Dáil Éireann debate -
Thursday, 21 Nov 2013

Vol. 822 No. 1

Health Insurance (Amendment) Bill 2013: Second Stage (Resumed)

Question again proposed: "That the Bill be now read a Second Time."

Minister for Health (Deputy James Reilly)

We have been putting in place the building blocks for universal health insurance, UHI, including the introduction of money-follows-the-patient funding. We are currently working on a White Paper on UHI, which will be published before the end of the year. This involves the development of detailed policy proposals covering issues such as the design of the UHI model, the UHI basket of services and funding mechanisms.

Revised risk equalisation credits to protect community-rated health insurance are an essential part of maintaining our community-rated system. I would like to focus on the specific changes made to these credits and corresponding stamp duties, which will apply from 1 March next year. The risk equalisation scheme, RES, provides for risk equalisation credits based on age, gender and level of cover in respect of insured people aged 50 and over. Under the Health Insurance Acts, the Health Insurance Authority, HIA, the statutory regulator of the industry, makes recommendations on the applicable rates to the Minister. Having considered the expert analysis provided and consulted with the Minister for Finance, I then set the rates for the risk equalisation credit and the Minister for Finance sets the rate of stamp duty required to fund those credits.

A critical element of risk equalisation is to ensure it promotes efficiency. In its assessment of the required support levels, the HIA compares data across the market. Using market average data means that an insurer with higher than market average claim costs will continue to lose out to its competitors and will, therefore, have a strong incentive to reduce its costs towards, or even below, the market average. The availability of cheaper entry level products in respect of which there is no increase in stamp duty may encourage more young people into the market and may encourage others to remain in the market. This measure is intended to encourage sustainability, therefore, from the perspective of the market as a whole. This is in keeping with my overall commitment to community rating in the first instance and to progressively increase the extent to which risk equalisation compensates for the costs of insuring older customers. Otherwise, health insurance would become prohibitively expensive for older customers, the majority of whom would be forced to leave the market at the time in their lives at which they are most likely to benefit from having it.

Without an efficient RES, there are clear negative implications for older or less healthy customers. In addition, there are serious potential consequences in terms of the promotion of fair and open competition, the stability of the market and the sustainability of insurers. The scheme levels the playing field among all insurers by providing a mechanism for sharing risk and attendant costs in order that an insurer with a less profitable risk profile is not obliged to charge higher premiums than the market average or incur significant losses, other things being equal. Where premiums are higher than the market averages, an insurer is more likely to lose younger than older customers, and its worsening risk profile may oblige it to increase premiums further, resulting in a cycle that could drive the insurer from the market. This is the so-called death spiral. On the positive side, an effective RES creates an incentive for insurers to focus on innovation, greater efficiencies and improved customer service rather than selecting customers based on risk. This is the kind of competition that is best for consumers.

With regard to policy development, it would be valuable to set out a basic road map for risk equalisation for the next three years. I am committed, at a minimum, to maintaining the current level of effectiveness by age group as measured against market average claim costs; adjusting the hospital bed utilisation credit, HBUC, as a proxy indicator of health status pending the introduction of a more refined measure, while ensuring the rate never creates an incentive for unnecessary hospital stays; introducing a more refined measure of health status, for example, through the use of diagnostically-related groups, DRGs; and incrementally increase effectiveness between 2014 and 2016 with a view to further increasing effectiveness to 85% for those aged over 70 years and to 90% in respect of customers aged over 80 years. In line with existing legislation and other requirements, these policy aims are subject to the following critical requirements: annual expert current market analysis by the HIA; scheme rules relating to overcompensation as agreed under EU state aid approval; and the final decision on applicable RE rates set by me in consultation with the Minister for Finance in line with the governing legislation. The measures being introduced will continue to protect community-rated health insurance, which is a vital part of our health system now and in the future as we move to UHI.

I have outlined the mechanics of how the RES works in terms of risk equalisation credits and corresponding stamp duties and what it is intended to achieve, which is the support of community rating, by ensuring older persons have access to affordable health insurance. I refer to the consequent improvements to the effectiveness of the scheme and I would also like to dispel some myths about the monetary impact of the revised rates for consumers. The stamp duty for advanced plans will increase by €49 for adults and €15 for children. This does not mean that each plan will increase by these amounts. It is up to the health insurers to decide their own pricing plans, an issue to which I will return in due course. These changes are necessary to further improve the effectiveness of the RES. I am fundamentally committed to progressively increasing the extent to which risk equalisation compensates for the costs of older customers.

The HIA has determined that when luxury benefits are excluded, the revised risk equalisation credits will compensate for 78% of the higher claims costs of people in their 70s, which is up from 75% this year, and for 86% of the higher claims costs of those in their 80s, which is up from 83% this year. These improvements will make a real and substantial difference to older people and are in line with the gradual improvement I am aiming for under the road map I mentioned earlier. It has often been said before that the true measure of any society can be found in how it treats its most vulnerable members and, in this respect, I am pleased to further help and support older persons in our society in having continued access to private health insurance at an affordable price.

The 2013 scheme also provided for a measure of health status whereby €75 per night is payable from the risk equalisation fund in respect of each overnight stay in a hospital bed in private hospital accommodation, including in a designated private bed in a publicly funded hospital. Used as a general proxy for health status, this is called the HBUC and it benefits each insurer who pays for a customer to use an overnight hospital bed. From 1 January, the HBUC will also be payable in respect of patients with private health insurance cover occupying public hospital beds. For policies effected from 1 March 2014, the amount payable under the HBUC will be reduced from €75 to €60.

All of the commercial insurers have declared their support for the principle of community rating, which is welcome. An implication of this support is that when a measure required to further support community rating is introduced - in this case, revised risk equalisation credits and corresponding stamp duties - every effort should be made by insurers to fully explore their capacity to manage their business and its attendant costs as efficiently as possible to minimise the requirement to pass the impact on to consumers directly. Insurers could examine a number of areas to ensure their practices are as cost-effective as possible, including administration costs, which can be a significant contributory factor to their overall business costs.

Under section 7F(1) of the Health Insurance Act 1994, registered undertakings are obliged to maintain and furnish information returns, including a statement of profit and loss and a balance sheet, before 1 April each year, while the Central Bank also requires financial data returns by 1 May. To reduce the administrative burden arising from two separate dates for related data sets, I intend to table an amendment on Committee Stage to change the deadline to 1 May, which will have the practical benefit of providing insurers with an additional month to finalise their preparations and meet the requirements.

Currently, VHI is the sole net beneficiary of the RES. It is open to insurers to reduce their outgoings under the scheme by taking on a fairer share of older lives. The VHI has a disproportionate market share of the older age cohorts. For example, VHI holds 89% of the market share in the over-80 age group, compared with only 6% each for Laya Healthcare and Aviva Health. I am disappointed by the inability of some insurers to offer products that are more attractive to older customers.

The revised credits should make older clients more profitable for newer companies operating in a competitive health insurance market. I look forward to seeing their numbers increasing across all of the insurers.

I am also aware that other factors impact upon insurers' ability to operate efficiently while achieving profit, such as rising medical inflation, increases in claims costs, increases in the average number of treatment days, etc. By way of example, between 2004 and 2008, the average cost of claims per insured person increased by 6.7% per annum but between 2008 and 2012, this increased by 12.6% per annum. Between 2004 and 2008, the average number of treatment days per insured person fell by 12%. However, between 2008 and 2012, the average number of treatment days per insured person increased by 45%. I can see that Deputy Kelleher is as upset about this as I am, particularly when we are reducing the average length of stay in the public health system. There are some lessons for the private hospitals and insurers to take from the public health system, if they care to look at it.

With regard to health insurers’ costs, I have consistently emphasised the need to address the rising cost of private health insurance and the necessity for all private health insurers to address their cost base aggressively. Last year, I established the consultative forum on health insurance to generate ideas to address health insurance costs. In June of this year, I appointed an independent chairperson, Mr. Pat McLoughlin, who is working with my Department and the insurers on a review process to give effect to real cost reductions in the private health insurance market. I want all insurers to address the base cost of their claims, as well as procedures being provided in an appropriate, safe, health care setting. By that I mean I want the patient to be treated at the lowest level of complexity that is safe, timely, efficient and as near to home as possible. I do not want procedures that could be carried out in primary care centres carried out in hospitals, day cases carried out as overnight cases or patients being kept in the day before and for a day later after a procedure. The incentives in the private health system do not seem to drive these types of efficiencies which are now being achieved in the public health sector.

Numerous lower cost plans are available from all four health insurers. As with other types of insurance, it is quite possible for consumers to find the same level of cover in the market for a cheaper price. Members who are on the same private health insurance plan for several years, or who have all the family on the same level of cover, or those who have opted for higher cover for private room accommodation in private hospitals, should review their requirements regularly. It is important to explore the full range of products now available in the market to avoid missing out on potential cost savings.

The Health Insurance Authority, HIA, provides information to consumers regarding their rights, as well as information on health insurance plans and benefits. It plays an important role for customers both in ensuring they have accurate information and enforcing the implementation of the law protecting consumers in health insurance. Its website, www.hia.ie, has a useful plan comparison tool which assists in finding suitable and competitive health insurance plans. With over 256 plans on the market, that advice is badly needed.

Following the amendment to the Taxes Consolidation Act introduced by the Minister for Finance to limit the relievable amount of premium, I intend to bring forward an amendment to section 7H(b)(ii) of the principal Act so that the statement a policyholder receives from a registered undertaking will clearly set out the gross premium before risk equalisation credits are applied, the applicable premium after risk equalisation credits to which community rating applies and the premium payable by the insured net of tax relief at source.

The key measures in the Health Insurance (Amendment) Bill 2013 are as follows. Section 1 defines the principal Act as the Health Insurance Act 1994. Section 2 amends the definition of “net premium” in section 2(1) of the principal Act. Section 8 of the Finance (No. 2) Bill 2013 introduces new ceilings on medical insurance premiums that will qualify for tax relief as €1,000 per adult and €500 per child. This has implications for the manner in which community rating is applied under the Health Insurance Acts. This amendment clarifies that community rating applies to the gross premium, less any risk equalisation credits and excludes any applicable tax relief. Section 3 amends section 6A of the principal Act. This amendment includes a technical amendment to correct a reference and a consequential amendment to the definition of “hospital bed utilisation credit” from 1 January 2014 to reflect the enactment of section 55 of the Health Act 1970 where private patients will incur a hospital charge in respect of an overnight stay in a public bed, as well as providing for consequential amendment to the definition of ''relevant amount" and the deletion of the definition of “reasonable profit”' at section 6A(2) while a replacement definition is provided for in section 5.

Section 4 amends section 7AB of the principal Act. For consistency, the timeframe by which a registered undertaking which wishes to vary benefits payable under a type of health insurance contract is required to notify the HIA is extended to 1 March from 1 January. This is in line with section 6.

