COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 25 Sep 2003

Vol. 1 No. 27

2001 Annual Report of the Comptroller and Auditor General and Appropriation Accounts.

Vote 33 (resumed) - Department of Health and Children.

Chapter 9.1: Extension of Medical Card Eligibility to Persons aged 70 and over.

Chapter 9.2: Drugs Payment Scheme.

Mr. Michael Kelly (Secretary General, Department of Health and Children) called and examined.

Chairman

We will resume on Vote 33 of the Department of Health and Children.

Witnesses should be aware that they do not enjoy absolute privilege and should be apprised as follows. As and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons identified in the course of the committee's proceedings. These include the right to give evidence; the right to produce or send documents to the committee; the right to appear before the committee, either in person or through a representative; the right to make a written and oral submission; the right to request the committee to direct the attendance of witnesses and the production of documents; and the right to cross-examine witnesses. For the most part, these rights may only be exercised with the consent of the committee. Persons invited to appear before the committee are made aware of these rights and any persons identified in the course of proceedings who are not present may have to be made aware of these rights and provided with the transcript of the relevant part of the proceedings that the committee considers appropriate in the interests of justice.

Notwithstanding this provision in legislation, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House, or an official, either by name, or in such a way as to make him or her identifiable. Members are also reminded that under Standing Order 156, the committee should refrain from inquiring into the merits of a policy or policies of the Government, or a Minister of the Government, or the merits of the objectives of such policy or policies.

I ask Mr. Kelly, Secretary General of the Department of Health and Children, to introduce his officials.

Mr. Michael Kelly

I am accompanied by Ms Helen Minogue, assistant principal officer from the finance unit, Mr. Dermot Smyth, assistant secretary from the finance unit, Mr. Tom Mooney, deputy secretary, and Mr. Colm Desmond, principal officer.

Chairman

I welcome the official from the Department of Finance.

Mr. Terry Walsh

I am Terry Walsh, assistant principal officer from the expenditure division of the Department of Finance.

Chairman

I ask Mr. Purcell to introducechapter 9.

Paragraph 9 of the Comptroller and Auditor General reads:

9.1 Extension of Medical Card Eligibility to Persons aged 70 and over

In his 2001 Budget speech in December 2000, the Minister for Finance announced the extension of the medical card scheme to cover all persons aged 70 years and over, irrespective of means, to take effect from 1 July 2001. This was given legislative effect through the Health (Miscellaneous Provisions) Act 2001 enacted in late May 2001. The Health Boards were formally advised of the Budget measure in January 2001 and were instructed to make ready their administration procedures in preparation for implementing the initiative by 1 July.

My staff examined departmental files which indicated that the original forecasted additional annual cost of providing medical cards under these new arrangements was €19m based on an estimated extra 39,000 persons becoming eligible.

More recent papers on the files suggested that the databases, on which the original estimate of 39,000 potential applicants was based, were inaccurate and not up to date and that the number of new applicants under the arrangement was set to exceed 70,000. By April 2002 it was estimated that the additional annual cost would be in the region of €51m.

The Central Statistics Office (CSO) estimate for persons aged 70 or over in the State in 2001 was 299,000. At end February 2002, the General Medical Services (Payments) Board (GMS) had registered some 327,251 persons in that category and indicated that there were up to 5,000 yet to register, while a further 5,000 were estimated to be in institutional care. The GMS also advised that there were 8,000 potential duplicate registrations and 28,000 persons who had no pharmacy claim over a 21-month period in 2000/2001.

Given the serious financial implications for the Exchequer resulting from the underestimation of the number of applicants eligible for the extension of the medical card scheme I sought the views of the Accounting Officer.

In response to my enquiries the Accounting Officer informed me that:

· The Department of Finance made his Department aware, a few days prior to Budget day in December 2000, of the decision to introduce automatic medical card eligibility for persons aged 70 and over. Informal oral contacts took place between officials of both Departments in relation to the cost implications of this initiative. The Department supplied such data as was readily available to it in the extremely short time involved in order to assist the Department of Finance in determining the likely cost of implementing the scheme in 2001. However, a clear marker was put down at the time that the implementation of the initiative would require the agreement of the Irish Medical Organisation (IMO) and the lrish Pharmaceutical Union (IPU), that the negotiating position of both unions would be greatly strengthened by the fact the measure was going to be announced as part of the Budget day package with a set date for its introduction, and that this would inevitably drive up the cost of the initiative.

· Following protracted and difficult negotiations between the Department of Health and Children and the IMO, a deal estimated to cost €19 million annually was agreed in late June 2001. Central to this deal was (a) a capitation rate of €438 per annum for newly eligible persons aged 70 and over, and (b) a capitation rate of €635 per annum for such persons in private nursing homes. This component of the deal with the IMO was estimated to cost €17.7 million in a full year, on the basis that there would be 39,000 newly eligible persons in total. The balance (€1.3m approximately) was in respect of an increase in the rural practice allowance and an enhancement of arrangements for payment of practice nurse/secretary allowances.

· The Department is still engaged in ongoing negotiations with the IPU in relation to the implementation of the scheme by community pharmacy contractors and it is estimated that the eventual cost of the deal to be finalised with the IPU would be in the region of €24m.

· The nature of inaccuracies in the Health Board/GMS databases was attributed to duplicates and to the non-removal from the lists in a timely manner of persons who have either died or moved away. A cleansing exercise concentrating on identifying patients in the over 70 category had recently been completed. As a result of this exercise in excess of 14,100 medical cards had been identified as surplus and were in the process of being removed from the system. It was planned to extend the cleansing exercise to the full over 70 medical card population and latterly to the full GMS list. The last major GMS list cleansing exercise had taken place at the time of the introduction of the plastic medical card in 1998.

· The Department maintains no independent records in this area. Under the 1970 Health Act a Chief Executive Officer of a Health Board is authorised to issue a medical card. The Minister for Health and Children has no authority or responsibility in the issuing of a medical card.

· The significant increase in the capitation costs to the Department of medical cards issued to persons aged 70 and over since July 2001 arose because this new category attracts a capitation rate which is a multiple of the rate for existing over 70s medical card holders.

Annual capitation rates for previously eligible persons over 70 years of age as at 31 December 2001 are shown in Table 38.

Table 38 ^ Capitation rates for previously eligible persons over 70 years of age

Distance to Surgery from Home of Medical Card Holder

	Male	Female
	€	€
0 - 3 miles	95.43	106.11
3 - 5 miles	106.71	117.44
5 - 7 miles	123.56	134.24
7 - 10 miles	140.06	150.79
Over 10 miles	160.58	171.33

· Health Boards were being particularly vigilant to ensure that new applicants had not already been in the system on a means-tested basis to avoid the possibility of the higher capitation rate being unnecessarily paid.

· No analysis had been carried out of the reasons for cancellation of existing cards on issue to persons in the aged 70 and over category.

· The GMS had done some work in assessing the potential overpayment arising from the inaccuracies in the databases used to determine the capitation payments to doctors and pharmacies. On the basis of research carried out in a number of Health Board areas the inflated figures could be resulting in overpayments of €12m annually.

· Given what had emerged in relation to the over 70s, it would be reasonable to expect a certain amount of inaccuracy in the GMS list in all age categories of the medical card schemes. However, with the higher mortality rates associated with the over 70s, it was expected that the level of inaccuracies in the list would be less in the under 70s category. It was planned to extend the current cleansing exercise to the entire GMS list in time. The planned rollout of the GMS Central Client Eligibility Index, an IT based eligibility system, would also address this issue. It was also pointed out that some years ago Health Boards relaxed the regime in relation to reviewing medical cards for the elderly with the result that the over 70s were reviewed less frequently than other card holders.

