Dáil Éireann debate -
Tuesday, 24 Mar 1981

Vol. 327 No. 12

Health Contributions (Yearly Reckonable Income) (Variation) Regulations, 1981: Motion.

Minister for Health (Dr. Woods)

I move:

That Dáil Éireann approves the following regulations in draft—

Health Contributions (Yearly Reckonable Income) (Variation) Regulations, 1981—

a copy of which regulations in draft was laid before the House on 18th March, 1981.

Subsection (3) of section 9 of the Health Contributions Act, 1979, provides that the Minister for Health may by regulations vary the health contribution rate and the ceiling level on which the maximum level of contributions payable in respect of an individual in any particular contribution year is assessed. Subsection (5) of section 9 requires that a draft of the proposed regulations shall be laid before each House of the Oireachtas and that the regulations shall not be made until a resolution approving of the draft has been passed by each House.

The original ceiling level specified in the Health Contributions Act, 1970, was £5,000. This was varied to £5,500 before income related health contributions came into operation in respect of the contribution year commencing 6 April 1979. That sum was varied to £7,000 under regulations approved by the Oireachtas in March 1980, and applied to the contribution year commencing 6 April 1980.

The proposed new ceiling figure is £8,500 and it is intended that this will apply for the contribution year commencing 6 April 1981.

The present rate of health contribution is one per cent, the same level as was fixed for the contribution year 1979-80. It is not being proposed that any change in the contribution rate will be made in respect of the contribution year 1981-82.

The proposed ceiling of £8,500 is the same as that specified in the Social Welfare (Amendment) Bill, 1981, which has been passed by the Dáil and is to be debated tomorrow in the Seanad. It is proposed that the new ceiling for social insurance purposes will also operate from 6 April 1981. The same considerations apply in the case of the proposed health contributions ceiling, as the basis for determination of variations in the ceiling levels in both codes is identical. When determining the income ceiling for any given year I am statutorily obliged to take account of any movement in the Transportable Goods (Earnings) Index. In the year ending March 1980, the latest available date, earnings increased by approximately 20 per cent. Accordingly the ceiling of £7,000 when increased by 20 per cent becomes approximately £8,500.

For the purposes of collection of health contributions income is divided into three streams:—

I—Income which is liable for income 1 158tax under the PAYE system and which is tax under the PAYE system and which is derived from insurable employment.

II—Income which is liable for income tax under the PAYE system but which is not derived from insurable employment.

III—Income which does not fall within the previous categories such as income from farming, the income of self-employed persons and investment income.

As I explained last year, the collection of health contributions from employees is integrated with the administrative machinery for the collection of pay-related social insurance contributions and redundancy contributions through the PAYE system. It is necessary that the ceiling levels for social insurance, redundancy and health contributions should be identical, otherwise the administration of the collection system would be more costly and far more cumbersome. The co-ordinated arrangements also facilitate employers in the administrative processes involved at their end.

The collection of health contributions from individuals with income which is liable for income tax, but which is not derived from insurable employment, is arranged through the tax collection system. The collection of health contributions in respect of income derived from farming is administered by health boards.

The revised ceiling level as it affects employees will be the same in the case of the self-employed, farmers and other individuals who are not insured under the Social Welfare Acts and the draft regulations provide accordingly. The purpose of the ceiling level is to fix an upper limit on the amount of the health contributions payable in respect of any one individual in a particular contribution year.

The total amount received in health contributions in the calendar year 1980 was £44.7 million. It is estimated that the total amount which will be received in the calendar year 1981 will be £48.6 million. Part of the estimated increase in 1981, about £700,000, is attributable to the raising of the ceiling level from £5,500 to £7,000 in 1980.

The balance is attributable to the additional receipts deriving from increases in incomes generally. The amount which it is estimated will accrue in the contribution year 1981-82 from the raising of the income ceiling is £800,000.

The proposed ceiling level of £8,500 is the same as that which it is proposed will also apply to health eligibility. In accordance with the terms of paragraph 32 of the Second National Understanding for Economic and Social Development it is intended that the statutory health eligibility limit will be increased from £7,000 to £8,500 with effect from 1 June 1981; the relevant income being that earned in the year ended 5 April 1981. The income ceiling for health contributions applies to the year ending 5 April 1982 and the relevant income is that earned in the year ended 5 April 1982.

