The Government's White Paper on private health insurance sets out an ambitious programme for change, including the transformation of the Voluntary Health Insurance Board to a commercial semi-State company and the retention of a revised system of community based ratings within the industry. A parallel goal is to rein in the rapidly increasing cost to the Exchequer of the public health service. The Minister for Health and Children, Mr Cowen, has set a tight, two-year schedule for the introduction of regulations on risk equalisation, the passage of complex legislation, the appointment of an independent regulator to the health insurance industry and the investment of £50 million in the VHI to ensure its solvency. After that, Mr Cowen spoke of privatising the VHI and offering a share option scheme to its employees.
The health services have been absorbing a growing proportion of State spending and there is no sign of a slow down. In the past two years, expenditure has risen by 30 per cent, according to the Minister, and he plans a capital investment of £525 million between now and 2001 in order to improve public health facilities. In that context, the Government's decision to retain the structure of over-lapping private and public health services - in spite of its perceived inequalities - may be understandable because of the inevitable disruption and cost involved in providing for a more level playing pitch. In his defence, Mr Cowen quoted a recent OECD survey which found that good quality health services are being provided here at relatively low cost to the taxpayer.
A decision to revise and expand the system of community based ratings, so as to guard against the "cherry picking" of younger, healthier customers and to ensure that all citizens can acquire cover, has drawn criticism from BUPA, the VHI's only competitor in the marketplace. But existing regulations on risk equalisation and community based ratings clearly have not worked. BUPA was "fined" £5 million last year when it exceeded a £6 million unfair competition threshold. The fact that BUPA made such profits on a client base of 110,000, at a time when the VHI insured more than ten times that number, was seen by the Government as likely to de-stabilise the market.
The Government will find widespread support for its defence of community rating. The viability of the health system is heavily reliant on the effective operation of solidarity between different generations, through which the young subsidise the healthcare costs of the elderly and are subsidised in turn by the following generation. In that regard, the introduction of premium loadings for people who buy health insurance at a later age merely shares the cost more equitably. The tiered system should encourage young people to take out insurance and, as a further incentive, the Government has undertaken to retain existing levels of tax relief. The cost of private medical insurance, now availed of by 42 per cent of the population, is unlikely to fall as a result of these proposals. The Minister has signalled he will move to charge the full cost of public hospital facilities to insurance companies over a five to seven year period. And the underlying pressure on health wages is expected to intensify. In seeking to introduce greater competition and efficiency within the private health sector, the Government has undertaken to protect the position of public patients and to ensure they will not be further disadvantaged. A maximum waiting period of one year has been set for their hospital treatment. It is a very long way from a level playing pitch.