Section 5 amends section 7F of the principal Act. Under this section, an overcompensated registered undertaking is required to make a payment to the risk equalisation fund if it has made more than a reasonable profit. The HIA carries out the overcompensation test on a three-year rolling basis, as provided for in the legislation. This amendment specifies the HIA will take what would constitute a reasonable profit for a registered undertaking in respect of its relevant health insurance business as a return on equity not exceeding 12% per annum on a rolling three-year basis using approved accounting standards and having regard to the European Union framework for state aid in the form of public service compensation. A registered undertaking is not deemed to have made a profit in excess of reasonable profit if its return on equity exceeds 12% per annum in respect of that business for part of that period, the three-year period, but not for all of that period. Further, it defines relevant health insurance business in the State as all of the undertaking's health insurance business in the State and return on equity in the case of a registered undertaking or former registered undertaking established otherwise than under the Companies Act as the equivalent, using approved accounting standards, of a return on equity of a registered undertaking which is a company established under those Acts.

Section 6 amends section 11C of the principal Act to provide for 1 March 2014 as the effective date for revised risk equalisation credits to be payable from the fund. Section 7 amends section 11E of the principal Act. This amendment provides that where the HIA is satisfied that a changed existing contract is now a contract which it classifies as now providing non-advanced cover, it will make regulations accordingly. Where the HIA is satisfied that a changed existing contract now provides advanced cover, the HIA will amend the relevant specification. In addition, provision is made for the HIA to review any evaluation and analysis of sample types of contracts. Where an error occurred in the classification of a product, the HIA will amend the regulations and the register of health insurance contracts accordingly.

Section 8 amends the reference on Schedule 2 to the principal Act. This is a consequential technical amendment to change the reference on the Schedule to section 7F from section 6A.

Section 9 amends Schedule 3 to the principal Act to provide the revised amount payable from the risk equalisation fund in respect of the hospital bed utilisation credit will decrease to €60 in respect of health insurance contracts renewed or effected from 1 March 2014.

Section 10 replaces Table 2 in Schedule 4 to the principal Act. With effect from 1 March 2014, the applicable risk equalisation credits payable from the risk equalisation fund in respect of certain classes of insured persons are revised.

Section 11 amends section 125A of the Stamp Duties Act 1999. This amendment specifies the accounting periods as three consecutive months beginning 1 January, 1 April, 1 July and 1 October. It defines the due date for returns to the Revenue Commissioners as the 21st day of the second month after the end of an accounting period. It then specifies the applicable stamp duty rates for 1 January to 28 February 2014 and 1 March 2014 onwards. Finally, it deletes section 2(A) in each place. Section 12 provides for the Short Title, collective citation and construction.

I commend the Bill to the House.

Deputy Billy Kelleher

I welcome the opportunity to speak on the private health insurance in general and address this Bill too.

It is hard to believe the Minister is in here, sponsoring this Bill, in view of all he has said about the viability of the health insurance market, the fact that it is contracting rapidly and the fact that what underpins intergenerational solidarity and supports community rating and risk equalisation is a flow of young people into the health insurance market. What we have had over the last few years is an outflow of young people dropping their health insurance or downgrading their policies. That clearly is not a sustainable position to maintain. Everything he has done in recent times goes contrary to the central tenet of his policy, which is to provide a vibrant, competitive private health insurance market to underpin his universal health insurance aspirations. The Bill undermines all of this.

The only people who have any consistency in the area of intergenerational solidarity and risk equalisation are those in my party. We supported risk equalisation and introduced it from the start, to virulent personal opposition from the Minister, given what he said, and to opposition from his party.

Deputy James Reilly

I did not.

Deputy Billy Kelleher

He certainly did, unless the record is mistaken, but I doubt that. In 2006, the Fine Gael leader, Deputy Kenny, said he was opposed to the introduction of risk equalisation, the Government scheme that would see BUPA hand over €160 million over the following three years to its competitor, the State-owned health insurance company VHI. The leader of Fine Gael who said that is now the Taoiseach. In 2009, Deputy Reilly expressed fears that the premium levy of €160 would make private health insurance unaffordable and would result in a contraction of the market by at least 10%, or 200,000 subscribers. He said the €160 levy would also significantly increase the cost of employee benefits for companies. Deputy Reilly, now Minister for Health, said at the time: "The levy is anti-competitive and it is a means to prop up the State dominant player. VHI remains super dominant in the health insurance market." He concluded his speech in 2009 as follows.

I would not commend this Bill to the House. I oppose it vehemently and believe it is ill advised. It is anti-competitive and is driving families out of the insurance market. It will put more pressure on our already pressurised health service. On all counts it is destined to be a disaster. We will regret the measure and, in fact, many people who have had to give up their private health insurance are already regretting it.

He made this speech in 2009 when a Bill was introduced to bring in a levy of €160. The Bill today is authorising a €399 levy.

The concept of risk equalisation, community rating and intergenerational solidarity is very important. We have supported it at all times. The difficulty I have is that I am being asked to support a Bill that will further undermine the very concept of intergenerational solidarity - that is, support from younger, healthier people who are coming into the insurance market for those who are older, sicker and needing medical care. This is the dilemma and it is being exacerbated by the Minister's continuing policy of undermining the private health insurance market. We had the bizarre situation a few weeks ago during the budget where the Minister for Finance drove a coach and four through the Minister for Health's stated policy on health insurance. The Minister for Health said he had not been consulted about this, so he should ask why not. However, we might at least think that the Minister for Finance would be consistent in trying to underpin what is a central tenet of the programme for Government, which is the need for a vibrant private health insurance market to underpin universal health insurance when it is introduced in 2016 or thereafter. Instead he put a cap on tax relief of €1,000 for an adult and €500 for a child, and he described this as only affecting gold-plated health insurance policies. We all know this is simply not the case. That particular policy announcement alone will increase the cost of VHI's Family Plan Plus Level 2 and other plans that are not gold-plated but are basic private health insurance policies. It will affect hundreds of thousands of people who have private health insurance. It will force people out of the private health insurance market. Not only is the Minister for Health undermining his own policy, but the Minister for Finance is doing the same thing. We are now engaged in a farcical debate in which the Minister says one thing and then does the exact opposite. Nothing in this Bill shows me that he is committed to encouraging people to retain private health insurance, nor to attracting younger people into the private health insurance market to sustain community rating and risk equalisation.

I am not the only person out there who is saying this. Several reports have stated the same thing. The Minister referred to the death spiral. The death spiral is happening continuously, but the Minister is in the vortex of that death spiral, forcing families to give up private health insurance. Every day we hear about cases in which people must make decisions about whether to renew their health insurance or use that money to fill the tank with oil or purchase basic items for their families. That is where we are at. I will get the usual lecture from the Minister about why we are where we are and all the rest of it, but the Minister is where he is now, and his policies are forcing hundreds of thousands of people to give up private health insurance. The figures are there to underline that statement. It is not alarmist; it is a fact. Behind those statistics are families who just cannot take any more. This not a positive step when all the other policies being pursued by the Government and the Minister for Finance are shattering the very principle of risk equalisation.

Let us look at the number of people dropping out of private health insurance. In 2011 and 2012, the fall-off among those aged under 60 was 133,735. We now have a situation where the risk equalisation and community rating requirement is falling on fewer shoulders. Therefore, premiums will go up, and we will then have a further drop-off in the number of people taking out private health insurance. The Minister is making no effort to introduce proposals on lifetime rating to encourage young people into the marketplace. He has made no advances in that area, so the idea that we are going to have a utopian universal health insurance system is further from reality every day, due to the Minister's policies.

At the beginning of this debate, I asked if it would be possible to delay the introduction of the Bill in order that we could discuss the report of the Health Insurance Authority, which will be published in the middle of December. The Minister said we could not do so because the health insurance companies would have to trade in the pricing of this levy. Trading in just means trading up. Their costs are going to go up. The people who have to carry those costs will be people all over the country who are trying to forage around to keep their direct debits going or find the money to front-load one payment for the year. The Minister should know this better than anybody, because he was one of the most vociferous opponents of increases in private health insurance during his time on this side of the House. He used to be apoplectic with rage, claiming that inflationary increases in private health insurance of 3%, 6% and 7% were the straw that would break the camel's back.

The camel is in quicksand and there is much more than straw on its back. It is unsustainable and the Minister knows that as well as anybody, but the pretence continues.

The Minister has decided to charge private patients in public beds the full cost. I do not expect the public health system to cross-subsidise private health insurance companies but there must be equity. People who take out private health insurance do so for a number of reasons but they are also ensuring the State does not have to treat them. They take out health insurance to lighten the State's health care provision burden. The Minister has stated that. He has said that people who fall out of the private health insurance market end up being treated in the public health system, which is under-resourced in its ability to meet its commitments to the people who do not have private health insurance. Now the Minister is lumping more people into the public hospital system day in day out.

The Minister talks about the roll-out of primary care, treating people in the community at the point of lowest cost, outside the acute hospital setting. We all support primary care. The primary care strategy was published in 2001. The Minister said it went at snail's pace for a number of years and that there was no commitment to it. I could argue very differently. I could certainly debate the point that it is in reverse. GP services throughout the country are under great pressure and stress. In the next few months we will see surgeries amalgamating and closing and GPs having to go to other jurisdictions because they cannot sustain the level of primary care cuts. The Minister expects them to take on further demands regarding chronic illness and other diseases such as diabetes and chronic obstructive pulmonary disease, COPD, to be managed in the community setting, but he is giving them no supports. There is a pretence that the Minister is fully committed to primary care but nothing could be further from the truth. He is committed to a few primary care centres around the country.

Deputy James Reilly

One. What did Fianna Fáil do in office?

Deputy Billy Kelleher

Many of them were selected under very questionable criteria, as the Minister well knows.

Deputy James Reilly

They put nice glossy reports up on a shelf.

Deputy Billy Kelleher

We had that debate before and it highlighted that there were difficulties regarding the selection process. Let us leave that aside for another day. The primary principle of this legislation is to support risk equalisation, as the Minister stated, but it is doing the opposite because of the other policies being pursued. If the Minister came in here and said he would increase the levy but had got the Minister for Finance to reverse his decision to cap tax relief on families who already find it difficult to pay their private health insurance premiums-----

Deputy James Reilly

That would do nothing for community rating.

Deputy Billy Kelleher

The Minister knows it would. The principle of community rating is for younger, healthier people to continually enter the health insurance market and cross-subsidise older people who need health services. That is an actuarial, statistical fact, or, in the Minister's language, an algorithmic progression.

Deputy James Reilly

Yes, continue.

Deputy Billy Kelleher

That will not happen because 6,000 young people are dropping out of private health insurance every month.

Deputy James Reilly

Yes.