· A GMS Information Project, funded by the Department, would address a range of GMS information deficits and would provide, in part through a national survey of 2000 persons (half of whom will be medical cardholders) an independent basis for estimating numbers of persons in each Health Board who have or should have medical cards and the basis for having such cards. It would address visitation rates (across age categories and specific categories of persons and illnesses), ascertain medical card review procedures used in Boards and the issue of so called discretionary medical cards. It would also identify the information collected by Health Boards for GMS Scheme purposes, the linkages that exist or should be created and through small sample studies it would be able to ascertain the reliability of the information arrangements currently in place.

The revised costings for the scheme for 2002 are shown in Table 39.

Table 39 ^ Revised Costing for 2002 Scheme

	Doctors	Pharmacists	Total
	€m	€m	€m
Pharmacy Lump sum and Enhanced Fees	-	17.78	17.78
Pharmacy Ingredient Cost	-	22.00	22.00
Doctors Capitation re New Over 70s	33.00	-	33.00
Other	10.15	-	10.15
Total	43.15	39.78	82.93

The GMS estimates consequential savings on the Drugs Payment Scheme on the basis of 69,068 patients at €28.06 million. The net additional estimated cost for 2002 is therefore €54.87 million.

9.2 Drugs Payment Scheme

The Drugs Payment Scheme (DPS) was introduced on 1 July 1999 and replaced both the Drug Refund Scheme and the Drugs Cost Subsidisation Scheme.

Under the new scheme, individuals or family units would meet the first €53.33 per month of the cost of approved prescribed drugs, medicines and medical and surgical appliances. Pharmacists, by agreement, claim the balance of cost over this amount from relevant Health Boards through the General Medical Services (Payments) Board.

Under the old Drug Refund Scheme, patients were required to pay, in full, the cost of prescribed drugs etc. at the pharmacy and at the end of each calendar quarter seek a refund from the relevant Health Board of their expenditure in excess of the threshold amount of €114.28.

The Drugs Cost Subsidisation Scheme subsidised expenditure of patients, certified by their doctors as having a long-term condition requiring regular and continuous use of prescribed drugs. The scheme met the patients' monthly expenditure in excess of €40.63.

The DPS was introduced administratively in July 1999. This method of introduction did not comply with statutory requirements and therefore the scheme could not be said to have come into operation legally until the introduction of amending regulations in March 2001.

The delay in the making the regulations to give legal authority to the new scheme has resulted in either overpayment or underpayment of subsidy to persons availing of the schemes depending on individual

circumstances and expenditure levels.

I sought the views of the Accounting Officer as to

· the reason for the delay in making regulations to give the new scheme legal effect

· the estimated amount of subsidy denied to participants under the scheme as a result of the delay for the same period and whether the Department intends to refund these amounts to the individuals involved

· the estimated amount of overpayments arising because of this delay in the period July 1999 to February 2001 and whether the Department intends to seek to recover these overpayments.

In his response the Accounting Officer stated that regulations fixing the threshold for the new scheme at €53.33 per month could have been made in July 1999 under Section 59 of the Health Act 1970 but, as Government approval had been obtained to amend that section, it was decided to defer making the regulations until the Act was actually amended. At the time it was envisaged that the amending provision would be enacted very quickly. Subsequently, however, difficulties and delays arose in securing drafting time and parliamentary time for the new legislation. Following further consideration and legal advice obtained from the Office of the Attorney General in October 2000, regulations to fix the threshold at €53.33 per month were put in place under the existing Section 59 of the 1970 Act in March 2001.

The Department of Health and Children considered that DPS provided a fairer and more user friendly system than the schemes it replaced, especially for monthly budgeting for families, and has produced significantly greater overall benefit for patients. The total benefit to patients under the Drug Refund Scheme or Drug Cost Subsidisation Scheme in 1998 was €95m (the last full year of operation). In contrast, the DPS subvention to patients was €140m in 2000 (the first full year of operation) and rose to €177m in 2001, an increase of 87% in 3 years.

While the overall level of benefit to all patients increased to the extent indicated, there would have been individual cases where the level of benefit was either under or over stated under the new DPS as compared to the entitlements under the Drug Refund Scheme or the Drug Cost Subsidisation Scheme. The General Medical Services (Payments) Board estimates that the overall cost of potential claims arising from the increased threshold during the period concerned is in the region of €18m. The potential claims involve some 175,000 households and cover approximately 4.75m transactions relating to 11.86 million items. The administrative cost of processing claims for potential refunds on such a large scale is estimated at a further €2m. The Accounting Officer pointed out however, that in accordance with an Informal Government Decision dated 17 July 2002, it was not intended to make refunds.

The estimated amount of overpayments arising is not known. The Department has not asked the General Medical Services (Payments) Board to devote the resources needed to calculate this amount in light of the legal advice received from the Office of the Attorney General in April 2002 that the Department cannot recover overpayments made to persons who may have benefited financially from the non-statutory scheme.

Mr. John Purcell

The subject matter of this examination has been well aired in previous meetings. The committee is dealing with some unfinished business arising from chapter 9 of the report. There are two outstanding issues. Regarding chapter 9.1, the committee will look at the progress made by the health boards in identifying all the overpayments arising from the failure to delete invalid medical card records from the system at the appropriate time and the subsequent action by the Department in recovering the amounts overpaid from the GPs concerned. The second issue under chapter 9.2 is the state of play with regard to the refunds arising from the delay in putting the drugs payment scheme on a proper legal footing.

As regards the first issue, I understand that the cleansing of the medical card database has now been completed and that a final estimate of the total overpayment has been computed. I will leave it to the Accounting Officer to furnish the committee with the details. As the committee will be aware, the recovery of the amounts overpaid from the GPs is not straightforward. Indications are that it is being resisted by their representative association. Again, the Accounting Officer will have the up to date position on that matter.

Regarding the second issue, the Department's approach to making refunds under the drugs payment scheme has been to use public notices to invite people to apply for refunds if they feel they had been overcharged by virtue of the way the scheme was administered during the period July 1999 to October 2001. Applications for refunds must be made before the revised deadline of 31 October 2003, accompanied by supporting documentation. As the committee will be aware, this approach reduces the number of refunds to be made when compared to the alternative of putting the onus on the Department to calculate and pay refunds to all those who would be entitled to one on the basis of the GMS records. As a consequence it is fair to say it is likely the amount the State will have to pay out will be a fraction of the estimated €18 million originally calculated. Clearly, the administrative costs will be less as well.

Mr. Kelly

I welcome the opportunity to bring the committee up to date on the GMS medical card overpayments issue. The committee will be aware from my previous appearance before it on 16 January 2003 and the Department's previous statements to the committee on 27 March 2003, when it met the chief executives of the GMS payments board and of the various health boards, that a substantial exercise has been under way involving the Eastern Region Health Authority, three area health boards in the eastern region and the seven health boards to review the entire GMS register. This exercise has been directed by the Department and involved close co-operation with the GMS payments board. It has been co-ordinated by a dedicated team led by the health boards executive, representing the chief executive officers of the ERHA and the health boards. As Mr. Purcell said, the exercise has now been completed.

When work commenced it was necessary to identify the actual cards which were considered to have generated an overpayment and the amount of that overpayment. Detailed guidelines were agreed by all boards where three months from the date when eligibility ceased could be considered a reasonable period for the processing and removal of such a record from the GMS register. This is comparable to the equivalent timeframe for normal deletion of other public service benefits, for example, under the social welfare system. Accordingly, records discovered to have been on the GMS register for more than three months since eligibility ceased were prioritised for in-depth examination in relation to overpayment. The degree of overpayment per individual record would depend on the length of time between identification and removal and the date when eligibility was determined to have ceased.

All medical card records removed from the register have now been examined. At this point, a total of 80,931 records relating to clients aged more than 65 years have been removed from the GMS register. Of these, 72,495 records relate to people aged over 70. Based on the agreed guidelines, not all of these records would have generated an overpayment and the bulk of these records would, therefore, relate to normal activity, that is, removal due to death or a person moving to another board area. Of the remainder, a total of 28,156 are more than three months on the register and have generated an overpayment. The estimated overpayment arising from the removal of these cards from the register amounts to €7.54 million in relation to capitation payments, with an additional €754,000 in respect of superannuation, a total of €8.294 million. This is the extent of the overpayment identified.

