Health Insurance (Amendment) Bill, 2000: Second Stage.

Tuesday, 12 June 2001

Seanad Eireann Debate
Vol. 167 No. 1

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Question proposed: “That the Bill be now read a Second Time.”

Minister for Health and Children (Mr. Martin): Information on Micheál Martin  Zoom on Micheál Martin  The primary purpose of this Bill is to amend and extend the Health Insurance Act, 1994, which provides the legislative basis for the regulation of the voluntary private health insurance market. It also makes certain provision, consistent with the existing VHI Acts, with respect to the powers of the Voluntary Health Insurance Board.

My Department is currently engaged in the preparation of a new health strategy which will be published later this year. Notwithstanding the renewed focus which the strategy will bring to public health services, at present private health insurance plays an important role in the provision of hospital services for a large proportion of our population. The purpose of this Bill is to provide a framework which maintains the established common good principles of our system and supports the further development of a competitive private health insurance market. The Bill implements improvements and innovations in the general regulatory framework outlined in the White Paper on Private Health Insurance published by the Government in September 1999. It has been framed so as to provide enhanced scope for competition in the market while at the same time strengthening the basis on which solidarity between generations operates through community rating. It is my belief that the provisions of the Bill we are now considering will facilitate achievement of these two goals which, it has to be acknowledged, are not easily reconciled.

While our private health insurance system was originally established to provide cover for a por[41] tion of the population then without an entitlement to hospital services, it must be remembered that private health insurance here is availed of on a voluntary basis. The voluntary private health insurance system here has developed and thrived on the basis of community rating, open enrolment and lifetime cover, which provide extensive safeguards for individuals in the operation of health insurance. An estimated 45% of the population currently have private health insurance cover. By contrast, the risk-rated and generally unregulated system in the United Kingdom has been relatively static with only about 12% of the population currently covered.

The health insurance market was opened to competition through the Health Insurance Act, 1994, which was enacted in the interests of the common good. The Act provided significant safeguards for insured persons in the context of the opening of our health insurance market to competition in accordance with our European Union obligations for the completion of the Single Market. The 1994 Act requires health insurance undertakings to operate in accordance with community rating, open enrolment and lifetime cover. It also provides for minimum benefit for risk equalisation.

The Act provided for the registration of insurance undertakings which either made cover available to the public or on a basis restricted to a particular vocational or occupational group, referred to as “restricted membership undertakings”. It also provided for the establishment of an independent regulatory body, the Health Insurance Authority, which I established on 1 February this year. The programme for Government specifically referred to the health insurance framework and led to the preparation of the first ever policy statement on private health insurance, the White Paper on Private Health Insurance, published in September 1999.

The White Paper described how the private health insurance system played a complementary role to the arrangements for the provision of health services to the public generally. In that context, it referred to advantages resulting from the mix of public-private practice established in the hospital system. Notwithstanding this, as stated in the White Paper, the Government's primary concern is to ensure equitable access to health services. This imperative is central to considerations in the preparation of the forthcoming health strategy and will be the primary determinant in all policies and actions arising from its implementation going forward.

I now turn to the principal provisions contained in the Bill. A key change provided for in the Bill relates to the definition of a health insurance contract. The principal changes from the existing definition are clarifications of the insurance cover comprehended by the definition, including employer arrangements and the removal from its scope of insurance plans which are solely con[42] cerned with services such as dental and optician services which have not featured to a significant extent in insurers' products.

There is provision to support the financial stability of community rating by allowing insurers discretion to apply late entry premium loadings in specified circumstances where cover is being availed of for the first time at an older age or where there has been a significant break in cover. This is known as a “lifetime community rating”. As a corollary to this measure, open enrolment provisions of the 1994 Act, which provide individuals with an entitlement to purchase health insurance, will be extended to persons of, or over, the age of 65 years.

The Bill includes revised arrangements in relation to risk equalisation, aimed at facilitating competition while providing a necessary safeguard for community rating against the threat of instability which would arise from the development of risk selection in the market. Under the proposed arrangements, the Health Insurance Authority will be given a significant role in relation to the commencement of risk equalisation and the level of transfer which would arise following any commencement. A special measure in the area of risk equalisation, aimed at supporting entry to the market, will give insurers coming in an option not to participate in risk equalisation arrangements for a period immediately following the commencement of health insurance business in this country.

A number of sections provide for the making of regulations by the Minister in relation to the detailed arrangements for implementation of the provisions concerned. The Bill provides that such regulations, other than a limited number of primarily routine measures, shall be submitted to the Oireachtas in draft form and will require approval by each House before they can be made. Regulations subject to this process will include those relating to risk equalisation. The Bill, therefore, provides for the Houses of the Oireachtas to have further, more detailed oversight of the measures to be taken in the regulation of the private health insurance market.

Section 1 is a standard provision which defines the principal Act as being the Health Insurance Act, 1994. Section 2 substitutes the key definition of “health insurance contract” contained in section 2(1) of the principal Act. The amended definition provides that the focus of the legislation shall be on health insurance contracts which have, to any extent, the purpose of providing indemnity against the cost of hospital in-patient, day-patient services and relevant health services which are defined in section 3.

To reflect the actual market situation and basic differences required in product financing and structure, the definition provides that the term ‘health insurance contract' does not apply to arrangements which provide cover against the cost of long-term nursing care. Similarly, certain [43] contracts currently offered in respect of health episodes, which provide cash benefits rather than indemnity cover, are exempted from the definition. There is also an exemption in respect of international health insurance plans written in this country where the vast majority of the persons being covered under each policy are residing in other countries.

Section 3 provides for a number of limited changes to definitions contained in the principal Act. These are mainly of a technical nature. There is, however, a new definition of ‘day patient service' which takes account of the large extent of procedures which are performed in hospitals on a daily basis and in respect of which health insurers pay benefits. The section also contains a definition of ‘relevant health services' which provides that out-patient services, general medical practitioner services and services consisting of the supply of drugs or medical preparations are comprehended by the definition of a health insurance contract.

If self-insurance on the part of employers was to develop, it would have the effect of damaging community rating by removing a predominantly young and healthy population from the general risk pool. This would threaten the solidarity between generations which underpins community rating. In this connection section 4 inserts a new provision which elaborates the type of arrangements which are deemed to constitute health insurance contracts. It provides that an employer who pays, or undertakes to pay, the fees or charges incurred by employees in respect of hospital in-patient services will be defined as a provider of health insurance and will be subject to the legislation. Self-insurance by large employers is a significant feature of arrangements in the United States.

Recognising the existence of a limited number of long-standing public service employment-related arrangements, an exemption to this provision will apply in the case of specific arrangements entered into by a Minister of the Government. Such established arrangements relate, for example, to some Defence Forces personnel. The effect of the exemption will be to enable these arrangements to continue as before outside the ambit of the health insurance legislation. A further exemption is provided for in respect of ‘excess' amounts, which are part of contracts currently offered in the market, where employers may meet such excesses incurred by their employees in connection with an episode of care or treatment. This amount is being limited to £100. It would not be my intention to facilitate any significant expansion of this exemption going forward as it could have the potential to impact negatively on the solidarity between generations which underpins community rating.