Deputy Billy Kelleher

It will be exacerbated by this policy in view of the fact that the Minister has already brought forward other policies that inflate private health insurance premiums. That the Minister can sit there and pretend that is not the case defies logic. I thought we were in difficulties but I now realise we face graver difficulties than I thought.

Deputy James Reilly

It is not half as many as the 250,000 people who lost their jobs.

Deputy Billy Kelleher

I thought at some stage the Minister might realise his policies are undermining the very proposals of universal health insurance he and the Minister for Finance espouse. It was an appalling attack on ordinary families who, day in day out, are doing their best to retain their private health insurance.

In October or November last year the Minister came to the Dáil with a Health Insurance (Amendment) Bill and we spoke about advanced care packages and non-advanced care packages. We on this side of the House were led to believe a sizeable number of the present plans would qualify as non-advanced care plans and would attract the lower stamp duty. However, when it came to publishing the list of advanced and non-advanced packages we found the average heath insurance policy was in the advanced plan section and therefore attracted the higher levy. A clear commitment was given in this House that this would not be the case and that many of the plans on the market would attract the lower stamp duty and levy but that has not happened. The ordinary plans families take out to protect themselves and pay for their own health care, lightening the burden on the State, were undermined by that U-turn on the number of plans that would be in the non-advanced plan attracting the lower levy and stamp duty. I cannot understand that.

There is another situation that goes back to the Health Insurance Authority's report last year. We all accept that there is confidential, market-sensitive and commercially sensitive information in this that must be redacted and there is no difficulty in that. The Minister could easily have published the report. It is probably in his desk and he has probably already read it. The report stated:

There is a conflict between the maintenance of the principal objective (community rating) and the sustainability of the health insurance market. The recommendation of the authority has taken account of these conflicting objectives along with the evaluation and analysis of returns, avoiding overcompensation and the maintenance of fair and open competition in the market.

The Health Insurance Authority has stated that any further increases are at variance and conflict with the principal objective of community rating. This is because increases drive out of the health insurance market those people who would cross-subsidise older people. This is not just Deputy Kelleher having a go at the Minister, although he well deserves that for what he said. This is the opinion of the Health Insurance Authority of Ireland. Although the authority advises the Minister continually he never takes its views and recommendations into account. This is a glaring example from the 2012 report. If the report states the same again, the Minister is acting contrary to the advice of an authority whose remit is to analyse the state of the private health insurance market and make recommendations and observations on it. The Minister comes here and states the reasons he is doing that but none of them stack up.

The other issue at the heart of this is VHI, which has an older cohort and a higher percentage of claims and will be the beneficiary of this. Is the primary motivation of this to address the impairment VHI will be in when it is regulated by the Central Bank as an insurance company? We all know VHI needs a huge capital ratio and reserve to be compliant and seek a licence from the central licensing body. The Minister could be honest and say he is doing this to ensure VHI will receive the largest amount of funding in transfers to benefit it for the purpose of off-loading it or minimising the amount of money the State will have to inject into it to bring it into compliance.

That would be fine. At least it would be honest. Clearly, this is what is at the back of many people's minds when the Minister proposes this increase in the risk equalisation levy, despite everything he said prior to 2011 when he was in opposition and vehemently opposed to these measures and stood up to protect hard-pressed families. All that has happened is that these hard-pressed families are being pressed and squeezed harder than ever. Let us get real on this issue. The measures the Minister proposes run contrary to everything we are trying to do in terms of risk equalisation.

The Minister mentioned universal health insurance and said he planned to move to the next phase and would publish the White Paper. We have been waiting almost three years for the White Paper. The Minister had proposals concerning the Dutch model, on which he had a fixation for some time. Those proposals have disappeared into thin air and we now are to have a White Paper which is to be published some time towards the end of the year. The difficulty I have with this is that in the meantime the Minister is pursuing policies that may undermine what the White Paper will try to achieve. I am sure he has set the terms of reference for the White Paper and provided for a recommendation to be brought back on how to implement a system of universal health insurance.

Regardless of what type of model will be recommended by the White Paper, we know that the basic principle of universal health insurance is that there must be a vibrant health insurance market. However, all of the policies the Minister for Health and the Minister for Finance have pursued in recent times have shattered the health insurance market which is contracting at an alarming rate. Only the other day we saw private health providers laying off employees. They are not laying off staff for the fun of it but because the private health insurance market is contracting and no longer profitable. If it is no longer profitable, we will see a further contraction and shrinking of the market, leading to less competition. Currently, there are four health insurers. The big insurer is VHI which came from a single State-sponsored private health insurance company to its current position where it holds approximately 50% of the market. This position cannot be sustained if huge numbers continue to leave the private health insurance market.

I accept that some insurance companies will cherry-pick their clients. The difficulty with a universal health insurance system is whether the Minister will be able to guarantee that there will be no cherry-picking of the cohort of people who will be targeted for health insurance. The Minister talks about having a nice suite of guaranteed services and cover - a set suite. However, if we look at the Dutch model of universal health insurance, it is in huge difficulty, with private health insurance companies dictating the coverage that will be available. The idea that the Minister will, somehow, with his vibrant health insurance market, be able to decide what cover will be available and the standards that will be laid down in terms of the insurers' obligation to provide cover is farcical, particularly when we have a situation where private health insurers find it exceptionally difficult to retain their premiums at an affordable rate and are unable to attract younger people into the health insurance market. This is completely at variance with stated policy.

As I have mentioned the issue of tax relief, I will move on to the charge for beds for private patients in public hospitals. What the Minister has done in one fell swoop is to incentivise public hospitals to prioritise private patients over public patients, as private patients will now be seen as a revenue stream. We are faced with a bizarre situation where the Minister is trying to promote a single tier health system, under which people will access health care based on need rather than ability to pay - a policy championed by him all the time - but at the same time he is bringing forward a policy that will force public hospitals to prioritise private patients because of the possibility of generating income as a result. This runs contrary to everything the Minister has said. This proposal and change of policy will undermine the move to a single tier health system under which everybody can access health care based on need as opposed to ability to pay.

We must realise that, by and large, the people who take out private health insurance are not part of the gold-plated circle to which the Minister for Finance, Deputy Michael Noonan, alluded. Perhaps the people concerned are at the Fine Gael €100 dinners, but the people I know who have taken out insurance are struggling daily. They are also taxpayers and entitled to enter the public health system. They have paid their taxes, made their contributions and are citizens of the State. Now they are being asked to pay on the double. They are also being asked to subsidise the public hospital system through the full cost charge for private patients in public beds. This is nothing more than another way to fill the black holes in the Minister of Health's budget year in year out.

We are in the bizarre situation where we are back looking at an Estimate that is simply comical in terms of whether it can be delivered. We know that in 2014 the Minister must take €666 million out of the health system. He says there could be churn or a turnover of up to €1 billion in cuts. Is it credible to suggest this can be done without a massive upheaval in health services? At a time when the Minister is proposing to do this, he is forcing more people out of the private system into the public system, which will further clog up hospitals and acute hospital settings. This must stop at some stage. This is being done by the party that supports community rating and the concept of intergenerational solidarity which it implemented and brought forward against virulent opposition from the Minister and others at the time. The Minister cannot deny that he was virulently opposed to it. He opposed it tooth and nail. I do not mind a small U-turn from time to time, but I do mind U-turns of this magnitude being made without explanation. The Minister should at least explain why he has now decided that community rating is a good idea and why it was a bad idea just a couple of years ago.

Deputy James Reilly

My party has always supported community rating.

Deputy Billy Kelleher

The Minister opposed it. He opposed the levy. The only way we can have community rating is through a transfer from people who are low risk to those who are high risk. That is the purpose of community rating and there must be a levy to do this. The Minister opposed the levy, which means that he opposed community rating. A levy is the only way the transfer can be made to those who need it most.

My party has a dilemma. We want and support community rating and intergenerational solidarity. We support the need for a vibrant health insurance market that is affordable to ordinary families. Every policy the Minister has brought forward in this House is the exact opposite of what he says he is trying to achieve. This is more shameful legislation, particularly when coupled with all of the other proposals the Minister has brought forward in hiking up the cost of private health insurance.

The final assault on private health insurance was the amazing attack by the Minister for Finance. I know the Minister for Health and the Department were not happy with it.

Deputy James Reilly

What about Fianna Fáil's amazing contribution to destroying our financial sovereignty?

Deputy Billy Kelleher

I certainly know the Minister is not happy with it. There were leaks about very strong words between the Ministers on this issue which undermined the Minister's credibility with regard to the private health insurance market.

Deputy Caoimhghín Ó Caoláin

The Bill is a follow on from the Health Insurance (Amendment) Act 2012, a very important piece of legislation which significantly updated the regulatory regime for the health insurance sector in the State. The 2012 Act introduced a permanent risk equalisation scheme from 1 January 2013. Risk equalisation makes possible the scheme of community rating, which ensures all consumers are charged the same premium for a particular health insurance plan regardless of age, gender or health status, thus preventing price discrimination against those more likely to require medical treatment.

The Health Insurance (Amendment) Bill 2013 has as its main purpose to specify the amount of the hospital bed utilisation credit and the amount of risk equalisation credits in respect of age, gender and level of cover that is payable to insurers from the risk equalisation fund from 1 March 2014. It makes amendments to the Stamp Duties Consolidation Act 1999 to revise the stamp duty levy required to fund the risk equalisation credits for 2014.

As I stated on Second Stage of the 2012 Bill, as long as we have the type of health insurance market and the type of health funding that exists in the State, the regulatory regime provided for in the Bill will be necessary. It involves a complex system of risk equalisation to support the community rating principle. This entails the transfer of compensation from insurers who carry lighter risk burdens to those who carry heavier risk burdens. All this requires regulation, monitoring, enforcement and penalties for infringements. Without such legislation the unregulated market would discriminate against the old and the sick, or any other group or individual insurance companies decided were a greater risk.

The legislation is, therefore, supposed to be a protection against the working out of the raw profit motive in the health insurance sector. It is supposed to be based on solidarity between generations and between the healthy and those who do not enjoy good health. This is welcome, in so far as it goes, but time after time I have indicated to the Minister that we in Sinn Féin would go much further, extending the principle of solidarity to the way we fund, organise, structure and manage our entire health care system. The cost of health insurance premiums is rising and there is real concern this legislation will inevitably lead to further rises, by as much as 15%. In an article in The Irish Times on Tuesday the Minister for Health, Deputy Reilly, stated the stamp duty increases provided for in the Bill do not have to be passed on to customers by the insurance companies. He stated, "I would also remind everyone again that insurers do not have to pass on the cost of the changes we have had to make. As I have said many times, they must look to their own cost base.” The Minister states it is up to insurers to decide their own pricing plans and insurers can reduce their outgoings under the scheme by taking on a fairer share of older customers, but he admits this is not happening. It is clearly not happening when we see the statistics cited by the Minister. VHI holds 89% of the market share of those aged over 80, compared to only 6% held by Aviva and Laya. For the 70 to 79 age group the equivalent figures are 78% for VHI and 9% and 12% for the others respectively. Clearly this is an unsustainable situation.