I stress that the total deletions amounting to 80,931 records comprise mostly what would be considered by the health boards to be normal, routine deletions due to death, change in eligibility status or persons moving from one board area to another. There is constant movement in the databases, with people moving in and out, so most of the deletions are routine.

In calculating the overpayments relating to people aged over 70, it was decided to concentrate on those records which were in excess of three months out of date. It is this cohort which comprise the 28,156 over-70 records and which have generated the overpayment mentioned. I also point out that on the date on which full medical card eligibility was extended to all people aged over 70, that is, 1 July 2001, some 16,884 cards were more than three months out of date, amounting to an overpayment of €6.649 million at that point. This constitutes the bulk of the overpayment identified as these cards would have been on the system for a longer period.

Due to the many changes to the contractual agreements with general practitioners over the period in question, the GP non-capitation allowances element of overpayments is proving more difficult to calculate. A detailed exploratory analysis by the GMS payments board has shown that there was an overpayment in respect of these allowances. The board is currently attempting to quantify the amount involved. Analysis to date shows that it is extremely resource intensive to calculate the overpayment under this heading for each individual GP. When more complete information is available, a judgment will need to be made as to where the balance of advantage lies in the context of the best use of taxpayers' money. We are determined to go after this, but we will have to measure the order of effort involved in the precise calculation that is needed and then make a judgment on the next steps to take.

The future management of databases has also received much attention. During the course of this exercise, health boards have dedicated substantial resources to examining and reviewing the management of their records systems. Additionally, improvements in the general register of births, marriages and deaths have assisted in the process of deleting records. As indicated previously, the ultimate solution to accurate record maintenance of the GMS register is the development of a unique client identifier. Work is ongoing on the implementation of this project, which will deal, inter alia, with the issue of data integrity and the management and control of client registration from here on. As one element of the health reform programme, the absorption of the GMS payments board into the new health services executive will lead to a single consolidated database for medical cards nationally.

The issues relating to recoupment of overpayment have received much attention since my last meeting with the committee. As previously signalled, we are committed to the recovery of excess payments, taking account of the legal and practical issues involved. Legal advice based on existing statutory and case law and the detail of the GMS GP contract has been obtained. That advice, including senior counsel opinion, has only recently come to hand. It is now being considered by the chief executive officers of health boards, the GMS payments board and the Department. Our consideration is informed by the knowledge that any attempt at recoupment is likely to be challenged in the courts and we acknowledge that great care needs to be taken on how to proceed from here. Any steps taken in this regard will need to be proofed against the probability of legal challenge. The IMO has already indicated that it will resist any attempt at recoupment. Subject to clarifying legal issues, the Department's intention is that full recoupment will be pursued. I will be formally notifying the IMO of this when I meet with the organisation in the coming week.

In relation to the drugs payment scheme refunds, there is considerable progress to report. The drugs payments scheme was introduced on an administrative basis on 1 July 1999 and put on a statutory footing in March 2001. Legal advice from the Attorney General indicates that underpayments which may have been made in the intervening period should be refunded. Despite an earlier informal Government decision not to make repayments, and in the light of subsequent legal advice, I was very conscious of the points made by the committee and I indicated in January last that I would have this matter reviewed. Following this review, Government approval was obtained to put in place a process for assessing applications for refunds under the scheme. Public notices were placed in the national newspapers on 26 June 2003 and on relevant websites, inviting applications for refunds by the end of September 2003. Subsequently, in response to concern from members of the public and from pharmacists who would be required to assist some applicants with their claim documentation, I agreed to extend the deadline for applications by a further five weeks to 31 October 2003. The contacts that were made with the Department indicated that short extension would largely meet the case. Accordingly, the scheme was again advertised widely on 12 and 14 September last. At this stage there has been a substantial demand for application forms, with some 13,000 claims received by the GMS payments board, the body charged with operating the scheme on behalf of the Department. The claims received are currently being processed and payment of refunds has already commenced. All claims received by the deadline of 31 October 2003 will be processed and paid by the end of December. The final cost and the numbers qualifying for reimbursement will not be known until all applications have been received and processed.

The Government decision is also predicated on applicants not benefiting by way of a claim where they might previously have obtained medical tax relief on their original expenditure under the scheme. To ensure that the Exchequer is not exposed to a double cost in such cases, applicants are made aware through the claim form that they have an obligation to contact the Revenue Commissioners if they feel that may be the case. Ultimately, it is the responsibility of individual claimants to pursue the issue with the Revenue. That aspect was clarified with the Revenue Commissioners.

I am satisfied, based on those arrangements, that the procedures that have now been put in place will bring the issue to a satisfactory conclusion.

Chairman

May we publish your statement, Mr. Kelly?

Mr. Kelly

Yes.

Chairman

On the point of the 28,156 records, it appears that the average payment on the GPs' register is €300 per card. That is a figure of over €8 million.

Mr. Kelly

The average overpayment to GPs distributed evenly would be about €3,366, but there is no even distribution because it is spread in different ways.

Chairman

If you were to do that calculation, it would be about €300 per card holder per GP.

Mr. Kelly

I have not done that calculation.

Chairman

I am disappointed that the IMO has not responded better. Do you agree that it has been less than co-operative regarding the issue of repayment? What is the problem about repaying the money?

Mr. Kelly

When I was last here, I said that there would be several stages in following through on this matter. The first was to identify all cards live on the system that should not be and to stop payment. The second was to identify all cases where there had been a period of time for which they were live and in respect of which payments had been made, and that has been done. The third stage, following through on that, was to calculate overpayments to individual GPs. Since that set of calculations was done, we have been looking at the means by which recoupment is best achieved. In the course of that, we have taken various elements of legal advice on different aspects because it is not straightforward when one examines the GPs' contract. We have signalled in public that it is our intention to seek recoupment. In fairness to the IMO's position, it has also been signalling in public, but it has not had that formally put to it. I will be doing so at a meeting with the IMO next week.

Chairman

On that point, it seems simple to me - if there has been an overpayment, it is just that, an overpayment. The IMO is saying in the press that it is due a counter payment for other services. It would make sense if you let it state exactly what, with an invoice accorded for them. It is a totally unorthodox way to do business to substitute payment and counter payment. Does Mr. Kelly agree?

Mr. Kelly

I do not wish to comment on the demeanour of the IMO. I am about to enter into a process with it, which I expect to be challenging. Putting it bluntly, I do not wish to play out my hand in public at this stage. However, I would expect that in the normal course of things, where it is demonstrated to any group of professionals that an overpayment has been made in good faith, that it would be receptive to the idea of it being recouped. I would expect that sort of response from the IMO. In fairness to it, I have not yet had that formal exchange with it and I would prefer not to judge what its response might be until I have had it.

Chairman

Do you agree that, with 80,000 cards in the system, it was a real shambles? Over five years, the number of cards taken off by the cleansing exercises of 1998 and today shows huge incompetence in the whole registration system.

Mr. Kelly

I have made the point that the 80,000 cards referred to are mainly routine deletions which have arisen as a result of people dying, moving on and so on. I accept that the 29,000 cards which had been live on the system for various periods are a poor reflection on the management of the register and the databases. We had a considerable discussion at my last meeting with the committee following our own analysis of that problem and the report carried out by the Comptroller and Auditor General.

Chairman

The inaccuracy in assessing the number of 70 year olds, the quadrupling of costs and the information that led to that decision being made are now having a considerable impact on the economy. It was originally anticipated that there would be something of the order of 39,000 people qualifying, whereas now it is perhaps twice that figure. The overall additional cost is €51 million. Is it not a reflection on the whole shambles of a system that the Department had such information on which to base its judgment?