Section 5 substitutes section 7 of the 1994 Act which provides for the community rating of [44] health insurance premiums. It maintains all the essentials of community rating provided for under the 1994 Act. In addition to maintaining the existing protections for consumers in relation to the setting of premiums on a community-rated basis, it prohibits the varying on the grounds of age, sex or sexual orientation of amounts payable by insurers in respect of the treatment and care of insured persons. The consumers' interests are thereby safeguarded both at the premium and benefits end of the insurance transaction. The section retains the provision requiring insurers to operate significantly reduced premium costs in respect of children. It provides for the scope of discretion by insurers to reduce premiums for dependent persons who are receiving full-time education to be increased from under the age of 21 to under the age of 23.

Section 6 inserts a new section which supports community rating by giving an incentive for individuals to take out health insurance at a young age and by ensuring that those who join late also contribute appropriately to community rating. It does so in the context of strengthening and making more robust the system of community rating. I believe this is a fairer system of community rating than the current one because it will reward those who take out private health insurance when young, it will provide for an appropriate contribution by those who enter health insurance later in life when the prospect of claiming benefits is higher and it is consistent with the general principle of community rating because a 70 year old person who originally joined the system at age 25 will pay the same premium as a new entrant aged 25. Under the section, insurers will have the power to apply late entry premium loadings only in the circumstances specified and subject to arrangements which the Minister will provide for in regulations. This form of premium regime is known as ‘lifetime community rating'. Persons already insured will not be liable to late entry loadings when renewing their cover.

Subsection (1), on foot of actuarial advice, clarifies that the measure applies to those aged 35 and over. The actuarial advice which I received is that people who join the system before their mid-30s already make a significant contribution to the solidarity of the system.

Subsection (4) provides that the circumstances in which a premium loading may be applied include the case where a person was not previously insured by a registered undertaking, had a lapse in cover of greater than 12 months duration or was availing of a higher level of cover. Another circumstance set out in the subsection relates to members of restricted membership undertakings who decide to remain outside the wider community-rated pool by choosing not to participate in risk equalisation arrangements.

Subsection (6) provides that the amount of the premium loading shall be determined in accordance with the regulations. In framing and [45] implementing these regulations, careful regard will be had to ensuring that the maximum permitted loadings are appropriate and do not represent an unfair burden on late entrants. Subsection (7) provides that the regulations may specify different methods or percentages in determining premium loadings, depending on the circumstances set out in subsection (4). It also provides that credit be given for previous periods of community-rated insurance cover held.

Section 7 arises from section 6 of the Bill. Given the intention to enable insurers to apply late entry loadings, the section provides for the disclosure of information relevant to the operation of such loadings between insurers. The information concerned will relate to the extent and duration of an individual's insurance cover and can only be sought for the purpose of operating late entry premium loadings. The provision of information will not extend to claims or medical records. The section provides for the Minister to prescribe the arrangements for such disclosure between insurers.

Section 8 substitutes section 8 of the 1994 Act which concerns access to health insurance cover on an open enrolment basis. A significant change is provided for in relation to facilitating the provision of cover to persons aged 65 and over who had not previously taken out community-rated insurance. Heretofore, insurers were not obliged to sell cover to persons aged 65 and over who were not already enrolled with another insurer. The section maintains the original provisions relating to the capacity of insurers to impose waiting periods, the operation of which is subject to regulations made by the Minister.

Subsection (3) provides for the Minister to prescribe waiting periods for eligibility for cover under a health insurance contract. Open enrolment regulations were made pursuant to the 1994 Act, and these prescribe maximum permitted waiting periods for payment of benefits in certain circumstances, including where a person joins for the first time and where a person has a pre-existing medical condition. Subsection (5) maintains the existing statutory arrangements which protect individuals from having to re-serve waiting periods on changing insurers, where no significant lapse in cover has occurred.

Subsection (6) provides that the protection for individuals against re-serving waiting periods on transferring between insurers shall not apply in the case of members of restricted membership undertakings which have decided not to participate in risk equalisation. An exception to this measure will apply where the person transferring is under 23 years of age. This will safeguard the position of dependants of members of such restricted membership undertakings, who, under their rules, can no longer be covered on attaining a certain age.

Section 9 substitutes section 12 of the 1994 Act which provides for risk equalisation arrangements [46] between insurers. The main changes from the provisions made under the 1994 Act are as follows; restricted membership undertakings to have an option in regard to participation in risk equalisation; the Health Insurance Authority to have a key role in determining the timing of the commencement of risk equalisation in the overall best interests of consumers; arrangements for the making of representations to the authority or the Minister in relation to the commencement of risk equalisation; and new entrants to the market to have the option of availing of a three year exemption from risk equalisation transfers between insurance undertakings.

Subsection (1) provides for the Minister to prescribe a scheme of risk equalisation, which will set out the details relating to the conditions for its commencement and the terms of its operation. Subsection (2) addresses the undertakings to which any risk equalisation scheme will apply. It also provides for the established restricted membership undertakings to exercise a “once off” choice to be permanently excluded from risk equalisation.

Subsection (3) maintains original provisions relating to arrangements for the making of statutory returns by insurers to the authority. It is the data contained in these returns which will be among the elements central to consideration of the commencement of risk equalisation, on the basis of which the magnitude of any transfers will be determined.

Subsection (4) provides for arrangements relating to the making of payments to the authority by insurance undertakings and the making of payments by the authority to undertakings, by reference to matters to be specified in the scheme. It also provides that the Minister shall determine the day when such arrangements are to have effect. In this regard, the scheme shall require the authority to evaluate and analyse the returns made to it, prepare and furnish reports to the Minister and recommend, where conditions specified in the scheme are fulfilled, whether the Minister ought, or ought not, exercise the power to determine that risk equalisation payments should commence.

The subsection will enable the statutory scheme to provide that, up to a certain specified level of material instability in the risk profiles of insurers, the Minister may only authorise the commencement of risk equalisation transfers between insurers on foot of a recommendation to that effect from the authority. Beyond the specified level, the Minister shall authorise such commencement unless there are good reasons for not doing so. The subsection provides that the authority and the Minister are obliged to have regard to the best overall interests of health insurance consumers in the exercise of their respective duties.

Under subsection (5) the authority, in making a recommendation on whether or not risk equal[47] isation ought to be commenced, shall inform each undertaking of its proposed recommendation. Each undertaking will be entitled to make representations concerning the recommendation, and the authority must take account of such representations before deciding the recommendation to be included in its report to the Minister under the scheme.