The reasons for the difference between the operational dates mentioned are, firstly, that it is necessary in the case of health contributions to comply with the statutory provisions that the ceiling level change operates from the beginning of the contribution year, that is 6 April 1981. Secondly, it is necessary to have provision for a June commencement date in the case of health eligibility so that in appropriate instances individuals can have available their forms P.60 as evidence of their income in the tax year ended 5 April 1981.

The position as regards eligibility for health services is that persons with income below the limit are entitled to the full range of hospital services in a public ward and to specialist diagnostic and treatment services on an out-patient basis without charge. Persons over the income limit are entitled to the same range of services but are liable to pay fees to consultants. The community as a whole is also entitled to avail of the drugs refund scheme and free drugs for specified long-term illnesses. Preventive services and infectious diseases services are also available free of charge.

In my remarks I have, by way of giving general information to Deputies referred to certain matters which do not affect the draft regulations now before the House. As I have explained, the purpose of the draft regulations is to fix the upper limit on the amount of the health contributions payable in respect of any one individual in the contribution year commencing 6 April 1981. I now ask the House to approve of the Health Contributions (Yearly Reckonable Income) (Variation) Regulations, 1981 in draft.

Mr. R. Ryan

I am grateful to the Minister for having made a more expanded statement than last year. When a proposal of this kind is made there is always a tendency on the part of bureaucracy to give the shortest possible statement.

The information the Minister has given regarding the income that will be derived from the increases in contributions gives us a broad idea of the consequences of the changes being made by the regulations. I say deliberately that it gives us a broad idea because I am still very confused about the matter after listening to the Minister and reading the figures.

The Minister has informed us that the total amount received in health contributions during the calendar year 1980 was £44.7 million. I understand that health contributions were increased from 6 April 1980 — I hope I am correct in that assumption. Therefore, the figure of £44.7 million for 1980 would not represent the figure for health contributions for a full 12 months. In his speech the Minister said that the total amount to be received in the calendar year 1981 will be £48.6 million. Taking one year with another, it appears to me the increase should be much greater than the £3.9 million which the Minister has mentioned.

By way of explanation the Minister said that about £700,000 is attributable to the raising in 1980 of the ceiling from £5,500 to £7,000. If one were to make a broad calculation on the basis of 12 months, the increase should be of the order of £8.5 million — say £9 million — instead of the £3.9 million mentioned by the Minister. There may be some statistical or administrative explanation for the variation but it does not appear to me that any administrative problem can explain away such a vast difference between what one could reasonably expect to be the result of a 20 per cent increase in health contributions. Broadly speaking, taking one year with another a 20 per cent increase in health contributions would be of the order of £9 million but the Minister has given us an estimate of £3.9 million.

Perhaps for once the Government are conscientiously calculating the serious depths of the recession and are assuming there will be a very considerable fall-off in the number of people at work, as a consequence of which the revenue to be obtained as a result of a 20 per cent increase in health contributions will mean an increase of only 10 per cent in the revenue earned by the State. That appears to be an appalling situation. I accept that the Minister and his advisers have been objective in their assessment of increased income, but if a 20 per cent increase will yield only a 10 per cent revenue increase this indicates an alarming degree of pessimism on the part of the Government that the employment situation will get much worse in the coming year.

When the ceiling of £5,500 was set in 1979 the trade union movement then suggested that the ceiling for eligibility, and therefore for contribution, should be in the region of £7,000 to £8,000. The fact that the Government fixed a very much lower figure indicates the degree to which the present or proposed ceiling falls far short of what many families know is the real level of need in relation to health expenses. The Minister cannot claim today he is doing any more than maintaining a bad situation, where there is not adequate provision for the health and medical needs of many families.