The Minister reminds us he has commissioned an independent report on the high costs in the health insurance industry and he expects to receive it soon. Whether he will be able or willing to do anything about these costs is another matter. The Minister also stated in the article: "The last thing we want is for health insurance to become a luxury that existing customers can’t afford.” The Minister can write this, but where is the evidence this is something believes or intends? He certainly is not adhering to it. The option of health insurance has become a luxury that is no longer affordable to many thousands who previously held it. I am not an advocate of private health insurance and I do not hold it on principle. In 2008 2.3 million people had private health insurance. In 2012 this figure had dropped to 2.1 million and more than 60,000 people dispensed with private health insurance in that year alone.

People who have dispensed with health insurance because they can no longer afford it are dependent on the public health system, which is under attack from the Government’s failed austerity strategy which it happily embraced when it took over from the previous Government. The State continues to heavily subsidise the private for-profit health system with private beds in public hospitals, a fast-track to care for private patients while public waiting lists grow, and the dual working of hospital consultants in the public and private sectors.

The Minister claims that the Government is making progress towards its ultimate goal, which he describes as a single tier patient-centred system of universal health care for all. This is what I want, but the Minister states this is to be achieved by a market-based universal health insurance system, and here is where the big gap presents. The Minister states the maintenance of a healthy and functioning private health insurance market is an essential step in the transition to this goal. The Bill before us is, presumably, one of the steps he deems necessary in this transition.

The Government wants to move to an entirely health insurance-based system of funding, managing and delivering health care. As I have noted here previously, the health insurance policies of Fine Gael and the Labour Party were conceived at the height of the Celtic tiger, when record numbers of people had private health insurance. Perhaps it seemed to be a ready-made solution for the State to extend health insurance cover to everyone, subsidising those who could not afford it or who made the choice not to take it.

During the general election campaign in 2011 and following the election itself, Fine Gael and the Labour Party managed to play down the differences in approach in their respective models of universal health insurance. Let there be no mistake; the Fine Gael approach won out in the programme for Government. When one reads the Fine Gael FairCare policy, it is obvious that said party favours privatisation and the commercial insurance model. The policy states that once universal health insurance is introduced "the insurance market will double in size". It also states, "This will attract new entrants, increasing competition and driving down costs". This is a purely market-based approach, treating health care as a commodity and believing consumers or customers will benefit from competition. The market basis for his so-called reforms was confirmed by the Minister in the article he wrote for The Irish Times this week.

Like its 2012 predecessor, the Bill is based on the recognition that there must be social solidarity within the insurance sector and that the market has to be regulated to prevent price discrimination against the old and the sick. As a result, normal commercial competition cannot exist because we would otherwise have a US-style law of the jungle where the young and the fit would benefit from cut-price health insurance and the old and the ill would be fleeced or driven out altogether. Instead, the principle of social solidarity is recognised. I never give up hope that the Minister might go that extra mile. In that context, why will he not extend social solidarity across the entire health care system? If one takes that solidarity to its logical conclusion, one moves to a system of universal provision of health care based on need alone and not on ability to pay. The question that then arises is how to pay for such a system.

Health care is hugely expensive and must be paid for. The question is how to pay for it in a way that ensures the best possible care for all who need it and achieves the best value for money. The Government is proposing to introduce universal health insurance, with the State subsidising those who cannot afford to pay insurance premiums. The State will still have a huge regulatory, managerial and funding role. Why, then, give private for-profit insurance companies such a central place in the system? What contribution will they make? They are funded by the consumers who buy their products. The insurance companies, on behalf of policyholders, will buy services from private or public hospitals or other service providers. In addition, they will have to make a substantial profit in the process in order to satisfy both their hunger for such profit and the interests of their respective shareholders. The Minister has already recognised the failure of the insurance companies to reduce their outgoings and address their cost base. We await with interest the report he has commissioned in that regard. Perhaps he might inform us as to when he expects to receive that report and indicate when he will bring it before the House.

Why not cut out private profiteering from the entire equation and retain that money in the health system and any surplus thereafter in the pockets of citizens in order to give them greater potential to succeed in life and to enjoy the comforts that life has to offer? The only possible reason for not keeping out the profiteers does not relate to health care. There can only be a commercial reason in this regard. In opting for the privatised insurance model – albeit including a slimmed down VHI in the mix – the Government is putting business before health. The Government should re-examine its position. Does the Minister also subscribe to this position, or are there other influences at play here? We need to remove business from the equation when considering health care because the latter is not about profit. People's ill health, the requirement to provide real health care and the protections that are necessary against the challenges that can present in the course of one's lifetime are not the bases on which profits should be made.

The bottom line for citizens is that when they need health care, they need it promptly. They also require the best care possible. I am a recent service user and wish to acknowledge that when one is in the system, it generally performs very well. Most people acknowledge having undergone a positive experience once inside the system. It is because of the need for greater urgency and the best care possible that Sinn Féin advocates universal health care based on equal access for all. We want that truly reformed system to be State-provided, funded from fair general taxation and free at the point of delivery. It will not actually be free because people will have already paid for it as part of their general taxation contribution. Such a system would involve a higher contribution in tax from the highest earners than they contribute at present. I make no apology for that at all. Such a system would give rise to comprehensive savings on costs, such as medicines and excessive top salaries, which we have set out in successive alternative budget documents, and would end the State subsidy of private health care. We do not favour the model of insurance-based funding advocated by the Minister for the reasons I have outlined, not only today but on many previous occasions.

If health insurance is to be the basis for funding, then it should be a State insurance scheme. Labour once claimed to be in favour of this, but its former policy has been suppressed in favour of that advocated by the Minister's party. The least desirable model, as far as we are concerned, is an insurance system based on competing private health insurance companies. In that case, the profit motive and the interests of shareholders, rather than public health, become paramount. This is the Fine Gael model and it is clear that it won out in the programme for Government.

I make no apology for once again citing the important paper, The Future of Healthcare in Ireland, published by the IMPACT trade union a year ago. I remind the Minister that, in the context of the Government's plans, this document states:

The Government model of competing private sector insurers has not been properly tested. Delays in its implementation suggest that Government plans for UHI have been poorly thought out. If implemented, the model is unlikely to deliver equity, value for money, quality or universal access. Quite the opposite: lessons from the Netherlands show that a profit-driven commercial model led to an inequitable and inefficient system of funding, different tiers of entitlement, rising hospital deficits and even bankrupt hospitals.

The IMPACT paper recommends examination of what it describes as a single payer social insurance model along the lines of the systems in place in France, Germany and the Nordic countries. It states the competing insurers model should not be adopted before all of the options have been evaluated on the basis of equity, quality, access to services and value for money. I have no doubt the competing insurers model will not tick the boxes in relation to any of these factors.

The number of people with health insurance is decreasing; premiums for those who have health insurance are increasing; the public health system is under greater pressure as people leave the private health insurance system and the two-tier public-private system persists, with the struggling public system continuing to subsidise the private practice of many consultants.

In the programme for Government a White Paper on financing universal health insurance was promised "early in the Government's first term". Two and a half years later, we are still waiting. I doubt if the first page of the White Paper has been written, not to mention agreed. I do not believe there is a White Paper in the offing and it will come as one hell of a surprise if the Minister is able to tell me-----

Deputy James Reilly

The Deputy should look forward to Santa's arrival.

Deputy Caoimhghín Ó Caoláin

I have been promised Santa Claus's arrival for many years, but he has failed to pop up. It must be something to do with my age.

Deputy James Reilly

Santa delivers. Children should not believe the Deputy.

Deputy Caoimhghín Ó Caoláin

If the Minister is Santa Claus, nothing will surprise me any more. Here we are waiting on Santa Claus's White Paper. Perhaps we will have a white Christmas, too.

A market based private health insurance system is not the route to real and necessary reform of the health service. I will repeat that message ad nauseam in the hope the Minister and his colleagues will listen to my argument. Meanwhile, the deeply flawed two-tier system deteriorates as a direct result of the futile austerity policy and scandalous health cuts of the Government. Earlier today Deputies discussed Committee Stage of another Bill that will change eligibility for health services. The cuts it imposes will hurt people who have given mighty service to the State for many years, targeting as they do at least 35,000 citizens aged over 70 years. None of these measures is doing anything to address the need of citizens to have access to a quality, universal health system.

As with its predecessor, this Bill is a necessary measure for the insurance sector, as it stands. Overall, however, the future of health insurance and the health system generally under the Government is fraught with the deepest uncertainty because the Minister is unable to make up his mind and grasp the real prize. What a powerful legacy he would leave if he were to introduce a universal system of health care, one paid for from general taxation and available to all citizens on the basis of need. That would bring to an end, once and for all, the days of competing profiteers. Such a system would be at the top of my list for Santa Claus.

Deputy John Halligan

The number of people with private health insurance dropped from more than 50% of the population in December 2008 to 45% in December 2012. This decline equates to approximately 200,000 people. New figures from the Health Insurance Authority show that 64,000 adults and children cancelled their cover last year. During the same period the Health Service Executive recorded a 9.1% increase in the number of medical card and GP visit card holders. The promised free general practitioner care for children aged under five years is set to bring another 250,000 young patients into the system at a time when resource allocation to provide this service has been reduced by approximately 35%. Notwithstanding this reduction, the Government expects general practitioners to provide the same level of service.

This increasing reliance on the already overstretched public health service is a major source of concern, one which the Government is addressing in a dismal fashion. The permanent risk equalisation scheme is not nearly as effective as it needs to be compared to the systems in operation in countries such as the Netherlands and Switzerland. I understand the latest figures indicate the scheme is about 55% effective. Perhaps the Minister might indicate the precise figure.

One certainty is that community rating will not prevent the health insurance system from collapse. The Government must acknowledge this. On introducing the permanent risk equalisation scheme, it claimed it was protecting affordability for those most in need. According to the Department, the Government is committed to keeping down the cost of health insurance for as many people as possible. In that case, why is it pursuing a policy that is completely contrary to this objective, as many commentators and experts have noted?

Funds from private health insurance companies are effectively propping up the public system, yet from what I can discern the Government is intent on hacking away at the sustainability of the market. It has been estimated that the health levy has increased by 149% for an adult since its introduction in 2009, with the rate for children increasing by 155%. It has been claimed that charging private patients the full cost of using public hospitals will result in another price hike. Some believe the market could shrink by 40% in the coming years if premiums continue to rise. Only last week, the Minister called on insurers to absorb the cost of stamp duty increases, which the companies argue will result in an increase in premiums of approximately 15%, although I doubt the accuracy of that figure.