Under subsection (6) a scheme shall require the Minister to inform registered undertakings of a proposed determination to commence risk equalisation arrangements. Undertakings will be entitled to make representations in relation to why such a determination ought not be made by the Minister and he/she shall take such representations into account before finally deciding whether to make the determination which would commence the process of risk equalisation payments between insurers.

Subsection (7) requires registered undertakings, when requested, to provide information or details to the authority relating to returns they have made. It also provides that the Minister is entitled to specify the form of, and particulars to be included in, reports being made by the authority concerning its periodic evaluation and analysis of returns from insurers.

Subsection (8) provides that registered undertakings which have made representations, to the authority or the Minister, relating to commencement of risk equalisation shall, when requested, provide information or documentation in support of their representations within a specified time. Subsection (9) maintains the provision relating to the establishment and maintenance of a risk equalisation fund into which insurers would make payments to the authority and from which the authority would make payments to insurers. It also maintains provisions concerning the keeping of accounts relating to this fund by the authority.

Subsection (10) defines a health insurance consumer and insured risks as referred to in the section. It specifies that the best overall interests of consumers includes the need to maintain the application of community rating across the market, as opposed to within the risk pool of individual insurers. It provides that conditions to be set out under a scheme requiring the authority to make a recommendation in relation to commencement of risk equalisation can differ from conditions under which the Minister shall commence risk equalisation. It also provides that these conditions can be expressed by reference to the amounts which would arise for payment, in accordance with the terms of a scheme, on account of the nature and distribution of insured risks among the undertakings. The effect of this subsection is to allow for a scheme to specify different trigger points based on the level of market instability evident from the differing risk profiles of competing insurers, as derived from the [48] analysis of their respective returns to the authority.

The capacity to set different triggers will enable a scheme to contain a significant degree of discretion within which the commencement of risk equalisation can only occur on foot of a recommendation to that effect from the authority. In the absence of any recommendation from the authority to commence risk equalisation, the development of a higher level of instability will require the Minister to authorise the commencement of risk equalisation unless it appears to him or her that good reasons exist for not doing so.

Section 9 also inserts a new section 12A in the 1994 Act. This new section enables the authority to disclose aggregate information derived from statutory returns made to it by insurers, but provides that such data related to individual insurers may be disclosed only where necessary for the functions of the authority or the Minister.

I wish to address briefly the need for risk equalisation in a health insurance system such as that which operates in this country and the arrangements envisaged. Our private health insurance system operates under the widely accepted principles of community rating, open enrolment and lifetime cover. Generally, this means that insurers must accept all comers, irrespective of their age or health status, and charge them a standard premium for a given level of cover. The system is built on the trust and confidence of consumers in the effective operation of community rating going forward. This is manifested in their willingness to pay into community rating when younger and healthier on the basis that when they are older and ill they will be supported by the same cross-community solidarity on the part of all subscribers.

Under this system, there is a serious danger that the market could be destabilised if significant variations emerge in risk profiles of competing insurers. For example, if some insurers, by accident of design, end up with a younger/healthier population they will be able to charge a lower premium or take a higher profit. The other side of the coin is that premiums will rise inevitably for those consumers who happen to be with an insurer which covers a higher proportion of less healthy individuals.

Risk equalisation is the mechanism which will counteract the very real potential for destabilisation to occur in a competitive insurance system operating to the principles of community rating and open enrolment. Risk equalisation simply aims to equalise differences in health insurers costs that arise due to significant variations in their risk profiles. The need for risk equalisation in a private health insurance system such as ours is supported by a wide range of national and international expert opinion and experience.

The purpose of section 9 of the Bill is to enable implementation of significant changes in the arrangements for risk equalisation as originally [49] envisaged under the 1994 Act with a view to addressing concerns about its commencement and impact. The characteristics of the arrangements relating to the commencement of risk equalisation will involve major discretion on the part of the independent Health Insurance Authority. Risk equalisation will commence only where material distortion has emerged in the risk profiles of insurers. The authority is required to be satisfied to recommend commencement of risk equalisation in the best interests of health insurance consumers and it must facilitate competition. There will be no recourse to an unnecessary commencement of risk equalisation. Furthermore, there is no question of full equalisation of claims experience as the authority will have significant scope in determining the basis for the calculation of any transfers under a scheme and insurers will retain their own unit claims cost efficiency.

Under successive Ministers, my Department has liaised with the relevant EU Commission services regarding plans to regulate private health insurance. The Department widely publicised and explained its plans to regulate and protect community rating in the competitive market. Whether health systems are voluntary or compulsory, the incentives for and consequences of risk selection are significant and need to be addressed. This may be represented as an imagined rather than a real threat. Risk selection in the absence of effective risk equalisation has contributed to instability in other systems, most recently in the case of a German insurer.

Arguments about the inequity of one insurer paying funds to another are not valid as payments under risk equalisation constitute transfers from young and healthy to the old and unhealthy who are part of the same community of risk under our system. Such payments represent a redistribution of excess profits arising from better risks and they support the normal operation of community rating. The sole purpose of risk equalisation transfers is the maintenance of effective community rating across the insured population as a whole.

Section 10 allows insurers entering the market to avail of an exemption from risk equalisation, lasting three years from the date of the commencement of health insurance business. The entry of additional insurers to the market has the potential to yield benefits to consumers in terms of competition, insured benefits available and price. To achieve such enhanced competition, it is necessary to give practical recognition to the fact that a new entrant to the health insurance sector faces initial marketing, development and operational costs if it is to compete with the two major insurers and establish itself with a reasonable prospect of sustainability.

Section 11 obliges the Health Insurance Authority to make specific annual reports in the event of risk equalisation being commenced. The envisaged reports would evaluate the operation of the [50] risk equalisation scheme with respect to its effects on the interests of health insurance consumers. The section provides that reports are to be laid before the Oireachtas. The authority is required under the principal Act to produce annual reports in relation to its activities.

Section 12 requires the Minister and the Health Insurance Authority to treat health insurance undertakings equally in similar circumstances. The section is formulated to ensure the Minister or authority may discharge their respective responsibilities to deal with differences between the circumstances of undertakings which require different treatment under the Act.

Section 13 deals with a number of miscellaneous consequential amendments. It also provides that the Minister, before making regulations, must present them in draft form to the Oireachtas to obtain the approval of each House. Pending the introduction of legislation changing the status of VHI, section 14 will allow VHI to engage in new areas of business as a principal or agent. Given VHI's current status, it is appropriate that new schemes should be subject to ministerial approval and to regulatory or other conditions as the Minister deems appropriate.

The Government is committed to changing the corporate status of VHI to that of a State-owned limited company, as set out in the White Paper. Preparatory work in that regard includes obtaining corporate finance and legal advice, which is currently in hand.

Section 15 is a standard provision which gives the short title and collective citation and provides for the commencement date or dates to be appointed by ministerial order as considered appropriate.