I am concerned that because of the very sharp increase in inflation in the past three years, a rate that in 1981 will be at least as bad, incomes have escalated at a rate which means that the real net contributions by many families towards health services far exceeds any increase in benefits they can obtain. As a result of the economic and social policies of the present administration since 1977, we have come to the point where the poor are getting poorer and the rich are getting richer. Percentagewise the rich enjoy a much higher increase in their income than the ceiling the Minister is fixing under the legislation dealing with health contributions.

In his reply I should like the Minister to deal with another problem which is a serious cause of scandal, inefficiency and drop in productivity. I refer to a situation where quite a number of workers are tempted to avail of their rights under the law as it exists and applies to offer evidence in the closing months of the financial year that they are disabled and unable to continue work. It is common knowledge — the dogs in the street know it — that a number of workers opt to be declared ill in the closing months and weeks of every financial year because by so doing they can keep their annual income at a level that enables them to benefit from the health and social welfare codes. If they continue at work and receive a net income each week which puts them above the level of eligibility they find themselves and their families at a serious disadvantage. This is the poverty gap which exists because we have not yet succeeded in refining our social, pay and industrial codes in such a way as to stop people being tempted to manipulate the jungle of social, health and industrial laws in order to keep themselves within the range of certain benefits of which they would be deprived if they continued at work. I realise it is not an easy matter to tackle this problem. I hope the Minister and his colleagues in Government are making an effort to refine the laws to prevent such situations arising. People are applying more energy towards taking advantage of the law which is intended for those seriously ill or seriously disadvantaged.

At one time it was thought that the only people who engaged in intricacies of this kind were among those who were heavily taxed and who therefore engaged in tax avoidance or even tax evasion in order to get for themselves the best possible net package, legitimately or otherwise. This does not apply to this country alone; it is happening all over the western world. Governments have attempted to make the law more humane and to deal with intricate cases and with the problems of individuals and families. But we have now arrived at a stage when our social code has within it serious disincentives to work and when, naturally, some people are attempting to avail of these disincentives. When those who have a greater aptitude for work see others getting away with it, they in turn are attempted to avail of the various loopholes which exist in the law in order to give themselves what some people would regard as an easier if a more boring living.

Therefore, there is a strong need to be more realistic in our welfare code so as to avoid situations of complexity which a few people of ingenuity can manipulate to their advantage and which in the end causes other people to follow their example and provokes a considerable amount of resentment among the general body of taxpayers, most of whom are only too willing to work but, understandly, less willing to pay considerable amounts of tax. No matter how willing people are to pay tax, that willingness can be considerably reduced when they see others abusing the system, as it is called. It is up to us as legislators, and to the Government, to bring forward proposals to prevent people abusing the system in a way in which it was never intended. Apart from these remarks, we support the proposals.

Mr. Tully

This is a necessary proposal which must come before us from time to time. One of the difficulties about it is that such measures are dry as dust and it is very difficult to make them readable. I sympathise with the Minister and his officials in their attempt to make this type of thing appear interesting and at the same time to cover the necessary points. When this sort of thing is being introduced, Governments from time to time attempt to put their stamp on it. In this instance it is the 1 per cent.

To say that there is not an increase in the amount because the 1 per cent has been left is not true. One per cent of what was being earned when this was introduced for the first time and 1 per cent of what is being earned now are two different things. Everybody appreciates that, and therefore there is no point in saying there has not been an increase. It means a substantial increase this year. Like Deputy Ryan, I am surprised at the small amount of additional money it is estimated this will bring in. Without discussing the matter with Deputy Ryan, I came to the same conclusion as his—it seems the Government appreciate that unemployment will get very much worse because otherwise they would have given a much more realistic figure.

There are a few aspects of this which I will refer to briefly, one of them being the services that will accrue from payment of this money. The Minister is on record on three occasions recently as suggesting that too many people are going to hospital. He may correct me if he wants to, but I read in the newspapers recently that he had suggested people would be better off if they could be treated at home rather than going to hospital and that some doctors were inclined to send people to hospital rather than treat them at home. I do not know whether that is true, but I should hate to think we are reaching a stage when a Minister or anybody else would publicly state that people should stay at home rather than go to hospital when they are ill. When a person is ill and it is recommended he or she should go to hospital that is where he or she should go.

