asked the Minister for Health if he will make a statement regarding reports that the VHI D and E plan insurance schemes are incurring serious losses as they are grossly underfunded.
66.
Ceisteanna—Questions. Oral Answers. - D and E VHI Plans.
65.
asked the Minister for Health in regard to the two new VHI plans, D and E introduced in April 1986 if (1) there is a stipulation that the plans be self-financing with subscriptions income matching expenditure on medical claims, (2) the VHI board estimated that 110,000 members would be required to accept the new plans in order to adhere to the self-financing concept, (3) the actual accepting members were 58,409 at 28 February 1987, (4) the pay-out in claims under the D and E plans has vastly exceeded the subscriptions income for these plans; the amount of the excess for 1987; his views on whether the excess for 1988 could be three times greater than the 1987 figures; and if the announced overall VHI losses of £15 million for 1987 show that the stability of the VHI system is under threat.
I propose to take Questions Nos. 65 and 66 together.
VHI plans D and E are required by me to be self-financing in as far as is practicable having regard to the necessity to ensure an overall VHI premium structure which embodies the principle of community rating. This means that premia are not varied according to individual risk status or the risk elements inherent in different age groups.
The projected required membership figure of 110,000 was calculated on the basis of the use of the new high technology hospitals solely by plans D and E members. In the event these hospitals are now also being used by plans B and C members although at a reduced rate of recoupment. This does serve to lower the level of plans D and E membership necessary to achieve a break-even situation.
The figure of 58,409 given by the Deputy as the membership of plans D and E at 28 February 1987 is correct. The membership of these plans stood at 83,729 at 29 February 1988. I am satisfied that plans D and E pose no problem to the financial stability of the board's operations.
The losses mentioned by the Deputy refer only to underwriting losses on the VHI's insurance business and are a normal feature of that business. However, when income from investments is taken into account, the net figure for losses on the board's overall operations in the financial year ending 29 February 1988 is likely to be in the region of £6 million. In this context I must mention that the board's reserves stood at £29.4 million in February 1987, an all-time record.
Would the Minister state clearly whether the failure of plans D and E to achieve the targeted break-even figure will have a serious effect on the extent of the losses now being incurred by the Voluntary Health Insurance Board? Surely the Minister must agree that this poses a serious threat to the continued stability of the VHI board who, in the Minister's own words, are dependent on their reserves, their investment portfolio, to sustain their current operations. Would the Minister agree that that position cannot be allowed to continue indefinitely? In view of the fact that the board are now incurring such heavy losses, and projecting heavier ones in the future, would the Minister reconsider the decision in relation to plans D and E and the extension of the other two plans, B and C, to the Mater Private Hospital? Furthermore, would he say whether it is proposed that members of the B and C plans will be allowed to use the Blackrock Clinic, which surely involves a deviation from the original commitment that these hospitals would be self-financing?
In order to prevent cross-subsidisation of plans D and E — which cater for the new high technology hospitals — by the remainder of the VHI membership under plans A, B and C, the Minister for Health, at the time of introduction of plans D and E, insisted that these be self-financing. Obviously, on the basis of the facts stated at this stage they are not proving to be so self-financing but rather are being financed from the reserves of the VHI. The VHI board are obliged, by direction of the Minister of Health, to operate a policy of community rating in setting the premia to be paid by their members. The effect of this policy is to avoid loading premia for increasing age or poor health status.
Although some plans may show a loss in cash terms, each plan is self-financing when considered in actuarial terms consequent to that policy of community rating. The board's actuarial pricing of the premia of the various plans ensures that each plan is self-financing. The VHI board originally estimated that a membership of 80,000 would be necessary under plans D and E if those plans were to break even. That figure was calculated on the basis of projected charges at the new high technology hospitals and on an average membership age of 34 years. When it transpired that the charges would be higher than anticipated and that the average age was emerging at approximately 40 years, the VHI revised their projected requisite membership figure to 110,000. All these figures were estimated on the assumption that plans D and E members only would use the new high technology hospitals. However, the Mater Private Hospital has been accepting plans B and C cover member-patients for some time. This, combined with the fact that not all the beds at the Blackrock Clinic are VHI-approved, means that the potential expenditure on plans D and E claims is reduced and those plans can be self-financing at a lower membership level.
A Cheann Comhairle——
I am sorry, Deputy Flaherty, at this stage I can hear only the Deputy who tabled the question.
I understood that, in accordance with the agreed procedures, Deputy Allen could nominate——
I am not aware of that, Deputy.
Deputy Allen and I contacted the office and understood it was possible to do so.
I repeat, Deputy Flaherty, that at this stage, in dealing with questions nominated for priority, the Chair hears only the Deputy who tabled the question and, if he is not present, that is too bad.
We were advised otherwise.
The Deputy ought to have consulted me in the matter.
Would the Minister agree that the £15 million loss projected for the VHI in 1987 has been the main reason for the increase of 8.5 per cent in members' subscriptions or thereabouts, that has been agreed? In view of the figures the Minister has been giving the House, and the projected losses, would he not agree it is inevitable that a further increase of approximately 6 per cent will be sought by the board next autumn? Furthermore, would he agree that it is time to reconsider the whole question of the extension of VHI cover to the high technology hospitals which are causing such heavy losses?
The position is that we have not received any application for such an increase. I might add that the board's reserves have adequately covered the losses projected of approximately £6 million.
But there has been an increase of 8.5 per cent agreed.
In relation to an extension of the actual hospitals services, Deputy Molloy might be interested in learning that his proposals voiced in this House would add to the problems of the VHI. Perhaps he would like to go into that in detail.
I do not expect to be answered by the introduction of a red herring. If the Minister wants a lecture on what is PD policy in relation to funding of the health services, I will be happy to take him aside and hopefully convert him to that policy as we have succeeded in doing in a number of other areas. Is the Minister at all concerned about the proposed extension of B and C cover to the Mater Private Hospital? Is it proposed to extend the B and C cover to the Blackrock Clinic also?
Basically, this is a matter of the VHI dealing with the management of the contract insurance board. As regards the details of any extension of B and C cover, that is a matter for consideration. We shall be discussing with the VHI the question of any extension.
A final supplementary.
Surely the VHI will not act independently in a matter of this kind. They are a semi-State board. Surely the approval of the Minister and the Department is sought and required before such a fundamental change could take place in the extent of the cover being offered by the VHI. Would the Minister confirm the extension to the Mater Private Hospital and could he inform the House whether discussions at any level have taken place with the Minister or officials in the Department of Health and VHI board officials with regard to the extension of B and C cover to the Blackrock Clinic also? Are any discussions at all taking place, or does the Minister know?
The Mater Private Hospital has been accepting plans B and C cover for some of its patients. This, combined with the fact that not all the beds in the Blackrock Clinic are VHI approved, means that potential expenditure on plans D and E claims is reduced and the plans can be self-financing at lower membership levels. As far as further expansion of this situation is concerned, it would be a matter for consultation with the Department. I agree with Deputy Molloy that it would be a question of discussing the matter with the Department before any such extension could take place.
My question is——
I have given Deputy Molloy a lot of latitude on the question, I think he will agree.
I take note that the Minister did not answer my last question.
The next meeting will take place on 25 March, I understand.