Mr. Kelly

I am not contesting that point. After my last meeting with the committee, I acknowledged - as did the chief executive officers of the health boards, to the best of my recollection, at their meeting with the committee - that the weaknesses in the data systems for updating the GMS register are not acceptable. That is the reason that, in the meantime, a huge amount of work has gone into both cleansing the database and ensuring that systems are put in place to prevent any recurrence.

Chairman

Regarding the drugs payment scheme, is Mr. Kelly disappointed that of the 175,000 people identified for the refund, only 13,000 have applied for it to date?

Mr. Kelly

The figure of 175,000 in circulation is the maximum possible number of claimants. We have always made the point that the extent of underpayment that might have been involved in any one case ranged from €1.25 to a potential €240. Our feeling all along was that the majority of those would have been at the lower end of that range. In a situation where the amount of money involved is very small, two factors must be borne in mind. The first is that, from the claimant's point of view, the value may not be huge. Second, from the point of view of managing taxpayers' funds as efficiently as we can, some balance had to be struck between the cost of administration of the scheme and the potential benefit to claimants. Part of the rationale in the arrangements put in place was that we particularly wanted to address the situations of those at the upper end of the range. We felt that the arrangements put in place would do that. One of the groups that has been in touch with me about this scheme is the Irish Patients' Association. It did not comment about the scheme's construction at all but asked that there be a short extension of the time involved. I met the association's chief executive this week and he was very appreciative of the change made in that regard.

Deputy Fleming

I thank Mr. Kelly for his presentation and the update on the situation. This is money which Mr. Kelly believes is due to the Department of Health and Children from the doctors. He stated that €8.24 million was overpaid. On the other side of the equation, however, it is clear that money is due to be paid by the Department to members of the public under the drugs payment scheme. It is felt that the Department is putting members of the public, who are due to be paid money under that scheme, through every possible hoop to prevent them getting the refund.

If the Department was honourable, it would have sent the cheques back on the basis of its computer records, once it had established that the people were registered for the scheme and were still alive. That would be an honourable approach. Similarly, with regard to the overpayment to doctors, the honourable approach by the medical profession would be to accept that an overpayment was made. The Department should have a mechanism in the GMS contract with GPs to deduct the amount from a future payment. If that facility is not there, why is that the case? I am concerned that Mr. Kelly is already talking about a legal approach by the doctors. He seems unhappy they are taking that route when an overpayment is due back to the Department.

However, he is not adopting the honourable approach of sending money back to members of the public without expecting them to jump through hoops. It is less than 10% of cases. Who would have those records or have understood the notice in the newspapers about this, notwithstanding the extension? A figure of up to €20 million was mentioned for 175,000 cases. If it is now less than 10% of cases, a sum of €1.5 million might be paid. How much will the administration of this cost be versus the amount that will be sent out? Mr. Kelly couched this nicely by saying he cannot give a final figure until the scheme is completed. However, I expect he has a current estimate of how much will be paid out under the scheme.

Mr. Kelly

Had it been possible on the part of the GMS payments board, the Department or the health board simply to flick a switch which would immediately identify all the people directly affected by the DPS change and to calculate a payment we could rely on, it would have been done. We looked at it but it was not possible. There are a number of reasons for this. First, clients who were below the threshold under the original scheme would not be known to the system so application is the only option. If people had not made their application under the new scheme, we could not have known about them. The only way of drawing them out was by public notice and inviting them to make an application.

The second issue is that people with higher levels of medical expense normally claim tax relief on those payments. Again, we had no way of knowing in what circumstances people had done that, what they had or what they did not have. It is not our business, frankly, to know that but, from the taxpayers' point of view, I could have been before this committee being told that we had made double payments because tax relief had already been claimed by individuals. I accept it is the responsibility of individuals to sort out their tax affairs but there is a double payment problem involved. We believed the most reasonable approach was to put that issue to people who felt they were affected by this, give them full information on it, make it easier for them to make an application and be reasonable with them in terms of the time frame in which that could be done.

The third reason the flick of a switch solution was not possible is that there are multiple claims from the same individuals which could not be linked on the system as it stands. It is a data systems problem. If it had been possible to do it, we would have done it.

With regard to the legal approach on the GMS issue, the Deputy referred to honour. In the first instance, the approach that will be made will be based on honour. It would be remiss of me as Accounting Officer to enter into this without considering all the jumps ahead. That is what I am doing. I am not inviting anybody down a legal road but I must proof whatever steps are taken in regard to this against legal challenge.

The Deputy made a fair point about the GMS contract. A comparison was made about this on a previous occasion with social welfare schemes, where a claimant who is overpaid is automatically deducted the overpayment. That is specifically provided for under the Social Welfare Acts. The problem with this matter is that the governing legislation is contract law. There is a GMS contract but the principles under which this would be looked at in a legal context are within contract law. The question is, what are the specific provisions in the GMS contract that govern this type of situation? There is no specific provision that governs the situation we are in. It is down to how particular provisions would be interpreted in a legal context and we have to work from that.

However, we are looking, in the first instance, at an approach that is based on honour and on demonstrating to this group of professionals that these overpayments were made in good faith and repayments are now due. That is the approach we are taking.

With regard to the estimate of costs under the DPS, based on experience with costing, the discussions I have had with this committee and the scrutiny by the Comptroller and Auditor General of previous costing exercises, I am not prepared to put my neck above the parapet at this stage and put a cost on it.

Deputy Fleming

Mr. Kelly is dealing with two fiascos but I am satisfied from what I have heard that he has the situation as well under control as can reasonably be expected. He also has the situation further along the road in mind. If for some reason a person presses the wrong button on a computer which results in a doctor being overpaid due to that error and there is no mechanism in the contract to get a refund, please renegotiate the contract to provide for that instance. Any administrative error could occur in respect of an overpayment in future. If nothing else comes out of this at least ensure that the GMS contract is renegotiated to include a facility, which would generally be included in every other normal contract, to ensure that if an overpayment is made in good faith, it can be recouped against a future payment. Other than that, I am satisfied that matters appear to be under control in this area.

Deputy Connaughton

I have listened to this discourse on a number of occasions. Mr. Kelly will be aware that the committee met the health boards and had intensive discussions with them. I do not intend to rehash those proceedings other than to point out that a debacle of huge financial proportions has taken place. Millions of pounds have been lost somewhere and I do not know whether they will be recouped.

I am not a solicitor but I have looked at what happened with the ghost medical cards and the various attempts there have been to put the systems right. The person who hoped to get a medical card which was his or her right was put through a fairly strenuous procedure to prove that he or she was entitled to that card. However, as soon as that procedure was completed, the health board appeared to claim, from what I could glean from the chief executives, that it had no handle whatsoever on the record of what happened after that. In other words, the databases were totally insufficient to meet the needs and the health boards had no idea where the holders of those medical cards had gone. To compound the matter, the Department did not have the foggiest idea what the health boards were doing and did not seem to have any interest in what they were doing. If the Department had done four years ago what it has just done with the health boards because of this issue, they would at least all be singing from the same hymn sheet. As it is, however, they all seem to be independent republics.

I congratulate Mr. Kelly on the way in which the Department took overall control of the situation, but that was never considered in the past. To compound the problem, the Minister at the time, in a rush of blood to the head, decided that everybody aged over 70 should get a medical card. Those people are certainly entitled to that, but the basis and evaluation on which that was decided had such a false foundation that it could not have been more wrong. Putting all that together, not alone are we talking about up to 30,000 ghost medical cards, but the foundation on which this package was based was completely out of kilter with reality.

I understand that when it was first decided that everybody aged over 70 would receive a medical card, it was estimated that it would cost about €19 million because 39,000 such people were eligible. In an update in April 2002, the number rose to 70,000 and the cost went up to €51 million. Is it true that another huge increase in those figures is pending? Over a year later, is the cost rising to €65 million?