Despite the consistent policy of pushing up premium prices, the Government has not shown any willingness to tackle underlying cost pressures in the sector. For example, hospitals are still fraudulently charging insurers in the region of €1,000 for patients who are sitting on chairs and trolleys in emergency departments. This charge is levied in addition to the public service charge patients are required to cough up before they may even pass reception in accident and emergency units. That is outrageous.

The description of private health care in Ireland needs complete revision. Those who are lucky enough to have a private health insurance policy incur substantial costs if they are referred to a private consultant before their insurance kicks in. Last week I cited the example of a lady who had visited a consultant to have an injury to her hand diagnosed. The consultant who had been paid €150 or €160 for the consultation then charged the lady a further €300 to provide a letter the insurance company had requested setting out the diagnosis. He did so in the knowledge that the lady would submit a claim to her insurance company. The Minister is aware of this outrageous practice, yet consultants are able to get away with it. They can pluck a figure from the air on the basis that their patient will receive €10,000, €20,000 or €30,000 in compensation.

The cost of health insurance has doubled in the past two years and now averages €2,500 per annum for two adults and two children. It has been predicted that 75,000 people will leave the health insurance market this year. As people leave the system, the public health service comes under even greater pressure. The current position is unsustainable.

It is Government policy is to implement a system of universal health insurance by 2016. It is a wonderful policy, but, according to Laya Healthcare, 76% of medical professionals believe the Irish health system, in its current form, fails to protect patients and ensure best outcomes. How could it? Since 2008 almost 10,000 staff and 1,700 beds have been removed from the public system, yet it emerged in recent days that the HSE had agreed to keep quiet about perks, allowances and pension top-ups worth €3.2 million for top earners. Perhaps the Minister might confirm whether a directive from the Department of Health to cease making these bonus payments has been followed through. It will be interesting to know if that has happened.

We are nowhere near having a fair, just and fully regulated health system of which the Minister has so often spoken. By the way, I believe he believes in a fair and just system. The problem many of us have is how he can deliver it. Private health care is being put beyond the means of increasing numbers of subscribers. We have yet to see any meaningful reform of how we pay for health care in a fair and equal manner and confidence in the public system is being hacked away. The Minister need only speak to any person who has private health insurance. He or she will tell him he or she is struggling and keeps it because he or she needs it. If he or she could find some way out of it, he or she would take it. Owing to the public finances, we are not in a position where everybody turns to the public health system because if people did, it would collapse, particularly because of the significant numbers in receipt of unemployment benefit. The 450,000 unemployed all avail of the public health system, which means that we must put billions of euro extra into it. As public confidence erodes further, the problem is that while few would want to leave the private health system, people will find that they have no option but to do so.

I made this point earlier and will make it five or six times again. How does the Minister allow consultants to act in the way they do in the example I gave? How does he allow them to rip off ordinary people in the way they do? How can it be that a consultant would make such a request? When I heard of this, I thought it extraordinary that the consultant, having examined the lady concerrned and after she had paid him to examine her, would ask her, because she wanted a letter detailing what he had said to her in the examination, to give him another €300 for the letter. That is appalling.

Deputy Mick Wallace

I do not profess to be an expert on the area of health. No doubt the Minister knows more about it than I do. I would like to understand it better. I am confused as to how the HSE works but, like most people, I see many problems.

The Bill proposes changes to the risk equalisation credits and to stamp duty. Seemingly, stamp duty will be increased on advanced policies. Advanced policies are held by 94% of privately insured persons, while non-advanced policies are not subject to this measure in the Bill - non-advanced policies have lower levels of cover, largely providing for public hospital cover. Stamp duty for most private insurance holders will increase by 12.5% on a child's policy, and by 14% on an adult's policy. The Minister, Deputy Reilly, has told health insurers that they must absorb this increase. Obviously we understand that this will be passed on to the consumer and increases in premiums will mean that more subscribers will leave the private health insurance system. Fewer subscribers in the system, in turn, means that costs for everybody else will go up, and will result in even more subscribers joining the public system. The concern is that this will put further pressure on the public system, which is already struggling owing to funding shortfalls and budget cuts. Age is also significant here, as the numbers of those leaving private health insurance - 61,000 in the past 12 months, which is a frightening figure - and in the overall reduction in the population who were privately insured, from 50.9% in 2008 to 44.8% in 2013, are highest for younger people. This drop-off in the number of younger people is not surprising given the financial pressures they are under, including reductions in income and increased unemployment, which is added to by underemployment and insecure employment. Risk and community rating work by levelling out costs between older and younger insurance customers, which means that younger people pay more and older people pay less than they would in a risk-rated system. The problem posed by a flight of younger people from private insurance is that it will be more difficult for the system to be sustainable.

The changes proposed in the Bill come on foot of budget 2014's capping of tax relief on health insurance premiums. Approximately half of all health insurance customers are affected by this, as the tax relief will now apply only to the first €1,000 spent on a policy for adults and the first €500 for children. Health insurers have noted that this reduction in tax relief will lead to people leaving the private health insurance system. The Government, however, has stated that the capping of tax relief and changes to stamp duty proposed in the Bill will lead to subscribers taking out different health insurance plans with lower levels of coverage.

The Government is introducing several changes to the health system through budget 2014, the Health (Alteration for Criteria for Eligibility) (No. 2) Bill 2013, and now this Bill. It is clear from each of these instruments that the primary objective is to save money and to cut spending. Although the Government has committed itself to the introduction of a universal health care system, including free GP care for all during the lifetime of this Government, it is hard to see how such policies will be realised if the reductions in spending are simultaneously implemented. While much has been made of the introduction of free GP care for those under five, our health system is being crippled by drastic cuts introduced since the onset of the economic crisis. A recent OECD report, Health at a Glance 2013, which I only read about today, highlights the fact that the countries bearing the brunt of the economic crisis have seen the most dramatic reductions in spending on health in recent years. Ireland's per capita health care spending has been reduced by 6.6% between 2009 and 2011. We saw a similar reduction in spending during the last recession in the 1980s, and some would say that the health system did not recover from that. Repeating the mistakes of the past is not only short-sighted but has dire consequences for the lives and well-being of the people of this country.

The Bill is another example of this dangerous and counterproductive approach adopted by Government. It introduces additional costs that will be passed on to the premiums of health insurance customers, regardless of the Minister's call for insurers to absorb costs. It will add to the growing number of subscribers leaving the private health insurance system, which will put increased pressure on our public system. The Government is increasing costs and cutting at both ends of the health system - it is more difficult for subscribers to remain in the private system with rising premiums, while at the same time the public system is overburdened, with those perhaps most in need of free medical care now being denied it through what the Government calls "medical card probity".

The Minister's request to insurance companies to absorb these extra costs and not pass them on to the customer is probably fanciful. That is not really how the private sector works. That is what worries me most about the Minister's liking for the Dutch system. I do not know whether Deputies have spoken about it already, but it seems as if the Dutch system is beginning to unravel. From what I understand of it, the system consists of a series of private companies supposedly providing competition, and those who cannot afford to pay for their own insurance are guaranteed a certain basic level by the Government. In Holland, the basic level is being eroded and less is being offered at that basic rate all the time because of increased costs. Seemingly, in a short space of time, the Dutch have seen their health insurance bill rise by around 40%.

One may call it a universal health insurance system but, given that the private sector has its paws on it, the Dutch State must find it difficult to guarantee that the system remains fair. From my own limited experience, the NHS in England, at least in its original form, offers a better template. It would give the Minister more control over the system.

Deputy James Reilly

HSE mark II, no thanks.

Deputy Mick Wallace

How about mark I?

Deputy James Reilly

We had mark I.

Deputy Mick Wallace

I accept that Fine Gael has more of an appetite for the private sector than for the public sector. I am not completely anti-private sector myself. I have done plenty of business in the private sector. However, the State sector does not have to be inefficient. In the area in which I worked, I saw many problems with what was being done in areas of the State sector but the problems were fixable. Similarly, it is possible to have a positive health system that is completely controlled by the State. Perhaps the Minister thinks that is impossible but I do not. If we leave matters in the hands of private companies, as is the case in Holland, we will be at their mercy. Private companies have a legal obligation to maximise profits for their shareholders. I do not think it is the perfect model or the one for which we should aim.

The Government knows that its current strategy for achieving its policy goals is failing. This is why we still have not been given a clear statement of how universal health insurance will be financed and why we continue to await the mythical White Paper on universal health care announced two years ago. Deputy Ó Caoláin claimed that the first page of the White Paper has not yet been written. I hope that is not the case because I am looking forward to reading it. I have no doubt it is a challenging policy area but I will welcome the policy if it comes to fruition.

Slashing the health budget on the one hand and introducing a universal health care system on the other will be difficult to reconcile. With the number of advisors the Government has on hand, surely one of them could have told the Minister what is obvious to a six year old child. It is bordering on fanciful for the Government to continue to pretend to the Irish electorate that it will introduce universal health care when its actions are actually working against such a system. If the recent report in the Sunday Business Post on the Government's spin on the budget is to be believed, such delusion and deception are hardly surprising. Why has the HSE stated that the cut to the health budget is €1 billion when the Government is claiming it is €666 million? Was this part of a general public relations strategy, whereby people in Ireland were told one thing about budget adjustments and people outside of Ireland another? God knows, people outside of Ireland have a considerable interest in our budgets nowadays. Whatever the answer, the cuts to spending on public health have serious immediate and long-term consequences. The aforementioned report notes that Ireland has low numbers of doctors when compared to other OECD countries and, along with four other countries, has the lowest number of obstetricians and gynaecologists per 100,000 women in the OECD. In the wake of the Savita Halappanavar tragedy and the several reports that were prepared on her death, we now know that Ireland's low numbers of maternity staff are a significant factor in the risks to women's lives and well-being. Ireland has 30% fewer maternity staff than internationally recommended. The director of the National Maternity Hospital, Dr. Peter Boylan, has stated that his requests for more consultants have repeatedly been turned down. Have we learnt nothing in recent months? How many more lives are this Government willing to risk in the name of fiscal adjustments and austerity, which are bringing an already stretched system to the brink?

Major issues arise with the Government's professed policy goals. Even if it could live up to its wonderful pronouncements on universal health care, there are serious questions about whether the model being pursued is the best or most suitable for Ireland. Several commentators have noted that Ireland is simply too small for a competitive health insurance market, and have pointed to the flaws in the Dutch system. The Netherlands introduced a universal health insurance system in 2006, the rationale being that competition among insurance companies would drive down spending, provide choice for consumers and improve quality of health care. It is not hard to see why these basic assumptions of a regulated but essentially market driven system should appeal to the current Government. However, the universal health insurance system introduced in the Netherlands has not to delivered any of the predicted benefits. Four insurance conglomerates control 90% of the Dutch health insurance market and costs have inflated massively, with Dutch families experiencing cost increases of 41% within four years of the system's introduction and government spending on health increasing by 5% annually. Given health insurers' drive for profitability, there have also been significant increases in spending associated with regulation. The tax office alone has had to hire 600 new staff to administer just one aspect of the new insurance system. So much for choice and efficiency.

