New controls to curb health spending prepared by Government

Post-budget measures aim to avoid another huge overspend in the sector next year

An image of the Coombe hospital in Dublin from Google Street View.

An image of the Coombe hospital in Dublin from Google Street View.

 

The Government is preparing new controls on health spending which will be unveiled in the coming weeks in a bid to avoid another huge overspend next year.

In response to questions from The Irish Times, Minister for Finance Paschal Donohoe said he intended to introduce “a new structure in relation to investment in health service for next year”.

“We are going to do it because we cannot normalise the level of supplementary that has happened this year,” he said.

Senior figures have been spooked by spiralling costs in the health sector, which will overshoot its allocation by €700 million this year, and officials in the Department of Public Expenditure are preparing new controls to impose on the HSE which will prevent overspending from developing early in the year.

According to the Department, the measures will include a new Budget Oversight Group which will include officials from that Department, the Department of Health and the HSE. It says the new body will “monitor and control health spend and staffing within the budget allocation and develop an early warning mechanism for any deviations”.

The HSE will also be required to produce a “pay and numbers strategy” by the end of December this year, which will set out the number of new staff it will hire as well as the total number of staff working in each area, along with their pay rates, overtime and allowances.

The HSE will also be told it must fulfil its statutory requirements to estimate its total number of employees and their roles, and also the type and volume of services it will provide for the budget allocated to it.

The Government’s priority is to avoid the need for another huge jump in health funding this time next year. Senior sources say that if this should occur, it would require increases in income tax to meet the costs. However, they acknowledge that the alternative may be restrictions on services and recruitment in the health sector next year, if similar patterns of overspending to this year become apparent in the first quarter of next year.

Senior figures in the Department of Health point out that a new board for the HSE will shortly be in position as well as the new executive chairman Ciarán Devane. The HSE is also currently recruiting a director general to succeed Tony O’Brien, who retired at the start of the summer.

A report on the management of health budgets published with the budget on Tuesday highlighted both the steeply escalating level of health expenditure in recent years and the failure of management to control the rising costs.

The report points out that health spending per capita in Ireland is now greater than ever before, having tripled since 1996. Expenditure has risen by almost 20 per cent between 2014-18, the report finds. The budget means that increase will continue next year, with an allocation of over €17 billion – the highest in the history of the state – for health.

Expenditure increases have been driven by the recruitment of new staff, new drugs and escalating drug costs and by claims for compensation against the HSE.

Expenditure on managing claims by the State Claims Agency has “increased substantially over the last four years, rising from €109 million in 2014 to an estimated €354 million in 2018,” the report says. It notes that this an increase of €254 million, or 233 per cent.

The report details a chronic lack of planning and controls in managing health expenditure. The “pay and numbers strategy” which was supposed to be supplied at the beginning of each year, was actually only provided in November 2017, and again in August 2018. “These timelines result in the Strategy having no impact on the planning and monitoring process,” it said.

It said that if legislative requirements were met by the HSE – in other words, if it complied with the law – it would help control costs.