Mr. Kelly

While the Deputy's question is a fair one in the broader context as to what the current cost of the over 70s medical card scheme is, in looking at the 2001 accounts, I had not anticipated that question. I have not been specifically briefed on it but I can talk to the committee in general terms about the movement, or otherwise, in that figure. In his opening remarks, the Deputy referred to millions of pounds being wasted in this area and I would like to clarify what is involved here. There is an overpayment to GPs in the order of €8 million——

Deputy Connaughton

That is right.

Mr. Kelly

——which the Department is committed to recovering.

Deputy Connaughton

It is a significant amount of money.

Mr. Kelly

In the current year it is a very significant amount of money.

Deputy Connaughton

Particularly if one had it in one's pocket, which, I assure Mr. Kelly, is far from what one has at the moment.

Mr. Kelly

Yes, if I had it in the Department's coffers, but we are committed to recovering that money. Until I am at the point where somebody says to me "You cannot recover it", I do not regard that as wasted. I regard it as overpaid and subject to recovery.

With regard to the cost of introducing medical cards for people aged over 70, the Department stands accused of taking data at face value from health boards and using that, with the Department of Finance, to calculate the cost of that particular policy decision by Government. However, as the Deputy pointed out, people aged over 70 are entitled to their medical card so I do not know if we can regard that as wasted money.

Deputy Connaughton

No, it is not wasted but, because this committee is concerned with value for money, we want to ensure that the people who are legally entitled to the medical card service receive it.

Mr. Kelly

Yes, but I want to make the point regarding what is waste and what is not. Clearly, the committee has a legitimate interest in any waste, as does the Department, and we are pursuing the overpayment. As regards the question of the Department not having the foggiest idea about what the health boards were doing, I never saw it as my function to check the accuracy of databases maintained by health boards where they have a statutory function to do that. However, as soon as the first indication reached the Department on foot of the escalating cost of introducing medical cards for people aged over 70, we got on top of the matter immediately. We did our forensic work on it to the point where this problem was identified and is now being managed to a conclusion. The analysis done by the Comptroller and Auditor General corroborated our findings.

As regards the current cost of providing medical cards to over 70s and whether there has been some jump in the figures, the numbers of people on the medical card register in the over 65 and over 70 categories have been reduced because we have taken the ghost cards off the system. There is no reason that the cost of providing medical cards to the over 70s would have jumped once that initial jump is taken into account. I do not know what the current figure is, but I can see no reason that the cost of the over 70s cards in particular would have taken another jump. There is no evidence to support that suggestion.

Deputy Connaughton

I understand that some 307,000 people over 70 years of age are entitled to a medical card, while 309,000 actually have the card. I know Mr. Kelly will say that 2,000 extra is a far cry from what the number of ghost cards was previously. As regards most or all of the people over 70 who come into the system now, there is no great science involved because they either have their birth certificates or they do not. However, will Mr. Kelly indicate the type of people who hold the extra 2,000 cards? Could it be that some people have two cards or could some people have changed address for whatever reason? Most people over 70 do not move around the country as much as younger people. Given all the talk I have heard about databases from the health board chief executives, why should there not be only a very small difference between both figures?

Mr. Kelly

I think the figures the Deputy is quoting are from a previous occasion when we were working off a population estimate supplied to the Central Statistics Office. We have an accurate read of population on the census date and the CSO provides an estimate because at any point in time people are moving into and out of the over 70 cohort. The up to date figure, the revised population estimate, as of 1 September 2003, is 307,719. The number of people on the register is 307,583. The Deputy is right that there is a small difference, but it is 136 at this point.

Deputy Connaughton

That is small, yes.

Mr. Kelly

It is, but there will always be some small difference.

Deputy Connaughton

Taking this documentation into account, there is a huge variation in the number of so-called ghost cards that the various health boards issued. For example, the North-Western Health Board had 1,853, while the Western Health Board had 6,995. Whatever mechanism the health boards had for finding out where ghost cards went, those figures look very poor to me. Can we take it everything is now up to date?

Mr. Kelly

Yes. That is the point of the cleansing exercise, as it has been described, of the database and the register over the intervening months, that cards which should not have been on it are now no longer on it. The figure I have given of the over 70 population estimate, the number of cards which are live on the system and the small difference of 130 is clear evidence that is the case.

Deputy Connaughton

In regard to recoupment of moneys we believe are owed to the State by the GPs, will Mr. Kelly give the committee an indication of the method by which GPs communicate the number of patients they meet on a weekly, monthly or yearly basis for capitation purposes? They do not have to notify the GMS payments board of the name, address or date of birth of the patient. That is done by category of patient, in other words, by age from 0-5 years, from 5-10 years and so on. Will Mr. Kelly clarify that is the case?

Mr. Kelly

I do not have the details of the precise chain of communication, although some of my colleagues may have them. The key point, if I may put it that way, is that under the contract, when it comes to where the lead responsibility for that information flow lies, the obligation is on the health board to maintain an up to date register. There are some obligations on general practitioners around the exchange of medical records, for example, where people are moving, and in relation to generally co-operating with the health board in the efficient operation of the scheme and so on. However, the primary or lead obligation is on the health board to maintain the register.

Deputy Connaughton

It is not the health boards after which the Department is going for the repayments, but the doctors.

Mr. Kelly

That is true because this is a situation where payments have been made in good faith which should not have been. The payments were made to GPs.

Deputy Connaughton

I fully appreciate this money is due to the State but does Mr. Kelly see that a scrum is developing? God knows who will get their foot on the ball when it starts.

Mr. Kelly

I am something of a veteran of - I will not say scrums - discussions and negotiations with various groups in the health services. Maybe "scrum" is not a bad description.

Deputy Connaughton

That ball will pass quickly from one to the other. I sincerely hope the legal advice the Department gets is the best available on behalf of the taxpayer because if people have been overpaid, they should repay the amount involved. The question will centre on who was responsible, whether it was the Department, the health boards or the doctors. By the time it all finishes, someone might say the medical card holder is responsible. I sincerely hope we do not arrive at that conclusion.

Deputy Curran

Deputy Connaughton touched on a point where his choice of words was probably wrong. He talked about a huge waste of money but later clarified the point. The decision and the policy to issue medical cards to everybody over 70 years might be different or different decisions might have been made based on the figures. It is important that, in the future, the figures are accurate in terms of implementing a policy. I am glad progress is being made along these lines.

I wish to put a general question on the medical card which follows on from who is responsible, how we can make the system accountable and how the system will work in the future. I heard a GP on radio recently state that when his cheque comes in - I do not know whether it arrives weekly, monthly, quarterly or how frequently - he gets a list stating that it is for 50 males between 0-5 years and so on. Patients are categorised in that way. Surely in this day and age he should get a print out of the names of the patients for whom he is being paid. If one is able to state there are 50 patients in the 0-5 category, one should be able to give the names so there is a balance and the GPs know for whom they are being paid. If they see an inaccuracy, either an underpayment or overpayment, they should be able to flag it.

The impression I got was that the GP got this cheque with the total number but not with the individual names. Considering they are the people at the coalface meeting the patients and, by and large, if one of their patients dies, they tend to know about it, surely they should have a much more direct input. From what I have heard, that does not seem to be the case; they are just getting the numbers. I do not know how often they get the cheque but surely it should be accompanied with a list. If that is not the case, as Deputy Fleming said earlier, we should try to introduce it so that the two sides are accountable and not just one side.

Mr. Kelly

I take the Deputy's point, as I took Deputy Fleming's. I have made a note of them and they will come into the reckoning in terms of looking at the GMS contract, an item we have identified as being due for review. On a point of practicality, in many practices - a list of 40 was mentioned - the list would be about 2,000. The practical value of sending lists of 2,000 people to GPs on a monthly basis and expecting them to methodically go through them is something at which we need to look. In taking the point, we should see if we can, in some way, share the responsibility. It relates to the construction of the contract and the flows of information to GPs, but we take the point and will incorporate it in thinking on this area.

Deputy Curran

I do not want to review this again in a few years. There must be balances.

