The OECD has changed the context of the health spending debate, writesMaev-Ann Wren.
The pursuit of the black hole in Irish health spending has acquired a new emphasis following the Organisation for Economic Co-operation and Development's latest assessment of Irish spending.
Proponents of the black-hole theory assert that Irish health spending is now so high compared to the EU without achieving EU standards of care that there must be a hidden drain of Irish investment in health.
While there are undeniably serious question marks about how Ireland allocates public healthcare resources, not least about the persistence of a two-tier system of care in public hospitals, it now emerges that there is a strong case for identifying underinvestment as a key explanation for the failure of the Irish system to achieve EU standards.
Despite recent large increases, Ireland still does not spend as much per capita as the majority of other EU states on public healthcare, according to the OECD.
This revelation emerges from the latest annual update of the OECD health database, regarded as the definitive international comparison of health statistics.
The OECD has introduced a new standardised system of health accounts and now excludes a higher proportion of Irish health spending from its comparisons than it had hitherto.
The database formerly excluded around 10 per cent of Irish public health spending on the grounds that it was social spending, whereas this year it has excluded approximately a quarter of 2001 public health spending.
The excluded funding is allocated to programmes in areas such as care of the elderly, the disabled and children at risk, which other states do not fund from their healthcare budgets and which have received recent substantial increases.
The consequence of this revision is that Ireland now appears to have spent only 89 per cent of the EU per-capita average on health in 2001, contradicting the Government's assessment in its 2001 Health Strategy that Irish public spending per capita exceeded the EU average in that year.
With Irish per-capita public health spending having averaged only just over 70 per cent of the EU average over the last 20 years, it is evident there is considerable ground to make up.
This analysis reinforces the arguments in the national health strategy for increased investment in hospitals, primary care and health staffing, effectively ignored by this Government since its re-election.
The OECD's measure of Irish spending relative to other states also takes into account the relatively high Irish inflation rate, which means that increases in Irish health spending deliver fewer services than increases in other states.
Comparing spending in US dollars adjusted to take relative inflation into account (referred to as "purchasing power parity"), the OECD significantly reduces the value of recent Irish health spending increases, which by its reckoning averaged 8.6 per cent in real terms over the years 1997 to 2001 compared to an average increase in money terms of some twice that amount. And the Government can hardly quibble with the OECD's use of this measure since the 2001 Health Strategy also used it to compare Irish health spending with other states.
The OECD has yet to compare health spending last year. Since it takes so many variables into account, it is impossible to reach more than a tentative estimate of how it would compare Irish spending in 2002 and this year.
However, assuming that other states have continued to increase public health spending at their annual average rate since 1997 and that Irish spending should be adjusted downwards in the same proportion as in 2001 to reflect the exclusion of social programmes and the effect of Ireland's relatively high inflation rate, it would appear that Irish per-capita spending will still fall well short of the EU average in both years - remaining below 95 per cent.
Indeed, with the relatively low increase in core healthcare programmes this year, the lowest since 1996, it is probable that Irish health spending is a lower percentage of the EU average this year than last.
The OECD data contradicts a statement in the ESRI's recently published evaluation of the National Development Plan that Irish per-capita public spending on health was "on track to be the third-highest in the EU".
The ESRI was drawing on recent analysis by DKM Economic Consultants, published in the Irish Banking Review, which asserted that in 2003 only Denmark and Luxembourg would spend more per capita on the public health system than Ireland.
Even in the entirely unlikely event that spending in other states had remained static since 2001, the latest year for which OECD figures are available, and Ireland alone had increased public health spending, Ireland's ranking would be 7th this year.
In fact, given the probable increase in other states, Ireland's ranking is more likely to have remained at its 2001 level of 11th out of 15 states.
The availability of this OECD data to Irish analysts should make for a more thoughtful debate about how Ireland spends on health.
Arguments about value for money remain valid, but so, too, do arguments for investment in increased capacity and for the probable need to increase taxes to pay for them. The effect of inflation on the value of health spending points to one of the central reasons recent increases have failed to deliver value.
Since the Government simultaneously reduced taxes, investment in health took place in an overheated economy, with massive construction inflation and rapidly rising wage rates.
The OECD data also requires revision of a calculation in this author's recently published book, Unhealthy State, which although suggesting that the OECD should arguably exclude a greater proportion of Irish health spending from international comparisons, concluded, based on its earlier database, that total Irish health spending, both public and private, had increased to 9.6 per cent of national income last year, a comparable level to France.
If following the OECD's new formula, more spending on social programmes is excluded, it would appear that Ireland is now spending just over 8 per cent of national income on health, in line with the EU average.
Maev-Ann Wren is the author of the recently published Unhealthy State