As I noted at the outset, reconciling the protection of common good elements of the voluntary private health insurance system with giving full rein to the forces of competition is a challenge. I am satisfied the provisions in this Bill represent a balanced, transparent and fair approach towards achieving that objective. I thank the House for its tolerance of a lengthy and comprehensive account of this complex Bill. I felt it was important to make a thorough statement on this Stage and I commend the Bill to the House.

Mr. Caffrey: Information on Ernie Caffrey  Zoom on Ernie Caffrey  I welcome the Minister to the House. This is an extremely important and complex Bill, as has been said. It proposes key amendments to the Health Insurance Act, 1994, which is obviously a timely move. The changes, however, should be put in the context of our health service and the Government's lack of a major coherent strategy. It is disappointing that the Bill fails to tackle a large number of issues which, if addressed, would contribute to a fair and equitable health service.

Our health system is a two-tier one as those who can afford to pay for the services they need are at the top of waiting lists, while those less for[51] tunate suffer. Despite huge investment in the past few years, the health service contains many injustices and inequalities. My party has put forward its major health policies through Deputy Gay Mitchell. The basis of the policy is the introduction of health insurance for everyone. Senators are aware of the necessity of health insurance and we advocate that rich and poor should have it. Unfortunately, treatment is made available to those who pay for the appropriate medical personnel. Despite the roar of the Celtic tiger, those in pain may have to wait for years to receive hospital care, a situation which should not continue.

We could look at many different national health systems. In the United States there is an expensive system of voluntary contributions which is out of the reach of many sections of the population. The Minister's speech referred to company health services, but those who cannot avail of such services are isolated. The British NHS is funded from taxation. Compulsory social insurance is common in most EU countries. France is a notable example of this and patients there must be seen within 15 days. If one applies for planning permission for a house, a decision is given within two months, but one may have to wait for two years for an major operation in our health service.

I did not agree with the introduction of medical cards for everyone over 70, as it highlighted massive inequality within the system. Those who retire with the fruits of huge incomes will qualify for a medical card, while a married couple earning £145 per week are not similarly qualified. Such contradictions must be addressed.

Two contentious issues central to this Bill are community rating and risk equalisation. The first of these ensures that affordable health care is available to people throughout their lifetimes and that age or previous ill-health will not dictate that more money should be paid for health insurance. Risk equalisation sustains community rating by protecting the stability of the market and by discouraging insurers from cherry-picking young and healthy people. Without risk equalisation the whole community rating system would be liable to collapse and many people would be unable to afford health insurance when they got older.

There is much concern among elderly people that they will not be able to afford insurance if there were no risk equalisation. If insurers could cherry-pick the market it would be to the detriment of the entire community. Risk equalisation is not an Irish phenomenon. It operates successfully in Australia where over 40 companies compete in a community rated market.

At a time of unprecedented economic growth and development when the Government is dealing with massive budget surpluses, people find it difficult to comprehend that we do not have an effective health service. The 1999 White Paper on [52] Private Health Insurance set out the reasons risk equalisation is required in a community rated private health insurance market. At that time the Government's view, set out in the White Paper and supported by a wide range of independent experts and interests, was that risk equalisation was essential to underpin and protect the stability of community rating. That cannot be over-emphasised. The White Paper also indicated that to further encourage competition it was proposed that an insurer entering the health insurance market would be given the choice of availing of a temporary exemption from participation in the proposed risk equalisation schemes for a maximum period of 18 months from the commencement of trading. The stated reason for this proposed exemption was the recognition of the value in terms of enhanced competition which new entrants are in a position to bring to customers and an acknowledgement of the start-up costs of new insurers and the administrative and information systems required and placed at risk by risk equalisation on a new insurer.

The first risk equalisation scheme introduced by the Minister for Health and Children was revoked by him before the White Paper was published and did not provide for any opt-out period. The VHI disputes that a lead-in period of 18 months is necessary for new entrants to the market. Furthermore, it highlights the danger of allowing a longer lead-in period. The VHI submits that there are many ways in which new entrants to the market can gain a competitive advantage other than non-participation in risk equalisation. The VHI has offered its assistance to the Department in relation to other structured ways of encouraging new entrants to enter the market.

Many potential sources of competitive advantage are completely and essentially unaffected by risk equalisation. These include distribution, customer responsiveness, product innovation, purchasing efficiency and administrative efficiency. It was also the VHI's view that one of the reasons there have been no new entrants to the health insurance market in recent years is the uncertainty which has surrounded the implementation of risk equalisation and that until recently the VHI operated on a break-even basis only rather than because it was proposed that risk equalisation would be introduced.

I note that much of the responsibility on decisions on risk equalisation rests with the Minister. I am not sure that this is a good idea. I acknowledge the work done by BUPA since it entered the market. It introduced badly needed competition. The VHI has increased the number of people using private health insurance from 46% to 47% of the population. It is good for consumers to have an alternative which can match the products already on offer from the VHI.

Although I am a member of the VHI, I have considerable knowledge of BUPA. My son [53] worked for BUPA for a year or two in Cork and I was familiar with the goings on in that company for a while. Its product was similar to what the VHI had on offer and the Government was determined that there would be a package of comprehensive benefits available. BUPA helped to increase the market dramatically by offering a package of comprehensive minimum benefits. Its essential contribution to the health service was that it created competition in a market which was fairly limited prior to its entry to it.

This is a comprehensive and complex Bill. If I have a reservation it is that the Minister's decision-making powers will be too much to the fore when this legislation becomes operative. It is not good that the discretion of the Minister will be involved at every twist and turn of the operation of this legislation, which is the message coming across in at least part of this Bill. While appreciating the necessity for it, there are major issues that have to be tackled in the health care area. As a Senator from the west, I know that people are dissatisfied with the service that is available. They view the situation in the context of current Exchequer surpluses and the fact that these are not being translated into an effective health service for all our people. This is not strictly relevant to the Bill under discussion, but is uppermost in the minds of most people.

With the reservations I have stated, I welcome the broad thrust of the Bill. It can do nothing but improve the situation in the future.

Mr. Glynn: Information on Camillus Glynn  Zoom on Camillus Glynn  I welcome this Bill because private medicine and private health care, while much is said nowadays about them, play a pivotal role in the delivery of a good health service. About 45% of the population avails of private health insurance which historically has centred on the provision of cover for hospital in-patient services.

The VHI was established in 1957 to provide cover for a proportion, then about 15%, of the population who had no entitlement to public health hospital services. It now provides cover for nearly 40% of the population or 1.5 million. Under the 1957 Act, the Minister had the power to license other insurers to operate in the market. Consequently the VHI operated as a statutory monopoly prior to the introduction of the Health Insurance Act, 1994.

Notwithstanding the licensing of a number of relatively small restricted membership undertakings vis-à-vis the Garda, prison officers and the ESB, the VHI has, since 1997, been engaged in competition with BUPA Ireland, a branch of Britain's health insurer, the British United Provident Association. BUPA Ireland is understood to cover in excess of 200,000 persons under the schemes it offers. The Health Insurance Act, 1994, enacted in the interests of the common good, provides for significant safeguards for insured persons in the context of the opening of the health insurance market to competition in [54] accordance with EU obligations under the Single Market.