The trouble is that we are not keeping pace with the demand for the type of hospital treatment needed. Like most public representatives, from time to time I find it necessary to visit people in hospitals and I am alarmed at the lack of standards in some hospitals. This in the main has been caused by the lack of finance. It is something the Minister must give great attention to. We have a situation where many of our hospitals are unable to cater for those seeking admission, and this makes the Minister's comment to which I have referred all the more serious. If the Minister feels there is not sufficient accommodation or, if there is, but there is not sufficient money to pay the staff to look after the patients, saying that people should not go to hospital is not the answer.

Another angle is the system of collection of this fund. It happens often in the country that a person with a small piece of land goes to work outside the farm. Such people must have deductions made from wages or salaries. Such people must also pay on their land valuation. That is anything but a perfect scheme. There should be some other system. Many such people who have paid in and who do not know what the score is do not get the advantage to which they are entitled and many of them pay more than they should.

Another difficulty arises in cases where people are alleged to be letting land. I came across a case of this the other day. A person on whom a substantial demand was made had been letting land up to three years ago when he was working for hire. Then this person began to work the farm as a full-time occupation. However, a demand was sent to him not once but twice, with a threat of action if the amount was not paid. It was alleged that the Revenue Commissioners or somebody else had stated that the person was still letting land, although it was three years since the land was let.

This is the kind of thing that does not endear the Department of Health to the ordinary rural taxpayer. More attention should be paid to this. Even people who have paid—I refer particularly to farmers—get a further demand for the previous year and in 12 months' time they may get a demand for three years. It is no use blaming the computer. Practically all civil servants fall back on the computer now: if anything is wrong do not blame them, blame the computer. It might be a good idea if they would go back to the good old days when people who could count did the counting and did not depend on a computer. We all know the computer can only issue what is fed into it.

We should be careful about this suggestion that there has not been an increase because this has been left at 1 per cent. One per cent now itself produces a substantial increase. Does the Minister feel or do the Government feel that this is like the turnover tax long ago, something that can be manipulated and if the necessity arises later the 1 per cent can become 2 per cent or 3 per cent? This is something which has got to be watched very carefully. I do not quarrel with the figure of £8,500. I suppose we are reaching a stage where medicines have become so terribly expensive that it is right that healthy people should pay for those who are not so healthy. That system cannot be condemned, provided the amount demanded from them is not too great.

Like the system in the voluntary health insurance, perhaps the Minister and his Department should look at the whole system operating under this to see if there is not some way in which a wider cover could be given to ordinary people. It is true that we have now reached a stage where, as one man said to me recently, he was not well but he could not afford to be sick. It is too bad that someone seriously ill is unable to go to a doctor; or, if they do go to the doctor and get a prescription, they are afraid to go to a chemist because of the costs involved. Perhaps the Department might consider the whole question of health services in general and see if there is some way in which they could be made more attractive. If someone living at home who is carrying on a full-time job, even if he is self-employed, does not go to hospital, it is often far more expensive than if he did so.

The question of professional fees charged to people who go to hospital and who get, as the old saying goes, bed and board, is an aspect of health which has to be looked at by the Department of Health. Somebody must attack the system which can, literally, put a person out on the road if they have a long stay in hospital and have to pay fees which, normally, they should not have to face. There are still people who like to say they will pay their way. It is too bad if some independently-minded man in hospital is paying his way at the expense of his wife and family. I know of at least one case where this happened, where so much money had to be paid out that, eventually, the family were left in very poor circumstances.

We have no objection to the making of the new order but we feel that perhaps the Department of Health could be a little bit more imaginative about the whole question of health. We have reached a stage now where another big step forward is needed.

Minister for Health (Dr. Woods)

I should like to thank the Deputies for their contributions. I know this is a very technical measure and quite complicated in its operation and administration. Consequently, it is not so easy to see exactly how the contributions operate. I should like to thank Deputy Ryan for his remarks in relation to the statement. We tried to be helpful in relation to this measure. I am sorry he still felt somewhat confused. I can understand why, because the problem is that your percentage increase only applies to the ceiling. It does not apply to the 1 per cent. If it applied to the 1 per cent, you would get the effect Deputy Ryan was postulating. But since it does not apply to the 1 per cent, it has a minimal effect on the total income, together with the fact that you have a sliding-back all the time. This is for three-quarters of a year; it can work out at less than that in the first year, in effect. That is the fundamental difference. It is only for those people between £7,000 and £8,500 that you are getting that sliding back effect.

