.
The Irish Times revealed at the weekend that the HSE has drawn up a series of highly controversial policy options for the Department of Health in an effort to claw back on the financial overrun which it has estimated could, if unchecked, reach €300 million by the end of the year.
The proposals include hospital bed closures, the curtailment of A&E services and new restrictions on the issuing of medical cards and drug-cost reimbursements.
One option put forward by the executive is ceasing to issue new medical cards or reimburse patients for the cost of medicines under various community drugs schemes once the official budget is exhausted.
Another is diverting €185 million earmarked this year for the development of services for the disabled, older people and in palliative care.
Alternatively, the executive has suggested there could be significant reductions in expenditure across the entire community health sector in a bid to deal with the deficits recorded on the demand-led schemes.
On the hospital side, the executive has proposed that beds and theatres could be closed over the summer months, although in some locations these closures could be for longer periods.
However, no final decisions have been taken on the measures to be taken to bring the budget back into line with the HSE's official allocation.
Privately the HSE believes its financial problems stem from underfunding in its Exchequer allocation this year as well as the continuing surge in expenditure in both the community and hospital sectors.
For several months the HSE has been signalling in internal correspondence with the Department of Health that its official budget was up to €450 million less than it needed to maintain service levels this year.
However, the Government has insisted that no additional funding is available and that the HSE has to manage within its resources.
A significant backdrop to this situation is the considerable annoyance at the highest Government level at the overspending recorded last year by the HSE.
Last winter both the Department of Finance and the Department of Health strongly criticised the HSE over the €244 million financial deficit run up last year. This resulted in the health authority having to be bailed out by the Government through the use of funding originally allocated for the nursing home repayment scheme.
Minister for Health Mary Harney warned the HSE in a letter to the board in December that such a scenario could not be repeated and that it was an "absolute necessity" for the HSE to operate within its budget.
The HSE has already taken steps to reduce expenditure. Controversial recruitment restrictions introduced over recent months have seen more than 2,000 people being removed from the payroll, leaving the health service for the first time in years now employing fewer personnel than officially permitted under its official staff ceiling.
However, with expenditure on the various demand-led community drug schemes and activity levels in hospitals powering ahead beyond targets, it now seems inevitable that further deep cuts will be required to balance the books this year, unpalatable or even extreme as the measures proposed may seem to politicians and trade unionists.
The only alternative is to seek to secure additional funding from the Exchequer. It is possible that the warning in the financial report that the current overruns were due in part to unexpected external economic pressures with more people made unemployed and therefore becoming eligible for medical cards, rather than due to poor management, may be the beginning of such a strategy.