The health insurance regulatory framework comprises the Health Insurance Act, 1994, and the Health Insurance Regulations, 1996. The White Paper on Health Insurance, published in September 1999, proposed significant changes to this framework aimed at enhancing competition in the market while fully preserving the common good aspects of the framework. It sets out fundamental policy objectives regarding the role of private health insurance in the overall health care system, the regulation of the private health insurance market and the corporate structure and status of the VHI board. This Bill, published in June 2000, will amend and extend the 1994 Act in addressing the regulatory issues dealt with in the White Paper. It is intended to deal with the VHI's future corporate status, which will be brought forward following full consideration of the market.

My good friend and colleague, Senator Caffrey, does not agree with the introduction of medical cards for those over the age of 70 years. It is important that those who have built this State and society should be recognised. It is also important to recognise that health care is more important and pertinent to people in that age group. It is axiomatic that they should be the beneficiaries under the general medical services scheme.

I also disagree with Senator Caffrey's views on cover for families on middle incomes. Medical cards are provided on the basis of income. As a member of a health board for over 20 years I can testify that in almost all cases where it can be proven there is financial hardship the appeals officers will take due cognisance and approve the provision of a medical card. A personal card can also be awarded to individuals within the family.

With regard to the regulatory framework, the 1994 Act enshrines the principle of community rating whereby the same premium is charged for a specified level of cover regardless of age, gender, sexual orientation or the recurrent or prospective health status of the insured person. Open enrolment requires health insurers to accept all individuals under the age of 65 years who wish to enrol in any health insurance scheme and insurers cannot refuse to renew a contract for any member, except in certain prescribed circumstances. Under the Act, insurers offering cover for hospital in-patient services are required to provide a minimum level of cover across a range of services, including general hospitals, out-patient and maternity benefits, convalescence, psychiatric treatment, substance abuse and day care.

Under the 1994 Act all insurers offering health insurance to the public must be prepared to participate in a risk equalisation scheme. This is an essential feature of a competitive market which operates under the principles of community rating and open enrolment. Risk equalisation provides for the equitable distribution of risk [55] between insurers. That is very important. It is a corner stone of any good private health insurance.

The arrangements for risk equalisation allow each insurer to retain its own efficiencies in terms of claims, management, cost containment and so on. In a market where open enrolment operates and where premiums are community rated, insurers who are successful at gaining young lives, or who engage in cherry picking, can charge a lower community rate or keep a higher profit margin, which is what private business is all about. Younger lives would transfer to the insurer offering the lower community rate, eventually forcing the established insurer out of business. The cycle could be repeated. That would not be healthy and such developments would cause significant instability in the health insurance market.

Revised risk equalisation arrangements will be introduced by regulation following the enactment of this Bill. Under the Bill the Health Insurance Authority will be given significant discretion in advising the Minister when risk equalisation transfers should commence. The exercise of this discretion will arise within a range of criteria to be specified in regulations and will give the authority a pivotal role in determining whether or not risk equalisation transfers are warranted without having regard to market circumstances. However, once a certain level of instability is reached, the regulation will specify that unless he or she has good reason for not doing so, the Minister shall determine that transfers should commence. Again I disagree with my colleague, Senator Caffrey, on this aspect. Nothing could be more open or transparent than the democratically elected Minister of any Government taking these decisions. It is consistent with democracy.

The approach taken to risk equalisation is flexible and allows for it to be implemented as a reserve power, that is, where it is considered to be absolutely warranted by reference to the circumstances in the market and in the best interest of consumers in ensuring effective community rating across the market. Community rating and risk equalisation are like a horse and carriage; they go together.

The Department has at all times liaised fully with the relevant EU authorities regarding its proposals. Under the proposed arrangements there is no question of full equalisation of claims experience. Insurers are to retain their own unit claim costs and will not be liable to share more than 50% of market utilisation experience.

The Bill also includes provisions which will strengthen community rating by providing a framework which will encourage people to take out insurance at a younger age through allowing insurers the discretion to apply loading on people who do not do so until they are older or who have missed contributions to the market while younger [56] and healthier. It means that those who have not taken responsibility for their health care will be penalised. We should all be responsible for our health and for taking proactive decisions on health care. This measure will ensure that people will make contributions to their health care at an earlier age which will make for good practice.

The measure will not affect persons who are currently insured other than in situations where they move to an insurance plan offering higher levels of cover. In such situations a loading is to be permitted only on the additional cover taken out. I commend the Minister on this. It is only fair and equitable to provide for those who wish to change the scope of their insurance cover. The Bill also provides for further explanation and information concerning risk equalisation and lifetime community rating measures.

The establishment of the Health Insurance Authority by the Minister on 1 February 2001 is another significant measure. The membership of the authority is a matter of public record. The authority will have a central and independent role to play in the operation and development of the country's private health insurance market. The Bill also provides that the Minister can give the authority significant powers regarding the operation of risk equalisation between health insurers. The Minister will be the arbiter and that is important. The assignment of further responsibility to the authority as provided for in the 1994 Act and referred to in the White Paper on Private Health Insurance will be addressed by the Minister in consultation with the authority. Under the legislation, the cost of sustaining the ongoing operation of the authority will be met from the proceeds of a levy on registered insurers.

The powers of the Minister pertaining to the voluntary health insurance board and its functions are set out in the Voluntary Health Insurance Acts, 1957 to 1998. The future status of the board is currently being addressed. As stated in the White Paper, the VHI will be converted to a public limited company owned by the State with provision for third party investment or a full sale if deemed desirable or necessary. As set out in the White Paper, financial and legal advisers, Davy's and William Fry, have been engaged to assist in this process.

The board, in its current capacity, is exempt under the EU non-life insurance directives from the prudential and other requirements normally applicable to insurance undertakings. The board's reserves of over £100 million, although they do not exceed the EU minimum solvency levels of £72.2 million, are insufficient to meet the commercial solvency standard of 200% applied for the purpose of granting authorisation as an insurer by the Department of Enterprise, Trade and Employment within the meaning of the European Union's non-life insurance framework regulations. In the White Paper, the Government stated it would arrange for a once off financial [57] injection to facilitate the restructuring of the VHI.

The Bill's measures are important. The Minister said everything in his statement and I commend the Bill to the House.

Dr. Henry: Information on Mary E.F. Henry  Zoom on Mary E.F. Henry  I welcome the Minister and the Bill. He should not apologise for his speech because it was a model of clarity. I am delighted that executives from the VHI and BUPA are in the public gallery and heard how seriously the issue was addressed by the Department.