When we spoke about the drugs payment scheme first, there was no willingness or effort on the part of the Department to make repayments to the public. I am glad that has been addressed and there is a scheme in place. That said, it is cumbersome for the public. It goes back to payments which were made a number of years ago. Mr. Kelly mentioned a number of reasons the Department could not do it, including that various people may be eligible for a refund who would have fallen below a threshold - in other words, they would not be on the Department's records. Of the 13,000 who have sent in applications so far, how many fall into that category or are new people?

Mr. Kelly

I do not know. I do not have an analysis of the 13,000 people with me.

Deputy Curran

Mr. Kelly spoke about the tax implications, that the State would not be giving a refund. In reality, the Department is sending out the forms and processing the claims but saying that if there is a tax liability, people have to sort it out themselves. When sending out the cheques, the Department could have put that note in with them.

I take the point that some of the payments were very small, ranging from €1.50 to €240. For example, with the medical card, Mr. Kelly said there is a three month period regarding the record. The Department could have said it would process anything over €20 or some such figure and would actively try to make contact and process it. It is an onerous task for the public to appreciate what is going on, to understand the advertisements in the newspapers and to get the documentation from pharmacists dating back a couple of years. For those on its records, I would have thought the Department should have been in a position to make contact directly with them.

Mr. Kelly

I am happy the Deputy acknowledged there has been significant movement and I accept that people who may not have benefited to the extent they should have under these schemes deserve to have their cases examined. However, in the context of the current year, I am also examining the full range of pressures relating to people who cannot get a service and to the extent that if money flows into this particular scheme, it is not available for something else. I take the Deputy's points but, as I pointed out to Deputy Fleming, had it been possible to do a straightforward exercise where we could stand over the data we had and believe we were covering everything that had to be covered and that we were not overcompensating, that would have been done. I have explained why that was not possible.

In the overall context of a policy position that was adopted by Government on this to the point where the health budget is under the pressures it is this year, we made the case and persuasively argued for a concession to be made in the overall context of the pressures on the health budget, about which I must be conscious in managing that total resource. There is no doubt the committee will endorse my efforts in this regard. This is a balanced solution in that it balances the overall benefit due to people, particularly those who are due a significant amount, against the overall cost, including the cost of administration in the context of many other needs in the health system about which I am conscious daily.

Deputy Dennehy

The issue of medical cards for the over 70s has highlighted a weakness in the system. Most of the work up to now was done on trust and payments were made on the basis of figures coming into the Department. However, every year the GMS board issues a glossy annual report, which is accurate. Pie charts and thousands of figures are used to outline what is paid out to various doctors. The number of doctors involved is 6,721. Is there a question over the figures for all payments, given the inaccuracy of the over 70s figure?

I appreciate the Department is examining the use of new computers and the linkage between the Department, the payments board and GPs. How far will the Department go on that as this is a weakness as we move forward, even in terms of supplying the service to the public? Numerous agencies were shown up on this issue, including the CSO, but if the accuracy and basis of the figures are questionable, we are in trouble. However, there must be a question mark over them.

I am extremely concerned about Deputy Connaughton's comment that there was a rush of blood to the head regarding the decision to allocate medical cards to the over 70s because every Member has quoted the terrible example of the old person in the west who could not afford to go to a doctor and was dying because he or she could not afford to look after his or her health. I have argued for years that medical cards should be given automatically to people aged over 65.

Deputy Connaughton

I wish to clarify what I said. No one has spoken more often on behalf of the over 70s than me.

Deputy Dennehy

I agree with the Deputy and that is why I am making the case. He stated there was a rush of blood to the head regarding the decision to automatically give medical cards to the over 70s. The IMO and GPs have argued it was an incorrect decision and medical cards should be given to people with young families and so on, who got a good deal. However, public servants, for example, had desperate lives because they were afraid of getting sick because when they did, they could not afford to go to a doctor. That nonsense needs to be addressed by the IMO and everybody else involved. Whatever about a miscalculation, this issue involved administrative errors. Costings were sought and the CSO got it wrong. We did not even know how many over 70s there were in Ireland. Deputy Connaughton will support my call for the threshold to be lowered to 65 years.

I refer to the question of overpayments. The principle must be applied in the same way in that money is owed to members of the public. How does that tie in with a concession on the deadline? If people made a claim in five years, for example, they should still be entitled to be reimbursed. If they could afford to go to court or go through the Ombudsman, they would have to be reimbursed. I am extremely concerned about the deadline for repayments and the two or three month concession. The vast majority of the 175,000 involved will not claim amounts such as €2, €4 or €10 but amounts such as €200 would make a significant difference to the people involved.

While we cannot make recommendations or formulate policy, the refund scheme should be open-ended. A small amount is involved and if people make claims next year, they should be reimbursed. I have made this point in the Dáil and to the Minister for Finance and the Minister for Health and Children. Mr. Kelly's budget will not be tangled up because there is a potential liability of between €3 million and €4 million. There should not be a deadline as people are owed money and are entitled to claim it.

I refer to the accuracy of the figures used for various aspects of the GMS. GPs argue that it is not their job to find out whether an individual has died or moved and the State is responsible for the accuracy of the payments. Deputy Connaughton is correct that every patient is listed separately. However, all we get is a list of doctors and the amount they received. They are not identified and it has been impossible to question the accuracy of their panels. However, there is a need to do this because it is also in the GPs interest. Capitation is paid automatically, whereas previously doctors were paid per visit. They are given a certain amount per year for each patient over 70 and it is incumbent on Mr. Kelly to ensure the accuracy of the figures, which need to be updated.

I am concerned that the last time we discussed this issue, the approach was a little woolly in terms of the accuracy of the census figures and other figures from the CSO. How accurate will these figures be in future?

Mr. Kelly

I refer to the accuracy of data generated by the GMS payments board system. The board is there to make payments on behalf of health boards and this is done on the basis of databases held by health boards which then feed into the GMS register. The overall quality of accuracy of anything that emanates from the payments board will depend on how accurate and up to date the medical card register is. The exercise in which we are engaged has taken a net 29,000 or gross 80,000 medical cards out of the system but there must be a continuing management exercise - which is now in place - which ensures people enter and exit the register when they should and that the right response is triggered at health board level. I have been assured by the health boards that they now have arrangements in place to ensure this.

The emphasis in terms of excess cards in the auditing that has taken place on the database in each health board has been on the over 65 age group. There is a reason for this. Anyone under 65 years who has a medical card has his or her position reviewed regularly - on an annual or biannual basis. There is also a reason this was not done as regularly for people aged over 65 years. In response to a great deal of representations from the public and public representatives, a more relaxed attitude was taken to the review of medical cards. People were not hounded. I use that word because it was used at the time when we were asked to do this. People were not pursued in the same way once they were over 65 years. A more sympathetic attitude was taken. This led to an overly relaxed attitude in terms of maintaining these databases but this has been corrected.

As I said in my opening statement, the ultimate solution is a single client index for the entire GMS scheme. I will not guarantee 100% accuracy of everything until we have this in place. We are working on it and will have greater than 99% accuracy in the meantime. The single client index is the ultimate solution. As part of a unitary health system which is part of the development of the health service executive on which we are working actively, we will have a single GMS scheme for the entire population. The payments board will work within a single health system. In that context, this idea of ten different databases will become redundant and it will become much easier to manage this in a more accurate way.

Deputy Dennehy

Deputy Fleming raised the issue and what Mr. Kelly said would solve some of the problems. There must be an onus on the person being paid for supplying the service, in this case a general practitioner or a pharmacist in the case of the drugs refund scheme, to confirm that the individual in respect of whom he or she is being paid is on the database. It is different if a paying client is involved. I refer only to those on medical cards.

Mr. Kelly has informed the committee that eight different people will be responsible for monitoring the databases. If they deal with 5,000 general practitioners in their health board area, the onus is on them to monitor those doctors. Deputy Fleming inquired if there was a requirement of practitioners to notify health boards of the accuracy of the databases. That is where we probably need to examine the contract. We have laboured this point but at that point there must be a tie-in because it is not fair on a clerical officer to be required to monitor all of these GPs but without the right to question the information supplied by them.