In general, the health market is not like any other market, such as the hotel or retail market. Market based health care systems are not efficient because private health insurers are in the business of making money. In the US, the country with the highest levels on spending on health care even though large swathes of the population are excluded from health insurance coverage, unnecessary costs are integral to the system because they make profits for private health providers. Unnecessary treatments and tests are prescribed and medically unnecessary procedures are recommended to increase profitability rather than the well being of patients. The inefficiency of market based systems is borne out by the World Health Organisation's assessment of the US as among the worst health care systems in developed countries in terms of death rates and reductions in suffering.

Fine Gael's free market ideology is dominating the future of the Irish health system. Ironically, this means that its own policy goal of introducing a system of universal health insurance is being undermined by its adherence to neoliberal principles. Market based, universal health insurance has been discredited in the Netherlands and it is time we woke up to the need for a single not-for-profit health provider that will allow people to avail of a system that is patient centred, accessible and equitable.

I have a friend, Molly Waters, who cared for my children when they were small and is a year younger than my mother. She needs a hip operation but she will have to wait a year before she can get one. She is in a wheelchair and her children want to expedite the operation because a year is a long time for a woman of her age to wait. God knows how long she might have left to live. The operation would cost €12,000 through the private sector but she will have to wait a year for public treatment. I do not know how the system works in other countries but I am sure the Minister will agree it should not be this way. It is unfair on this woman.

Deputy James Bannon

I commend the Minister for Health on the fine job he is doing. He took over the portfolio at the worst time in history as far as funding is concerned. Funding is still scarce but he is doing a better job than previous Ministers who occupied the post at a time funding was in abundance. One former Minister compared the Department of Health to Angola in the worst period in its history. Morale in our hospitals has greatly improved.

The Minister has given reassurance to health professionals since taking this heavy task on his shoulders.

I welcome the opportunity to speak on this Bill. Private health insurance is of the utmost importance to many people and their families. I am delighted the Government has made changes to the private health insurance system to make it more affordable for older people. With the agreement of the Department of Finance, I understand there is an extra age related income tax credit for insured persons aged 60 and over. This credit, known as risk equalisation, is provided as a tax relief at source, which means the cost of the policy is reduced by the amount of the age-related income tax credit on all insurance policies.

The Health Insurance (Amendment) Bill 2013 sets out to adjust the risk equalisation credits and stamp duty payable so that the risk equalisation of health insurance can be changed. The adjustment is to increase the levy on advanced policies, which cover 94% of insured people. There will be no change to stamp duty on non-advanced policies, covering 6% of insured people. This stamp duty is a levy on health insurers and should not be passed on to consumers, which has been the case in the past. There is no better person to ensure it will not happen than the Minister.

In February, the Joint Committee on Health and Children discussed the health insurance levy and aspects of the risk equalisation scheme. Appearing before the committee, the Health Insurance Authority's industry regulator outlined the level of impact risk equalisation has on market premiums and what determines premiums, stating:

Risk equalisation in itself has no effect on overall market premiums. The determinant of overall levels of premiums is the insurer's cost of providing a service and the greatest element of this is the cost of claims.

I am sure the Minister is examining this topic. There is no foreseeable reason the premium should rise when the risk equalisation levy rises. The Minister has encouraged insurers not to pass on the increase in stamp duty to customers but every time the insurance companies receive a levy, they unnecessarily pass it on to the average person. I have every confidence in the Minister that it will not happen on this occasion.

Risk equalisation schemes promote a fair and balanced health insurance market and ensure older or sick people can access the market on the same basis as others. Risk equalisation is a vital support to community rating, which is at the heart of the Irish private health insurance market. It means everyone pays the same price for the same product, regardless of age or health status. Health insurance should be as affordable as possible for older and less healthy customers. We have an aging population, with more people availing of health services than in the past. It is good that people are living longer, with the age profile having increased. In the risk equalisation scheme, there is a risk equalisation fund where the health insurance company receives credit for each customer deemed to have a higher risk. Risk equalisation credits are paid out to the health insurance companies in respect of the premiums of people aged 50 and over. The amount of the credit depends on the person's age, sex and the type of insurance cover. This credit can vary from €600 in the case of a person aged 60 to 64 years to €2,700 in the case of a person aged 85 or over. The fund is paid for by stamp duty levied on all open market health insurance policies. Risk equalisation is essentially a system that compensates insurers that carry heavy risk by means of payments from other insurers that carry lighter ones.

The HIA has stated that, without risk equalisation, the incentive for the insurer is to insure younger and healthier people while avoiding older and less healthy people. Where insurers have older and less healthy people on their books, the incentive is to sell them a different product in order to charge more. The risk equalisation system protects the right of older people to purchase health insurance at a reasonable rate. Risk equalisation also supports competition. Without it, competition would be distorted in a community-rated market because insurers with the worst risk profile are at a significant disadvantage.

The Department of Health has stated that the changes to the levy are necessary to balance the risks based on data on market participation. The reason for the change is that taking into account such factors has altered the demographic profile of those insured as well as market developments. Since the economic downturn, large numbers of people have dropped their health insurance. Some 50.8% of the population had cover at the peak in 2008 compared to 44.8% at the end of September 2013. The drop in the number of insured is highest among those aged under 50 years of age.

I am concerned at the decline in health insurance numbers as it is an issue for the market. It threatens the balance of health insurance risk in the community rating system. In this system, younger people, on average, make fewer costly claims, subsidising the claims of older insured people. The loss of a number of younger subscribers will upset this balance.

Having said this, a number of policy options have been put forward to support younger people entering or staying in the health insurance market to support the stability of the market. A greatly needed initiative to bring younger people into the market is the introduction of lifetime community rating. This system will make it beneficial for an individual to take out health insurance at a younger age with a cost saving benefit. The most common reason people have dropped their health insurance is cost. More than four in ten of those who have dropped a policy have done so for that reason. The private health insurers need to ease up on people and allow them access to an affordable health plan. At least four or five private insurance companies have entered the Irish market since it was opened up. This was a lucrative business and the companies will take any opportunity to make more money. The levy should not increase premiums but is being used by insurers as an excuse to justify a hike on prices. These measures help to create equality for all age groups as they intend to bring about no overall increase in premiums and to spread the risk more evenly between the healthy, the less healthy, the old and the young.

In our programme for Government we stated that we would introduce a system of risk equalisation for the current insurance market. We are delivering on that promise. I compliment the Minister on that. I am also pleased to note that the Minister is reforming the health services to ensure the financing system is based on incentives that promote fairness and efficiency, while also reducing costs, improving control, and improving quality. That is happening. We are all well aware of the difficulties the Minister is encountering in delivering his reform programme while budgets and staff numbers continue to reduce.

Acting Chairman (Deputy Paudie Coffey)

I must call Derek Keating.

Deputy James Bannon

I thank the Acting Chairman for allowing me time to finish.

Deputy Derek Keating

I am always happy to share with Deputy Bannon, even if it means giving him an extra few seconds of my time. I am reminded that I have a Bill before the House, the Rights of Grandparents Bill 2013, which seeks to give more recognition to the role of grandparents in society. These are people from a generation that contributed to the building of our modern society, and I think of how these people could be celebrated during the centenary of the 1916 Rising. These are people from my parents' generation, the many hundreds and thousands of people who made a contribution to building the modern democracy we have in Ireland today. It is one of the reasons I support this legislation.

The purpose of this Bill is to adjust the risk equalisation credit with regard to health insurance. I refer to the Minister for Health's comments for a recent article in The Irish Times, which referenced the fact that we must retain the solidarity that exists between the young and healthy and the elderly who may require more health care. This legislation sets out to make private health insurance affordable, although we know that each year. and particularly in the past six years or so, health insurance costs have dramatically increased. If there were a free market, the elderly and those who are more vulnerable in today's society, including those who need protection from the market, would be abandoned. That is another reason I support the legislation.

The Bill sets out to observe the principle that everyone has the opportunity to pay the same for a health plan, regardless of age, gender or medical condition. The President of the United States, Barack Obama, has recognised that one of the important entitlements in that country is the right to health, and that is why there is now what is commonly known as Obamacare, which essentially provides more widespread access to health services.

At the heart of our health service is the Government's policy of aspiring to a universal health system, led by the reforming Minister, Deputy James Reilly. There are already plans afoot to provide free GP cover for children under the age of five, and this legislation offers similarly exciting protection for elderly people who have contributed to the development of the health service through their taxes. This Government is committed to fairness, equality and access, and underpinning that is the system introduced by this legislation. It will balance cost and ensure that younger holders of health insurance contribute to older people's care, and in turn those who are younger and middle aged will enjoy those benefits when, in time, they need to avail of community rating, or risk equalisation, as it is known.

I welcome the Minister's call for the insurance companies to absorb all of this recent increase, or at least a significant portion of it. I also believe there needs to be a greater sharing of the burden between the companies, including VHI, Aviva and Laya, and I call on those companies to review their cost base and consider the medium to long term in the cover they offer. There has been quite a significant downgrading of cover in the past number of years because of our economic crisis, and a significant number of people have cancelled insurance for economic reasons. There have also been improvements in the health service in recent times, and we no longer have long waiting lists or daily news reports about large numbers of people on trolleys. The health system is being reorganised and solutions are being found to resolve the doctors' dispute. This comes despite the fact that we have less money in the health services, fewer staff and a significant increase in the number of procedures.

I welcome the Minister's announcement that no small hospital will close, as the future of small hospitals is secure. The Government is committed to cutting the cost of services but not the quality, and it is determined to monitor and minimise excessive expenditure. Like others, I am unhappy to hear of bonus payments to hospital chief executives, and the Minister is investigating the matter. It is worth remembering that the Minister has only been in office for two and a half years. He has one of the most difficult jobs in the country, and I am not just saying that because he is in the Dáil tonight. This is clear when one considers the state of the health service he inherited from a Government that had so many resources in its time. I recall a previous Minister saying about those recent years that the country was "awash" with money.

As I have noted, the Minister has got to grips with the numbers of people on trolleys and the junior doctors' industrial problems. There are new contracts for consultants, waiting lists have been tackled, and the Minister is now getting to grips with spending. I fully support the Minister's view that the money should follow the patient. The legislation contributes to the progress in achieving single-tier patient-centred universal health care for all living in this country, and at the very heart of that health service are the new primary care centres.

I conclude by stating my support for the legislation. Through risk equalisation, the most vulnerable - including the coping classes and elderly in particular - will be protected from the consequences of a market-driven health service, which I would be opposed to.

Acting Chairman (Deputy Paudie Coffey)

Deputy Creighton has ten minutes.

Deputy Lucinda Creighton

I thought I would have 20 minutes.