This is a most important matter and the introduction of effective risk equalisation is the only way affordable health insurance will be possible. The community solidarity that existed in Ireland through risk equalisation between generations has been extraordinarily important. Any of us who are aware of situations in other countries, such as the United States and Germany where this did not prevail, know it was a great problem for those who were insured and who lost the ability to pay for insurance at the time they most needed it. It was also a problem for the insurance companies which did not want risk equalisation. The Minister has got it right and I welcome the Bill. The Minister will work out the details of the risk equalisation and we must trust him with that task.

The Bill is fair to insurance companies by allowing a three year period before a new company can enter the market. In addition, and perhaps more importantly, it removes what I describe as frills. It deals with the core of health insurance where risk equalisation applies. Dental and optical treatment or getting money if one is out of work are additional benefits and they will not be affected by the Bill. I wonder if the Minister could also include the hotel accommodation aspect. People do not appear to understand that an enormous amount of the health insurance premia for the higher categories relates to what I describe as hotel accommodation. However, the Minister has struck the right balance.

People occasionally say to me that they have never claimed and they should get a rebate. However, I tell them they should be glad that it has not been necessary for them to claim. It would be terrific if one had insurance for 30 years and never had to claim. That would not be bad and I wish I could say the same. However, the Minister has made a big improvement in the Bill.

One could quibble about whether health insurance is now voluntary or almost obligatory. I do not blame it all on the Minister, but 30 years of neglect in terms of financing the health service has created a bad mess. This is one of the reasons there is such a high number of people in the private health insurance sector. It is extraordinary that almost 50% of the population has private insurance and this takes away from the benefits of having private health care. One was supposed to have easy and immediate access if one needed [58] it, but people in the public health service who complain about how long it takes to get an appointment to see a specialist at a hospital or to have an operation should check what is happening in the private health service because the queues there are also long.

When I knew the Bill was coming up, I took the opportunity to find out if consultants had appointments for mythical patients that I would refer to them. However, no gynaecologist had an available appointment within two months. I said I had a patient with acute arthritis of the knee, but the earliest appointment to see an orthopaedic surgeon was four months. It was much the same story regarding ophthalmologists and if one had a rash, it would have consumed one entirely before one got to see a dermatologist. The position with regard to back pain is almost impossible in the private sector.

There is a serious problem because, over the years, a sufficient number of consultants was not appointed to deal with a population that is now demanding first class health care. It is unfortunate but that is the position at present. Regarding the cancellation of operations, I am aware of people in the private sector who need hip and knee replacements, but their operations have been repeatedly cancelled. It is worth noting that it is not only happening in the public sector. However, one marvellous aspect – the Minister should grapple them to his heart with hoops of steel – is the availability of family doctors. Public and private patients do not have to wait very long to see them and that is extraordinarily important. The gatekeepers of the system are in a position to see patients and say that something is wrong with him or her.

However, an unfortunate aspect at present is that people are being sent to accident and emergency centres to try to ensure they are referred to hospitals. From both the public and private perspectives, it would be good if family doctors had more access to X-ray facilities, physiotherapy services etc. This would cut down on the number of referrals to hospital specialists and it would be a great saving for private health insurers. They allow payments to family doctors for certain items and perhaps this could be extended to other facilities in hospitals. However, facilities are so pressurised at present that there is a tremendous reluctance among those working in hospitals to allow access to those who work outside hospitals.

I spoke recently to an oncologist who mentioned the length of time he must keep people in hospital to ensure they have CAT scans, given the length of the queues for such scans. This is enormously wasteful of money and an undesirable consequence for the health of the patient. We are all distraught when the treatment of people with cancer and other acute illnesses is delayed. This is the priority area that must be addressed at present. However, an improvement in the facilities available to family doctors within [59] hospitals would ensure a great financial saving to the public and private systems. It would also be extraordinarily important for patients.

When Mr. Patrick Plunkett resigned from the board of St. James's Hospital because of the conditions in the accident and emergency department, I visited the department and it was appalling to see two or three people with cardiac failure lying on trolleys. Some had been there for hours and had blue faces, hands and legs. They were on drips and it was terrible that those patients were not transferred immediately to hospital beds. There is also the worrying sight of people waiting hours and if their family doctors had access to x-ray facilities they would not have to be there at all. I hope the Minister will regard this as one of the priorities for his Department.

There has been much talk about the extension of hours of opening of the specialist clinics attached to hospitals. This would cost a great deal of money because the nursing staff, secretarial staff, porters and administrators, as well as the consultants, must all be paid to staff the clinics. While I am sure that to a business person it sounds like the ideal solution, the costs involved would be extraordinarily high.

Competition between health insurers is a good thing because a single operator can become complacent. I am a plan A/B person myself and I am always fascinated by people who pay really high prices just to have hotel-quality accommodation. The clinical care will be the same for everyone, and that should be emphasised. A public patient in a hospital will receive the same clinical care.

I am constantly told by my colleagues of the terrible delays caused by the failure to upgrade equipment, much of which dates from the early 1990s and is now obsolete or just worn out. The Minister knows only too well that replacement costs were not factored in and those costs have to be covered now. I hope that future health programmes will include the cost of replacement so that hospitals are not trying to work with bits of radiotherapy equipment which are only fit to be museum pieces and not fit to be used on patients, public or private. The upgrading of services is very important. Breakdown of equipment means that patients are waiting longer. There should be better co-ordination of tests. Private hospitals make more of an effort in this regard and that policy could be extended to the public hospital service.

The Minister for Finance, the Minister's friend and perhaps co-operative colleague, introduced tax relief for the building of private hospitals in the last Finance Bill. This was very odd and shows that he has settled on the idea of the separation of the public and private hospital services. I would not be too enthusiastic about that, having seen both systems in operation. The mix ensures that the level of service is raised for all patients. For example, the consultants are then tied to the [60] hospitals and this is preferable to having them crossing the city to another establishment.

One of the proposals for this tax relief measure was that these private hospitals should have accident and emergency departments. I wonder if the Minister is aware of the cost of setting up and staffing an accident and emergency facility. The cost is astronomic and we certainly do not want to see Mickey Mouse accident and emergency services set up. If people are not in need of proper accident and emergency facilities, then they should be seen by their family doctor. It would be better to supply facilities for family doctors to improve their establishments so that they could undertake more in the way of treatment than is possible at present.

I compliment the Minister on how children are treated. It is very important to explain to people that when it comes down to brass tacks and children are seriously ill, consultants do not have public and private lists. In the case of cochlear transplants, no child can be a private patient because all the children are assessed in terms of medical need. The same applies for paediatric cardiac cases. All the consultants weep about is that they cannot treat all those who need urgent treatment. As a result, the Minister and his Department have been involved in the transfer of children to other jurisdictions. Our main problem is not the lack of cardiac consultants to do the operations but rather the shortage of nurses for nursing care in the intensive care units. I am aware that the Minister knows this all too well.