I would like to return to the issue of refunding those owed money. I do not make the case for the 175,000 people involved but, as Deputy Fleming said, it appears that a different approach is adopted to taking money from professionals or even elected Members than from elderly people who are now being given two months to claim it back or else forfeit their right to do so. The offer should be left open. Why can it not be?

Mr. Kelly

I will try to explain the rationale for having a specific period. It related to managing the spend in the current year when I know there are many other pressures on the health budget. I felt it was a reasonable action to allow a period of three months following a fairly high profile public campaign in terms of notices in newspapers, on websites and so on. It was well known to pharmacists that this was happening. Much information for patients has flowed from the willing co-operation of pharmacists.

Deputy Dennehy

While I welcome Mr. Kelly's enthusiasm for managing the finances, he is wrong on this issue.

Mr. Kelly

We have extended the deadline. Once I know the bulk of the cost is accounted for, I would be more relaxed about individual applications received after that. I am tied to a specific policy position which we would have to examine.

Deputy Fleming

Mr. Kelly has hinted that, when the bulk of these claims have been dealt with, he might have a relaxed approach to late applications. He has opened the door for the scheme to run on. Did I hear him correctly or did he mean to say that?

Deputy Dennehy

I guarantee that Mr. Kelly will have to pay the claims.

Mr. Kelly

On the practicalities, a team is in place specifically to handle these claims efficiently and issue payment. Once the job is done, that team will disperse. At the end of the day, we are a caring service.

Deputy Fleming

That is fine.

Chairman

On capitation rates and Deputy Connaughton's point that the rate for those aged 68 to 70 years was quadrupled and ranged from €435 to in excess of €600 for those in nursing homes, does Mr. Kelly not agree that the IMO struck an extraordinary deal?

Mr. Kelly

While I know it is not the Chairman's basic point, there is a rationale for having a higher rate for people aged over 65 years or over 70 as against the general population in that there is experience of higher sickness and morbidity levels. There is also a rationale on the basis that, if someone is in a nursing home, the reason they are there is they are at a point of dependency from a nursing, medical and social viewpoint. If they are still managing in their own homes with supports at community level——

Chairman

The capitation rate for patients aged 69 years in a nursing home on a medical card would be 75% less to the GP. Is that not the case?

Mr. Kelly

One can always cite hard cases. In terms of developing policy, we must examine the evidence based on studies of morbidity in certain age groups. A person of 23 years could be so medically, nursing and socially dependent as to have very high medical costs. However, if the general use of medical and nursing care and drugs is examined, it will be found that there is a sharp gradient at age 65. It is a general fact for the population. Our schemes are based on those norms.

Chairman

What is at issue is that, on the introduction of medical cards for those over 70 years, the IMO negotiated an extraordinary deal compared with the normal payments made on medical cards.

Mr. Kelly

The deal arose from a set of negotiations during which those on the management side - the Department, health boards, the Health Services Employers Agency - would have put their best foot forward, as would have the IMO. The result has been the negotiated settlement.

Deputy Boyle

The historical background and the need for new systems to be put in place have been covered by other members. I wish to deal with anticipating future costs. The Society of Actuaries in Ireland brought out a report today on the likely cost of pensions in 2050. The report recommended that the retirement age be raised to 75 years, something we might now consider for the medical card scheme. The import of a study like this is the need for actuarial advice to be sought in advance. We know there were difficulties at the inception of the scheme in anticipating how it was going to operate but to what extent was actuarial advice sought regarding its cost in ten or 20 years and has such advice been sought since?

Mr. Kelly

I will deal with the over 70s issue first. Projecting the forward costs of the GMS scheme on a year to year basis is challenging. It does not all just come down to actuarial data on survival and so on. It comes down to the introduction of new drugs and so on and care being provided in the community. We have our own methods of trying to project costs forward in the short-term.

In relation to longer-term projections, an exercise has been undertaken, presided over by the Departments of Social and Family Affairs and Health and Children, on the longer-term costs of care. That piece of work has been presented to the Government. It looks at long-term costs, which are considerable.

Deputy Boyle

In making such determinations, what factor is put into the equation for medical inflation as opposed to the general rate of inflation? Medical inflation seems to be running at three or four times the rate of general inflation. Is that the type of figure on which the Department of Health and Children is operating?

Mr. Kelly

On a year to year basis we try to estimate the rate of medical inflation. If one looks at the percentage increases in insurance premia in countries where there are insurance based health systems and at our own experience of both pay and non-pay costs, percentage increases, taking account of both pay and non-pay costs in our context, are somewhere in the range of 8% to 10% per annum.

Deputy Dennehy

I was troubled about the accuracy of the database. We are trying to put together a database of special needs services for young people. Who would compile such a database and how accurate would it be?

Mr. Kelly

The organisation of the database is done by a specialist unit, which is central. It draws on information from local areas but the work is done by a specialist unit. Having been around at the formation of the unit a number of years ago, I would have confidence in the database and the statements of need that emerge from it.

Deputy Dennehy

I am worried about fragmentation. Mr. Kelly spoke about the PPS number. Perhaps if everyone is going to be given one number, the system might work. However, it seems that many bits and pieces of surveys and accounting are done, even within Departments, in a fragmented way. There is more to it than simply having a national identity number.

Mr. Kelly

On the general issue of the quality of information and information systems, the Department is conscious of its corporate responsibility to ensure the systems, throughout the health service, are up to standard. We are not in that position. That is the reason we have done much analysis on systems for pay-roll, measuring activity in the health system and general accounting. All of this work has culminated in a national health information strategy which attempts to put together a full picture of what our needs are in developing proper information systems. This will require a legislative framework as well as significant investment. It is all part of the reform of the health system which the Government announced during the summer.

On the specific information element, we have prepared a strategy document which is due to go to Government for approval shortly. It will become the foundation from which we will move on. At its centre is the adoption, for health service purposes, of the standard PPS number in order that we will have inter-operability capacity between health and other systems across the public service.

Mr. Purcell

The two issues have been well aired over a number of meetings. The problem of the medical card is an old one that was not seriously addressed until the fall-out from the extension of the medical card to those over 70 years. There were previous, so called, clean-ups of the databases but they were not as comprehensive as they should have been. People under the age of 65 years also die or move and can be duplicated. I am not going to open that can of worms. We have done well to get to where we are today and great credit is due to the Department of Health and Children for taking a hands-on approach. One could be churlish and say the Department's action was belated but, at last, we are coming to finality on the matter.

The Accounting Officer mentioned the difficulties. Undoubtedly, there were serious difficulties: the different databases; review conditions being relaxed; and different standards applying throughout health boards, even to ordinary medical card reviews. There is history. If one wanted to look back far enough, there may well have been overpayments to GPs since the capitation system was introduced but we will leave it at that for the moment.

With regard to the drug refund scheme, in our zeal to refund individuals who have received underpayments - it is right that this should be done - we should remember that there was also a calculated overpayment to people who had availed of the scheme. This was estimated by the Department at approximately €2 million. I simply wish to tidy up these matters and ensure the committee deals with them in a comprehensive way. The €2 million overpayment was directly attributable to the Department's lapse in not putting the new scheme on a legal basis. I am sorry if we have to end on this rather serious note but it should not be lost sight of simply because it has not been mentioned today.

Chairman

I thank the Comptroller and Auditor General. I also thank Mr. Kelly. Going back to last January when this problem was first identified, he has seized the opportunity to deal with it. It is clear he is dealing with it decisively. I thank him and his Department for finally establishing a very safe structure to ensure there is traceability, which is the key. No area of health should be seen as a black hole from the point of view of funding. There should be accountability and traceability.

From what the Comptroller and Auditor General stated, the €2 million overpayment represents the flip side of the coin. The overall systems now being operated by the health boards and the work done by the Department will mean that we will no longer have the lacklustre systems that operated. It has been good effective work on behalf of the public accounts since January and I am pleased with the overall response from the Department and the way this matter is being dealt with.