Acting Chairman (Deputy Paudie Coffey)

The Deputy is listed to share with Deputy Tóibín.

Deputy Lucinda Creighton

I am sharing 20 minutes with Deputy Tóibín, who will take five minutes.

Acting Chairman (Deputy Paudie Coffey)

Is that agreed? Agreed. We will see how it works out.

Deputy Lucinda Creighton

Yesterday the Mater Private Hospital announced that it would axe 95 jobs, citing the fact that 170,000 insurance policyholders have cancelled their cover since 2011 and "the further erosion of resources in the sector due to the cap on tax relief on premiums over €1,000". The reduction in patient services in the Mater Private Hospital and further reductions in private hospitals throughout Ireland will have an inevitable consequence, imposing an even greater strain on the depleted resources of our public health system.

I put a number of parliamentary questions to the Minister for Health asking what impact he felt the change in tax relief announced by the Minister for Finance would have on the number of individuals previously in the private system who will now be seeking to use the public health system. In his response the Minister informed me that there was no basis upon which he could make any such assessment. Surely the example of the Mater provides the sort of financial forecasting required, and I hope there will not be further announcements along the lines of yesterday's statement. Sadly, I am not in any way confident that that will be the case.

As I have stated before, reducing the tax relief on health insurance makes no sense and does not stack up with stated Government policy. The Minister for Health knows this well and I suspect that many of the advisers and officials sitting beside him share that view. This measure was announced by the Department of Finance as a way of shoring up the VHI, and it is essentially an additional private insurance levy for all insurers that is being used to fill the capital regulatory hole that exists in the VHI.

We can debate the philosophical underpinnings of tax reliefs, tax increases or tax cuts but, basically, what the reduction in tax relief means for 1.1 million policyholders is that their premium will increase. That is the inevitable outcome and that has been verified by anyone who understands or is involved in the sector. People do not care about the semantics of the argument, but they do care about the impact it will have on their already depleted household budget.

The Minister said in an interview last February with The Sunday Business Post that he did not believe another rise in VHI premiums was "fair, proper or right". I agree. Yet, here we are, eight months later and the changes in tax relief mean that tax relief on VHI's health plus extra plan, for example – not a gold-plated plan - will push the premium to €2,096 from €1,837, an increase of a substantial 14% or €260. The Minister is aware that these plans are invariably held by elderly people who are doing their best to avoid higher excesses and to ensure their policies will cover the full amount for common procedures which are run-of-the-mill for older people such as hip replacements and heart bypass operations in private hospitals. As the Minister said himself, VHI has 90% of the elderly health insurance market. The change is a direct increase in premia, the same increase that just eight months ago the Minister said would not be fair, proper or right. That is precisely what is happening. We can dress it up whatever way we want but that is the result for people who are paying the premia.

I am working on the assumption that the Minister for Health does not support the changes imposed on him by the Minister for Finance. We had a flavour of that at the Joint Committee on Health and Children a few weeks ago, but that does not absolve him of the responsibility for it occurring. He is the Minister for Health. Even if the revenue generated from the changes to the relief are to be used for a capital injection into VHI, there were alternative means for how the VHI’s well-flagged difficulties could have been addressed. The matter has been rumbling on for some time since the European Court of Justice ruling in September 2011. We knew that the VHI had to shore up its reserves to the same levels as its private competitors. At the same time we were told that an additional €220 million would be required but it seems from the latest reports that this figure has been reduced significantly as a result of Warren Buffet's reinsurance deal. It has also been reported in the press that this deal is not yet over the line due to concerns relating to the Minister's commitment to the health insurance industry and to risk equalisation. It appears Mr. Buffett's concerns are being adhered to, and that is essentially the purpose of recent announcements but the question is at what price and to whom.

It appears to me that the changes to tax relief and risk equalisation changes in the health insurance levy dealt with in the Bill have absolutely nothing to do with some form of strategic health insurance policy and everything to do with giving a very famous international investor every term and condition he has sought. As far as I can see, this is a large accounting trick, where instead of the State having to account for the €230 million or so additional cash injection for budget 2014, both Ministers have found other means to fill the capital hole and secure Mr. Buffett's investment on his terms. It is a short-term fix that will cause long-term problems. A net saving of €70 million or so to the State for next year’s budget year from Buffett's investment is not justifiable faced with the number of policyholders who will be affected and the 170,000 health insurance policyholders who have cancelled their policy since 2011. I assume most Members will be aware that Mr. Buffett is the world's most successful investor for a reason: he maximises returns and reduces risk but that comes at a price. On this occasion, the price is being imposed on 1.1 million Irish health policyholders.

The Buffett solution to VHI was not the only solution, nor indeed were increased levies, tax relief and ultimately this major State capital injection. VHI could have been broken down and sold into different parts. The proposal was something we contemplated in opposition as a possible, indeed probable, solution. There clearly is an appetite for further international investment in the Irish health insurance market. That has been demonstrated by the arrival of new companies such as GloHealth. If VHI had been split up, instead of the taxpayer taking the €150 million hit or sweetheart deals being provided to Mr. Warren Buffett, the investors could have made the capital investment and there would not have been a requirement to inject taxpayers’ money.

I do not suggest that we should abandon risk equalisation but let us engineer a far more efficient health insurance market that will benefit Irish taxpayers. At the moment it is simply a question of firefighting. No strategic reform has taken place and VHI is getting everything it wants. Mr. Buffett is getting everything he wants and the taxpayer and the policyholder are paying the price for both. A report was done by Goodbody stockbrokers and Matheson solicitors in 2011 on the future of VHI. It appears that the report has been suppressed. I urge the Minister to make it public so that, as legislators, we can all scrutinise the alternative options that have been put to the Government but have been ignored to date. That would be a healthy, open and transparent way to proceed.

While not specifically dealt with in this legislation, albeit very much linked to the economic rationale for the legislation, the Minister must impose very strict conditions on VHI for receiving this taxpayer investment. Earlier this year it was discovered that the average staff cost at VHI in 2011 was €62,000 compared to €40,000 at Laya Healthcare. VHI continued to pay into a defined-benefit pension scheme for its 900 staff in 2012. In 2011 the pension provision amounted to €7.7 million. I understand former staff receive lifelong VHI health insurance and, equally, current staff also receive this top-up payment. It is important that if we write a cheque to the VHI on behalf of taxpayers that we do so with stringent conditions. The Minister will have no credibility in making statements that private insurers should make greater cost efficiencies in administration – I have heard that repeated by a number of Government backbench Deputies - when the State-owned VHI continues to maintain such disproportionately high staff costs. On average, they are 50% higher than competitors in the health insurance market. VHI staff benefit from large pension entitlements and private health insurance top-ups. That is not sustainable. If we inject taxpayers’ money into VHI there must be substantial, systemic and deep reforms. To date, I do not see much evidence of that.

One of the biggest failings the previous Government made after writing huge cheques and issuing the guarantee for the banks was that it did so without any conditions. I plead with the Minister not to make the same mistake. One could argue that the sum involved with VHI does not compare to the bank bailout in terms of quantity but it is an important principle and it is important to set down such a marker.

I urge the Minister to reconsider both the change in tax relief and the alterations in the risk equalisation measures and explore further the scope for breaking up VHI and avoiding the necessity for taxpayer investment that will be funded by these measures.

If the Government remains serious about implementing universal health insurance, it is inevitable that some form of tax incentive will be introduced to encourage people to take up policies. The cost of the tax relief in 2013 will be a future cost in some budget year most likely before 2016 if the universal health insurance policy is delivered when promised. Moving 50% of the population into private health insurance will not be done without some tax relief. I presume the Minister knows this. In the meantime, the very short-term savings to the State will merely impose longer-term costs on our public hospitals. I fear the Mater Private Hospital’s enormous staff reduction, announced yesterday, may be only the beginning as an increasing number of people move away from their private policy and into the public health system, thereby putting increasing pressure on the latter. Is this seriously the outcome the Minister set out to achieve when he came into office? I genuinely do not believe that was the objective but that this is a short-sighted, unintended consequence. It will make it far more difficult to achieve the objectives of universal health insurance. Logically, moving people out of private health insurance, only to try shift them back in the very near future through a universal scheme is simply not going to be practical or possible.

Fine Gael ran on a platform of ending the two-tier system of health service. The two-tier system, created by the previous Government, led to the unique position in which private health insurance holders were eating up public hospital infrastructure and staff. This reduces the amount of public hospital infrastructure available to the other half of the population that does not have private health insurance. This, in itself, is unsustainable.

The consequence of the policy advocated, which is now enshrined in this legislation, is to reduce the number of private health insurance policy holders entirely, which is resulting in the reduction of services in private hospitals. This has no effect on tackling the two-tier health system; it reinforces it and further damages the public health system. I hope we will have an opportunity to return to this matter on Committee Stage.

Deputy Peadar Tóibín

The health system is in crisis without a shadow of a doubt. In recent years, approximately €3 billion has been taken out of the health system. The system has lost thousands of staff and thousands of beds have been closed. This year, we are set to see between €666 million and €1 billion being taken out of the hospital system. This means hospital services are being closed. For example, we have seen eight of the nine HIQA watch-list hospitals lose their emergency departments. Our Lady's Hospital in Navan is now the last hospital on the watchlist but there is a threat to close its department by December 2014, despite the fact that there is insufficient capacity elsewhere in the system. These decisions are not being based on patient safety but on the fact that costs have to be cut due to budgets. The health chiefs of the major Dublin hospitals said as much in their letters. When the Minister was involved in the budgetary process, he said as much also.

The health care system needs root-and-branch reform. We need a system that allows access at all levels for all people on the basis of medical need alone. The two-tier system is grossly inequitable and immensely inefficient. It must come to an end. We need a new universal public health system that provides health care free at the point of access on the basis of need and funded through the general taxation system. We need a new system based on public service and social solidarity. We need a system in which the State does not heavily subsidise the private sector while at the same time expecting public patients to languish on public waiting lists. We need a system whereby a baby in my constituency does not have to die from meningitis three minutes from hospital, having waited for an extended period for an ambulance to arrive. We need a system in which a rugby player does not have to wait 45 minutes for an ambulance on his having received an injury and in which a man does not have to die of a heart attack in the Newgrange Hotel having waited 40 minutes for an ambulance. We need a system in which a man in Canistown does not have to die after waiting 40 minutes for an ambulance, in which a road traffic accident victim does not have to die after waiting 25 minutes, in which a child stuck under a 1-tonne industrial gate for 50 minutes does not have to suffer internal injuries while awaiting an ambulance, and in which a victim of serve stroke does not have to wait 40 minutes for an ambulance before being brought to hospital. There was a case recently in Rathoat in which a person had a panic attack and became unresponsive and unconscious and stopped breathing. That person had to wait 35 minutes for an ambulance to arrive. The day of the health service we desire is not here yet. The figures I have outlined are admitted by the HSE in its press statements. The problems of the two-tier health service continue unabated.