It is important in talking about private and public health care for children that we acknowledge there will be a difference in the treatment of children for problems with tonsils and adenoids. Orthodontic treatment will be totally different. As far as I can see, buck teeth will never be straightened out in the public system at the moment. Parents should be assured that when it comes down to brass tacks their children will be looked after in both systems.

I am thinking of tabling an amendment to section 5 of the Bill. This is the section which obliges the insurer to offer premia on an equal basis on the grounds of age, sex and sexual orientation. I suggest a proposal for genetic profile. I know that the Cathaoirleach is aware of my requests that we do something by way of legislation regarding genetics. I may suggest that on Committee Stage. We in Ireland are in the forefront of genetics and there is no legislation on the subject.

I congratulate the Minister on the Bill.

Miss Quill: Information on Máirín Quill  Zoom on Máirín Quill  I welcome the Minister to the House and congratulate him on the Bill. It is, as he said, very complex legislation. It is no small challenge to seek, on the one hand, to create the conditions where we can have good healthy competition which is essential for the well-being of the consumer and, at the same time, to sustain [61] the principle of community rating which is the bedrock of our policy of looking after people in need of health care. It is very challenging legislation which has been discussed at great length in the other House on Committee and Report Stages. A good deal of discussion went into its formulation before it came here. As a result, we have a Bill that is more fine-tuned to the realities of the market in which insurers operate. It is critically important that the regulations that derive from this Bill should be subject to very rigorous examination and scrutiny at regular intervals to ensure that the basic objectives of this Bill will be met and met in their entirety.

The essential part of the challenge that I refer to is how well regulated competition can be entertained on the one hand and how we look after the community rating on the other hand. The great strength of this Government is the courage with which it has introduced competition into so many areas of the economy, as a result of which we have a much more vibrant and promising economy now than in the olden days. My party is very committed to the promotion of competition in every element of society, including the health insurance area. The primacy of the consumer is paramount and if this is not so when we are talking about people's health needs, then what else is more important? This issue must always be approached from the viewpoint of the primacy of the consumer. What is good for the consumer in terms of health insurance is what we should be aiming to achieve. There is no doubt that in health insurance, as in so many other areas, competition is very good.

I am one of those who was born into the VHI. I am of a VHI family. It is like being born into Fianna Fáil, one's parents were in it so the youngsters were reared on it. It is the same with the VHI. I am aware of the difficulties and challenges for a small operator in breaking into an area that is well established and has wide and deep roots. I was supportive and welcoming of the entry of BUPA to the market. That was to the benefit of the community at large. I salute the courage of BUPA in being the first to break into what was a restrictive and monopolistic culture in the area of health insurance.

More competition was needed as an essential step in addressing the rapid rise in health service costs. For example, in the public health sector the health bill has risen by more than 50% in the past three years. Given those escalating costs, it is more essential than ever to have good and healthy competition in the market. It is critically important that a modern confident Ireland would seek to reap the benefits of deregulation in the health insurance market. The greatest outcome of deregulation is that it brings with it alternatives, alternative producers and new products. As a result there are benefits all round, particularly for the existing established companies in that they are challenged to seek out new measures and to [62] become more consumer friendly and they are prevented from becoming stagnant. I am not saying the VHI has become stagnant but it happens to the best of us. Competition is good and anything that promotes it has to be regulated and supported. Anything that inhibits it has to be critically examined to see whether it can be removed.

I seem to be the odd person out in the debate this evening but I am concerned about the risk equalisation payments as they will be applied to BUPA. The VHI has 88% of the market. BUPA broke into the market in 1996 and has 12% of the market. It seems wrong and anti-competitive that a company that is seeking to break into an established market would be required to pay the equivalent of about one third of its annual profits to the established company. That seems anti-competitive and I would welcome the Minister's response. I am slow to quote figures because BUPA has not published its figures. I wish it would do so because then we could approach this argument with definite facts and figures at our disposal. It seems wrong that a newcomer on the market is required to pay that amount to a well established company supported by a number of us who have been insured for a long time.

The principle of community rating and open enrolment are established in the 1994 Act and are safeguarded within the Act. That should be taken into consideration. There is no instability in the market and I see no evidence of upcoming instability. Both companies are making profits and as a result the market is expanding. That more people are taking out private insurance is a welcome outcome. These are the factors that apply. It is important that a mechanism be in place with risk equalisation as its aim. That should only be invoked if there is evidence of instability. I do not think it should ever be used as a factor to put road blocks in the way of what is good and healthy competition. It is a mechanism that ought to be put in place but is inappropriate in current conditions. Perhaps the Minister will respond to that issue as it is not in the best interests of consumers in the long term to inhibit good regulated healthy competition. I see no evidence of instability in the market and both companies are growing and making profits. I am pleased about that because that is what keeps them. That is the oil that keeps the wheels running.

A health insurance authority is being put in place as a regulatory body to regulate the scheme that will be put in place by the Government. I have no difficulty with that. However, I am concerned about the composition of that body. There is a fear that it will be top heavy with mathematicians, actuaries, statisticians and such people and that there is not a sufficiency of people who have expertise in the insurance market. Insurance has its own trade and its own culture. That is something I would like to guard against. It may be that I have a severe hangover these days from [63] the machinations of a certain commission that was at arm's length from active politicians who put on a campaign that was totally non-productive. I may not be in the best mood today to talk about these bodies which we set up and which are at arm's length from politicians who have to make decisions and have to be accountable for the outcome of their decisions. It is important that the people on the body understand the insurance trade.

Somebody asked earlier why young people should take out insurance for illnesses which, I hope, they will not have until much later. There is the whole principle of insurance. We all take out car insurance and pay it on an annual basis. We pay it but I hope we will never have a car accident and will not have to draw it down. Nevertheless, we are prepared to take out insurance to cover for eventualities that may occur during our driving lifetime. Equally we insure our houses in case a fire breaks out, but in 99% of cases that insurance is not drawn down. That is the nature of insurance.

I would like to see companies aggressively seeking new clients and the Government giving tax-based incentives to young people in particular to encourage them to take out private cover. That is important. I understand that the regulations will be subject to approval by both Houses of the Oireachtas. At least the regulations will be put in place and monitored by people who have to answer to the public.

In regard to private companies, we can only advise them on what we think would be good things to do. There is a good extension of cover now. In the olden days if one wanted to get cover one had to stay overnight in a hospital. Nowadays one can get cover if one goes in as a day care patient for investigation, tests etc. That is a good idea.

I ask insurance companies to consider extending insurance cover to more non-hospital medical procedures. That would be a very good input on the part of insurers towards the health service. It would strengthen the health provision in the community including GPs, public health nurses, etc. That can be put in place in the community to serve the needs of a number of people who could be kept out of hospitals if that were in place.