Mr. R. Ryan

One per cent of the 20 per cent?

Dr. Woods

It is probably not quite that either. I think the Deputy will recognise that the 1 per cent not increasing has an effect on the total income. It only applies to that portion between £7,000 and £8,500. In addition, those people who increase at a lower level will not have the increase of the order of £7,000 to £8,500. There are far more people at the lower level, so the actual amount of money is considerably smaller than would be anticipated. That is one of the interesting points in relation to this discussion that should be recognised. Health services currently cost us slightly in excess of £800 million and the total contribution from the employees is estimated to be in the order of £48.6 million. It is reasonable to say therefore that the State is not leaning unduly on the employee in relation to charges for health services.

As Deputy Tully said, the health services have become very expensive, and the State carries the vast bulk of the cost of these services. If you put the cost at £800 million, the State is carrying at least £750 million of that amount. Therefore the service in relation to the direct contribution cost is particularly good. This is an agreement which came under the national understanding and it is honouring a further part of the national understanding. Anyone who comes under the £8,500 in the year ended 6 April this year — you are talking about the last year's income — will be entitled to the full range of hospital services in a public ward and to the specialist, diagnostic and treatment services on an out-patient basis without charge. If for that previous tax year your income exceeds £8,500, the only thing you will not have will be consultants' fees. That is very easy to cover separately. Everything else is covered: the stay in hospital in a public ward, the cost in the hospital and even the treatment services on an out-patient basis are covered. Consultants' fees can be covered for a very small cost through the VHI and that is what most people do. A husband and wife with three children can insure themselves for that cover with the VHI for approximately £37 per annum. That is tax allowable, which would reduce it to £24 per annum. You are now talking about people over £8,500 in last year's earnings, not in this year's earnings. They are probably going to be considerably over that amount in this year's earnings. To ask that couple to provide £24 per annum to cover consultants' fees is not asking too much. It enables us to operate a system which has a balance of voluntary and statutory, something which is being increasingly recognised as a very valuable mix of service and which is in many ways more effective than a totally State-controlled system which is in England where there is a trend towards this VHI kind of cover for at least some of the areas.

I think that I have covered the question about consultants fairly well. Deputy Tully mentioned that the unemployment must be rising. In fact we are not expecting that. I thought that the Deputy was happy to get that point in, but in effect we take in the same estimates as we are given in the finance arrangements in the budget early in the year and there is no arrangement in that respect here in this provision. Deputy Tully made the most of the 1 per cent by saying that it increases each year, but he will recognise that on the cost of the £850 million it has slipped a long way behind the cost of the services now, and one of the big problems on the income to the Department of Health is that provision of new services other than through the budget and taxation generally is restricted by 1 per cent. Therefore in effect I accept what the Deputy says, that it does increase. The trouble is that it does not increase in any way in relation to the increased costs of the health services.

Deputy Tully also raised the question about some quotation somewhere about me suggesting that people should be debarred from hospital to save hospital expenses. I have not seen that quotation, but I do not want to debar anyone from hospital.

Mr. Tully

Three times.

Dr. Woods

People tend to quote things ad nauseam and it is hard to keep up with them at times. That could arise, certainly in relation to the elderly in particular, where as the Deputy knows, there has been a practice in the past which arose very much in the mental and psychiatric services where people tended to be put into beds and left aside from the community generally. The emphasis which I will be making here is that we want more of the elderly people to be sustained and helped to stay at home and to have the facilities to do this. For instance, this can arise in conjunction with the opening of the new day hospital where people can come in on one day a week and get physiotherapy and various other kinds of assistance and therapy and this in effect means that they do not have to take up hospital beds and they can stay in the community. It is in that context that I would be encouraging that kind of development. Apart from it being better for the individual, in any event, it is also better from the point of view of the use and administration of the services.