We will open the Vote to discussion.

Deputy Fleming

We have had a detailed discussion on a couple of aspects. I have a general question on the Vote. For the calendar year 2001 how many were working in the health service on 1 January and 31 December 2001? Assuming there was an increase, how much of the increase was represented by medical personnel - doctors, nurses and consultants - as opposed to non-medical staff? I ask this question as there is a general view that staff numbers in the health service in recent years have increased from approximately 60,000 to approximately 90,000. The public believes the service has deteriorated despite the additional 30,000 staff. How can an extra 30,000 staff be appointed but the public believe the service is worse?

Mr. Kelly

I have various figures with me but we will try to dig out the specific figures for 2001. I will deal first with the second part of the question.

Deputy Fleming

The big question.

Mr. Kelly

It is the category that attracts most comment. I looked at figures this morning. For example, the numbers in nursing in the period from 1997 to 2002 increased by 25%. That is not a percentage increase one hears very often in public. The figure that attracts most attention is the number categorised as clerical and administrative grades. Currently, in 2003 terms, there are in the order of 15,000 out of a total staff of 96,000. Of these, from rigorous analysis of who are they and what they do, 10,000 are directly involved in supporting patient services. Therefore, some 5,000 are in managerial posts, from what we call grade 8 upwards - headquarters posts or posts in the field managing a particular service. In my own analysis and having talked to people working, for example, in banking, insurance and other service industries, I do not believe the 5,000 figure would be regarded as excessive by norms elsewhere.

On the other hand, we have taken, as a particular objective in the development of the reform proposals, the commentary on the health system that there are too many administrators. How do we address this? I will not go through the whole rigmarole but one particular feature to which I would point is the development within a single health service executive of a national shared services centre. The idea is that, through the standardisation of basic administrative processes throughout the system, the centralisation of expertise around particular functions like payroll, procurement, accounts, etc. and working to the principles that have been found to be successful elsewhere, we can expect to drive an efficiency gain provided we make the necessary investment in systems.

We are taking very much on board the objective of minimising administrative and managerial overheads in the health system. In saying this I will also say managers are performing essential functions. I cannot do away with the jobs they are doing. They have got to be done. There are essential posts. In so far as we free up resources in this way, it is also our intention - again, this is part of the reform strategy - that freed up resources will be released to front-line services. Therefore, it is not a taking out of the health system but a reprioritisation towards front-line services.

For 2001, I offer to send the Deputy the opening figure, the closing figure and the percentage change in each category.

Deputy Fleming

I am very happy with that. Mr. Kelly mentioned a 25% increase in the number of nursing staff but the general figures the public has in mind show that the total number of staff went from 60,000 to 90,000. Mr. Kelly has now said 96,000. There is a perception that there has been a 50% increase in the number of staff. If the number of nursing staff only increased by 25%, another category increased by 75%. The 25% increase in the number of nursing staff does not seem in line with increase in the total number of staff that the public believe happened in the health service. Even though 25% is a sizeable figure, it is considerably less than the percentage for the total increase.

Mr. Kelly

Sure.

Deputy Fleming

I will take the figures when Mr. Kelly sends them to us.

Mr. Kelly

Let me comment on that general point. First, there is the perception of the health system. The perception usually projected is the one that one reads in the newspapers, etc. There are different projections. I can provide as much anecdotal evidence from people who have had a very good experience in the health system as from those who have not but I never read about this anywhere. However, the organised work on this done, not by the Department but by an independent body, the Irish Society for Quality in Health Care, found satisfaction levels of 90% to 95% in acute hospitals and a higher satisfaction rating in aspects of primary care, particularly general practitioner services, etc.

Sometimes the perception is different from the reality. When it comes to making a judgment about the people concerned in terms of where they are and what they are doing, etc., we also have to look at the fact that 1 million patients will be treated this year in acute hospitals, about whom we do not read very much. People are rightly concerned about the group waiting for a procedure, either because they are waiting in the accident and emergency department or because they are waiting for an elective surgical procedure. I am equally concerned about them. When we talk about the perception, it should be balanced.

Deputy Connaughton

I would like to speak about that perception. Mr. Kelly talked about reprioritising, which is true. Most people tell me that once they access a bed in a hospital, they are extremely well looked after. The problem is to get the bed.

I have a question which relates to the current year, not the year under review. Given the huge exposure in the media and with the imminent onset of winter and the famous winter vomiting bug which will inevitably come, are the processes in place to ensure, as far as possible, there will not be overcrowding resulting in patients being treated on trolleys at acute hospitals? Will all of the beds closed be opened, particularly in acute hospitals in Dublin?

Mr. Kelly

While I have not been briefed in detail to answer the Deputy's question, I will do my best. One of the major things we can do to manage that is to organise anti-flu vaccinations for the relevant cohorts of the population. In that regard, the Minister launched the 2003 programme yesterday and, in the next week or so, there will be a publicity campaign targeted primarily at those in the older age groups and in a vulnerable position with regard to flu.

Yesterday the Minister and I met representatives of the Eastern Regional Health Authority and a number of the chief executives of the Dublin hospitals on precisely the question raised by the Deputy. Various steps are being taken in preparation for the surge we know we can expect. For example, in the Dublin hospitals there is a cohort of long-stay patients for whom there has not been a place of referral from the acute hospitals after the completion of treatment for their acute episode. For a very significant number of these, places have now been identified. Special funding has been put in place to address this problem over the coming weeks. There is also scope in some of the Dublin hospitals to reopen beds which were closed for management and budgetary reasons over the summer period. This will also be done.

Whatever health system one looks at around the world such as the highly regarded French system which had its problems during the recent heatwave, the NHS or other health systems, one encounters peaks which can be very difficult to manage at short notice. We have a responsibility to anticipate these surges in so far as we can and try to create flexibility for managing them. On the problems experienced in winter, we are doing all we can with regard to the programme in the eastern region and a similar programme in the Southern Health Board area, particularly Cork, in relation to the long stay-population in hospitals.

Deputy Boyle

On a point of clarification in relation to consultancy services, are the reports prepared by health service consultants as distinct from hospital consultants as such?

Mr. Kelly

They are management consultancy reports.

Deputy Boyle

Why was it half the anticipated level in the year in question?

Mr. Kelly

We are not usually questioned on figures which come in under budget. I do not have that specific information with me but we will follow up and clarify the position for the Deputy. In general, we have a level of spending on consultancy services which I do not regard as excessive by comparison with other Departments and given the size of the health system. The increase is generally in line with inflation, year on year, apart from a particularly large study.

As to the reason the provision for 2001 exceeded actual expenditure, it might relate to the timing of payment for a particular study. I will have to look at the detail. However, from a brief consultation with my colleague, we believe it involved a particular study of the corporate status of the VHI, in respect of which we expected payments to be made in 2001 but, in fact, they carried forward because the study was not completed.

Chairman

I understand a value for money study has been carried out of waiting lists. When is it expected that the Minister will place it before the House?

Mr. Kelly

My recollection is that we received it fairly recently, possibly in the last number of weeks. I know from discussion with the Minister that he does not intend to delay it. There is a timeframe within which it has to be presented to the House. I expect this will take place during the coming weeks.

Chairman

It is imperative that such an important report is debated in the Dáil as quickly as possible, having regard to the issues and concerns arising. It would be encouraging to receive an assurance that it would be brought forward sooner rather than later.

Mr. Kelly

I will certainly take that point back for discussion with the Minister.

Chairman

I thank Mr. Kelly and his staff for their assistance to the committee. I also compliment the Comptroller and Auditor General on his outstanding work on this matter, particularly in relation to the two critical issues of medical cards and the drugs payments scheme. This has resulted in a very satisfactory conclusion.

The witness withdrew.

The committee adjourned at 1.25 p.m. until11 a.m. on Thursday, 2 October 2003.