There are other simple things also. I know somebody who had hip replacement surgery a few years ago. When they phoned the insurance company to ask about the after care provision, they were told they could go to a convalescent home for two weeks which would cost £700. The person had a preference to go home but had some basic needs such as home help. It would cost about £5 per day to have a person come in, put on the elastic stocking, give the crutch and let the patient go off for a walk. However, the insurance company could not cover that at all. [64] Because provisions like that were not made, people were going into convalescent homes who did not need to be there. We need to develop new products and these will come if there is significant good competition.

The Minister must not allow people who have a very conservative view on how the health services should be delivered and how health services should be arranged to facilitate that delivery to dominate this debate. He should think about healthy competition as being good. We have the capacity to introduce regulations which will ensure that people in need, who are most vulnerable, will not suffer as a result of what is in this Bill. He must not allow excessive demands on new companies, trying to break into the market, to stifle competition because it will not be good for consumers.

Minister for Health and Children (Mr. Martin): Information on Micheál Martin  Zoom on Micheál Martin  I thank the Senators for their interesting contributions. No doubt we can go into many of the issues in more detail on Committee Stage. I accept Senator Caffrey's general support for the concept of risk equalisation. He made a number of references to health policy and issues generally, which I will leave to another day. I have ably dealt with these in the other House and here and they are not the subject matter of this Bill, which deals with the regulation of the health insurance market.

He is of the view that many of the decisions on the implementation of risk equalisation rest with the Minister. In fact much of the work and many of the decisions rest with the new health insurance authority that I have established under the primary Act. It will take many of the decisions on risk equalisation and will advise the Minister on triggering the risk equalisation mechanism. Having analysed the data from the insurance companies, it will have to form an opinion whether there was a significant distortion of the risk profiles that constitute a threat to the stability of the market and make a recommendation to the Minister.

A scheme showing how risk equalisation might work was outlined on the Committee Stage of the other House. That will form part of the draft regulations that will have to come back to this House in the autumn. I intend to have this Bill through before the summer recess and come back with draft regulations for the implementation of the Bill, which will cover a framework to facilitate the introduction of risk equalisation if that is necessary.

Entrants to the marketplace were clear that risk equalisation was part of the agenda. It was provided for in the 1994 Act as a clear mechanism to underpin community rating. This Bill is designed to provide for risk equalisation and also to facilitate competition. On Committee Stage I might bring examples of how authorities in other insurance markets still consider risk equalisation [65] an important feature of the kind of system that we have.

The Bill broadens the range of products the insurance companies can provide to cover general practitioner services, etc. That is provided for in the definition of an insurance contract.

Senator Henry broadly welcomed the Bill and I appreciate her support. I note her comment that the private waiting list is also growing. We have some distance to go in terms of capacity in our acute hospitals system. There is a strong connection between the public and the private systems. About 2,500 beds in our public hospitals are reserved for private patients and there are a further 1,800 beds in the private sector. That interplay is coming into focus under the health strategy. Public patients are not getting a fair deal at the moment and we are looking at the public-private mix to get a better deal for them.

Overriding all that are capacity issues in terms of beds and manpower. There is an argument that we are not using all our institutions to the maximum extent. Some of the more elective hospitals have nine to five routines with nothing happening at weekends and we could make greater use of those facilities. We have commenced talking with the relevant bodies about the renegotiation of the consultant contract, which is fundamental, and about setting up the framework and mechanisms to implement the recommendations of the manpower forum. A national task force is to be established to go through all the implications, to quantify the cost and to work out the models of how it would work in different types of hospitals in rural and urban environments. Much work needs to be undertaken on that.

The Finance Act introduced tax relief for private hospitals and this will help capacity somewhat. I have no difficulty with the public sector contracting in from the private sector either, especially to complete additional elective procedures. However, under the national development plan, we are committed to very significant investment in public hospital capacity. In time that will alleviate waiting lists.

The classic example is the cardiac facility that we put into St. James's Hospital. Having put in a substantial investment in human resources and in facilities, we got a huge hit on the waiting list for cardiac bypasses, etc. We have halved the waiting list for cardiac bypasses in the last 15 months. This is a clear result of an investment in extra capacity in the system. When the cardiac facility in Galway comes on stream, that will have a further step change effect on waiting lists. There are also further developments in the Cork unit which will lead to a strong regionalised service, north, south and west that will take pressure of the Dublin hospitals where many of these procedures are for people from outside the region.

Some 20% of the waiting list relates to ENT, many of which are very minor and none of which [66] is life saving. Although we have allocated increased resources to orthopaedics, waiting lists remain stubbornly high.

I appreciate Senator Glynn's endorsement of the Bill and his support for the extension of the medical card to over 70s, which is important in terms of the status we accord our elderly people. Senator Quill touched on the nub of the debate in terms of reconciling the respective agendas of competition and community rating. Parts of the Bill are very much concerned with facilitating competition, including that provision which allows for a three year “window” whereby a new company entering this market will have an option to stay out of risk equalisation for three years. The original provision in the White Paper was for an 18 month period. This provision may have a more telling impact on the level of competition in the market than risk equalisation. It was interesting to hear that view being articulated during some of our contacts and discussions with people who might be interested in coming into the market.

Risk equalisation will only be applied when we have all the data which is not currently available but which, under the provisions of the Bill, will be compiled by the Health Insurance Authority. It will only be applied when stability is an issue. An important judgment has to be made in that regard. We cannot wait until instability has occurred because at that stage confidence would have flown out of the market and we would be in trouble. We cannot have a band-aid approach, hoping that an emergency can be dealt with. Once the public loses confidence in the system, it may be too late to enter the marketplace. This can happen very quickly if the risk profiles differ fairly dramatically over a two or three year period, resulting in a lop-sided situation if there is no corrective action.

We are trying to put in place a system which is flexible enough, which is not punitive, which facilitates competition and which is in the overall interest of the consumer, this being an over-arching principle enshrined in the Bill. The system is intended to deal, in time, with any destabilising impact which cherry-picking, or different risk profiles, could have on the market. That, in essence, is what we are attempting to achieve in this Bill.

I note the comments which were made about the composition of the Health Insurance Authority. That aspect has not been raised in representations which I have received. Perhaps some of the people making representations were more blunt with Members of the House than they were with me in that respect. There are some consumer representatives and some professional experts. I believe it is important that they should keep some distance from the market in such a relatively small country as this.

[67]Miss Quill: Information on Máirín Quill  Zoom on Máirín Quill  It has been suggested that I had a hangover after the referendum.

Mr. Martin: Information on Micheál Martin  Zoom on Micheál Martin  I accept that. The Senator is probably not alone in that regard.

Judging from the intensive lobbying on this issue, it seems that the Health Insurance Authority will have a busy time. I believe there is a good balance on the authority – we can reflect on that aspect on Committee Stage. I thank [68] Senators for their helpful comments and I look forward to the Committee Stage debate on the Bill.

Question put and agreed to.

Committee Stage ordered for Tuesday, 19 June 2001.

The Seanad adjourned at 6.45 p.m. until 10.30 a.m. on Wednesday, 13 June 2001.


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