Mr. Tully

Wearing his other hat, the Minister could help by giving them a little more for staying at home.

Dr. Woods

I would love to, and as soon as that becomes possible the Deputy can be certain that if I am involved I will be very anxious to do that. Taking the question of hospitals, the same problem arises that you have people going into regional hospitals or general hospitals who could quite readily be treated locally. We have had some excellent examples of this where the local doctors have given treatment in a hospital which was preserved locally for that purpose and people go on to or come back from the general hospital and thus we get a more efficient service overall.

Deputy Tully mentioned one or two things about the farming side which I know to be quite close to his heart. To clarify that point, if a farmer has another job he should tell the health board who will wait until the end of the year to take their contribution from the farming profits.

Mr. Tully

No, they will not. They will demand it and say they will send it back to him.

Dr. Woods

I am given to understand from the official side in the Department that that is the situation.

Mr. Tully

Will the Minister tell the health boards that?

Dr. Woods

We will follow that point and see. In regard to the other side of the contributions, I am not making any change in the farming multiplier for the contribution year 1981-82. It will remain at the current level of 117. This is in recognition of the fact that the incomes have not grown in that area as they have in the other areas generally and this is the fairest thing to do in the circumstances of this year.

On the question of standards and needs generally we are doing a great deal to keep up with the needs. If we look at the employment of nurses, consultants and various other people within the last three or four years we will find a very considerable increase, and I can bring those figures to the House at any time. At the same time we have also a very major reorganisation of our hospital services under way currently and this is beginning to pay off in a fairly substantial way at this stage. We have tremendously improved services now available in different parts of the country. We note that we have the Cork Regional Hospital, very modern with very high standards and top class facilities. Towards the end of next year we will have Beaumont Hospital which is again a major development and gets away from two very old facilities in the central city, Jervis Street and St. Laurence's. I would like to pay tribute to the medical staff and the nursing staff who have worked in these hospitals with fairly outdated facilities and have provided a very high level and standard of service. We have the new developments in St. James' Hospital which began towards the end of last year. The building and construction development there is under way and that will deal with a large part of the south side centre city. The new Tallaght Hospital board were appointed just recently and they are undertaking the planning of major facilities in Tallaght. We will have shortly the finishing of the new major extension in Letterkenny Hospital and major upgrading of facilities and services there. Tralee General Hospital is also almost complete and we are pushing on all the time with some other developments.

We have problems of overcrowding in some areas and, I am happy to say, a major growth in population. I am trying to deal within the resources available to me with the key pressure points in this area. I have had extended discussions with the health boards in relation to that and I will continue to pursue that need. While I accept that we have some facilities which are not of a standard that we would like to see, we are doing a great deal to update and upgrade these. We are envied to some extent by people outside who see the operation of these facilities and the standards to which they are developing and who comment on them from time to time. We intend to pursue as vigorously as possible within the resources we have available the improvement of those services.

Deputy Tully mentioned the healthy paying for the not so healthy. I would not like that idea to go around too much. With 550,000 admissions to hospital in the year not very many people can regard themselves as above hospital. Most people start off in hospital in the first instance, and that means nearly everybody nowadays. Fewer than 1 per cent now do not start off that way, although earlier on in our time it was somewhat different. Everybody is involved and everybody is sharing and I would not like people to go away thinking that there are those who are not. We often do not think sufficiently about the extent to which we utilise in our families the services which are there and the extent to which we depend on them and need them. It is amazing what the Deputy got into in such a short time.

An Leas-Cheann Comhairle

The Chair is beginning to wonder where we are going.

Mr. R. Ryan

The Minister is doing even better.

An Leas-Cheann Comhairle

The Minister is doing better than any of the other Deputies.

Dr. Woods

I am at the very end now.

Mr. Tully

The Minister mentioned the hospitals which are doing well. He did not mention Trim.

Dr. Woods

I might be able to get around to one or two yet. I assure the Deputy that the question of services generally is something which I keep under review with the Department and on which I will have discussions with the VHI board with a view at whatever time is possible to improving the services and the kinds of services which are available to people generally. I would like to thank the Deputies for their contributions and for supporting this measure.

Question put and agreed to.