Significantly, costs continue to rise, for both the end user purchasing private health insurance and the State. The cost structures are not being properly tackled. A large number of people are caught in the austerity trap. In the past year, some 60,000 people have been forced to forgo private health insurance. Most of them, many with young families, are struggling to make ends meet and pay for health insurance. I fear the steps being taken may lead to further increases in the costs associated with the private health care system. Therefore, we will see many more tens of thousands of families shedding their health insurance over the next while.

We will not change the Government's ideological bent on this issue any time soon. It is necessary to ensure that some social solidarity and intergenerational solidarity exist within the system. It is, therefore, positive that risk is equalised within the health system and that customers are not discriminated against on the basis of age, gender or health status. This element of the Bill is a step forward and I welcome the Minister's input into it.

It is very important that the cost issues within the private health system be focused upon. There is a major imbalance with regard to the age spread of those with private health insurance, and there is also a major imbalance with regard to pay rates in the private health insurance sector and the health service itself. We have seen that come to light this week. Until these imbalances are actually dealt with, it will not be possible to lower the cost of health insurance for the end user.

Deputy Bernard J. Durkan

I am delighted to have an opportunity to speak and will not delay the House for very long. Over the years during which the Leas-Cheann Comhairle and I have been Members, we have heard many solutions to health service problems, and they have varied in extremity. They included the now-famous abolition of the health board system, which was regarded as the answer to everybody's prayer. It was argued that it would be much cheaper to run the health services under the HSE but we now know this did not materialise.

I was less enthusiastic about the proposals than others over the years because, unfortunately, I had seen the failure of so many bright ideas on the way. The present Administration has done a reasonably good job in achieving targets that were almost impossible to achieve in an extraordinarily difficult economic climate. The tide has been against the changes the Government is trying to introduce. Within reason, it should be acknowledged that a reasonable attempt is being made to change things for the better. It is not easy to do so because there is no area of government like the health service that creates its own inflation to the same extent. It is almost impossible to watch, as the Minister and I will remember from our days on the Eastern Health Board. However, it used to be possible to monitor in a far greater way the changes as they took place and to identify emerging costs at an earlier stage.

Health inflation costs will have to be borne in mind. I have tabled scores of parliamentary questions on this issue.

The age profile must be distributed evenly among the private health insurers. I am not so certain that is happening. When community rating was introduced and competition was brought into the marketplace, the intention was that it would improve the circumstances for the consumer, but we know that did not happen. I cannot get answers to parliamentary questions on the degree to which the age profile rotates between all the insurers, because that is the basis on which everything stands. We hear daily that old guys like myself should not really have private health insurance because we are a burden on the system. That fails to recognise that during the 1970s, 1980s and 1990s, when interest rates were at 17% and 18%, we had to pay high rates for health insurance while at the same time paying interest rates on mortgages that were equally exorbitant. It should not be forgotten that there were burdens in those years as well and that the families of the 1970s and 1980s had to pay a heavy price for private health insurance, so there is nothing unique about it.

The contributory costs must be assessed, acknowledged and monitored daily, because there is no other way to do it. When there is an increase or a proposal for an increase, the administration in the health service must get involved immediately, because it takes on a life of its own. For instance, if HIQA inspects a nursing home - I have tabled parliamentary questions on this as well - it will say that in order to achieve the highest quality and standards in health and safety, it will subdivide wards to modernise them, despite the fact that many people in those wards do not want that done and that it has nothing whatsoever to do with health and safety but with somebody creating a situation that will cost more. The result is that the staff-to-patient ratio is increased to that extent that it is no longer viable, we have fewer patients in the institution and it become less cost-effective. This happens on a regular basis and I cannot understand why it has not been arrested.

I refer to the private versus the public health sector. I am not at all satisfied that adequate supervision has been applied to the extent to which both sectors contribute to dramatic increases in the cost of private health insurance. I do not want to go into the details of any of the cases with which I have dealt - I am sure every Member of this House has dealt with such cases as well - but I can assure the Minister of one thing, namely, that some of the bills I have seen for procedures, even minor ones, in public and private hospitals are appalling. If anything is to be done to curtail the escalating costs of the health service in this country, that area will have to be targeted as a matter of urgency. I have spoken to scores of people who have had experiences of that nature, as I am sure every Member has, when the cost of the procedure was such as to frighten them and place a burden on them which they could barely handle in terms of premiums.

Minister for Health (Deputy James Reilly)

I thank all those who partook in the debate on the Bill. I will address some of the specific issues raised by contributors. The main purpose of this Bill is to specify the number of risk equalisation credits, in respect of age, gender and level of cover, that are payable to insurers from the risk equalisation fund from 1 March 2014 and to make consequential amendments to the Stamp Duties Consolidation Act 1999 to revise the stamp duty levy required to fund the risk equalisation credits for 2014. In addition, there are some technical amendments to the Health Insurance Acts.

This will have the effect of ensuring that risk equalisation continues to be as effective as possible in providing the necessary support to community rating while, at the same time, the scheme remains robust and transparent and promotes fair and open competition in the market. In particular, while improving the effectiveness of the risk equalisation scheme overall, these measures will make health insurance more affordable for older people by supporting community-rated premiums.

I will not go over the specific details of the Bill again, but it is clear there are serious challenges to the maintenance of a competitive and sustainable health insurance market. The last thing I want is for health insurance to become a luxury customers cannot afford. There is a number of options that can be explored to help address the decreasing number of persons holding private insurance. The proliferation of plans available on the market and the increasing segmentation of the market due to strategies adopted by the commercial providers are of growing concern to me. A potential measure to address this would be the implementation of rules relating to the maximum number of products that can be marketed by individual insurers. Clearly, the fact that there are 256-plus policies on the market is destined and designed to confuse people. As I said earlier, the Health Insurance Agency has a good website that people can use to help them make a good choice in regard to the insurance they require. People should shop around and consider whether they need to have their children on the same policy as themselves.

The introduction of a standard plan supported by effective risk equalisation and optional risk-rated additions could have a beneficial impact on the market. People mentioned lifetime community rating, which I intend to actively consider. Currently, somebody the same age as myself can get insured at the same cost, despite the fact I might have been insured for my entire life while that person only decided to become insured for the first time today. There is an issue there at which we should look.

There are a number of technical issues which have to be considered before any possible introduction of lifetime community rating, such as the age at which premium loading should commence and the rate at which the loading should apply. In this regard, I have instructed my officials to commence work immediately on assessing the full implications of introducing such a measure.

In seeking to address the current market decline in tandem with the possible introduction of lifetime community rating, there are other initiatives which can be examined to aid sustainability of the market. Another potential change relates to amending legislation to allow insurers the option to charge adults aged 18 to 29 at discounted adult rates. Currently, they can do this with students up to the age of 23. A number of other issues will be examined.

The impact of the risk equalisation scheme, which is the purpose of this Bill, is that stamp duty for advanced plans will increase by €49 for adults and €15 for children. However, this does not mean the cost of the plans will increase by these amounts. Everybody knows what is happening in the market. Why is it that Laya and Aviva have so few people over the ages of 70 and 80? They are gearing their market products to attract younger people. The reason they are doing that is that these people are more profitable. They make more money out of a 25, 30 or 40 year old than they make out of a 70 or 80 year old. If risk equalisation was working properly, one would expect that Laya, which has 22% of the market, would have 22% of people over the age of 80, but it does not. It has something like 3% or 6%. One would expect the same of the other companies, but that is not the case. How can that be if their marketing is fair, equitable and does not seek to segment? However, that is not the case. It is very clear what is going on, and that is what risk equalisation is about. Let us look at it from another point of view. If they did have an equitable share of the higher-risk older people, there would be no transfer of funds whatsoever between the insurers but, of course, that is not the case.

They do not have to increase the cost of their plans by the equivalent of the levy increase because they can easily absorb it from the profit margin they generate on policies for younger age groups.

Some media outlets have reported a doubling or more of insurance premia in recent years. I fully recognise that the increases of health insurance over the past few years at a time of financial crisis have made it hard for many households to bear but I would like to dispel myths about the increases. In 2008, the average premium paid for open membership insurance was €728 approximately before tax relief and this had increased to €1,048 gross in 2012, which represents a 44% increase. In the 12 months to the end of June 2013, the average premium paid was €1,095, which represents an increase of 59% since 2008. It has, therefore, not doubled or anything remotely like it but it is still difficult for families to deal with and nobody is denying that.

Deputy Creighton stated the levy is used to prop up the VHI. It clearly is not given it is used to subsidise older patients. The fact that 89% of people aged over 80 are insured with the company means it will receive the levy. The position is similar for people aged over 70 but if the other insurers were playing ball and taking these older people on, there would be no transfer of funds. The tax relief subsidy is a taxation matter that is put centrally but I must correct a misstatement because the Deputy is wrong. The administration costs of the VHI are lower than Laya Healthcare and Aviva Health and they are considerably lower than its American counterparts.

Why is the cost of health insurance increasing annually? Why do we passively accept medical inflation of 9% when most other sectors are experiencing deflation or inflation of 1% or 2%? There is no rationale for this. There has been no proper, aggressive attack on the base costs of health care. Two years ago, an individual made €1 million out of the VHI alone while last year an individual made €850,000 out of the company. That is before the moneys that may have been paid by the other insurers are taken into consideration and money paid in cheques and cash across the table in their practices. I do not care how good someone is because that level of remuneration is not sustainable in this country. It is clear that we have to benchmark what we pay and why we pay it and we must conduct a clinical audit which, astonishingly, has never been done. However, such an audit is being introduced by the VHI and this must be conducted by doctors. I do not mean any disrespect to nurses but a nurse cannot challenge a cardiologist, neurosurgeon or other specialist. It takes one of their peers to do that and there is little point in a cardiologist challenging a surgeon or vice versa. An audit would establish why the tests are being done, whether they are necessary and why there is such a volume of them.

I do not want to say anything that might upset Members and I am sorry people are losing their jobs in the Mater Private Hospital but there are reasons for that which do not necessarily relate to the reduction in the number of people who have health insurance. In the coming year we will have an opportunity when the consultants' contract and the private hospital contracts are up for renewal to drive down costs. We are paying the same rate for procedures that used to take two hours but now only take 20 minutes. This means that, in some cases, consultants can make between €4000,000 and €450,000 a year for a one-day week. That is not sustainable but none of this was tackled in the past. It will be tackled and Pat McLoughlin's group is examining this. This is not about consultant bashing. Excellent consultants work in the health services, some of whom work hard and do more work than they are contracted to in the public sector. However, there are others who do not and they are abusing the situation and they will be dealt with. Similarly, the cost issue has to be dealt with before we move to universal health insurance and we will deal with it. The average length of stay has increased in the private sector and it is reducing in the public sector. There is, therefore, a great deal of learning to be done on both sides. We can learn from each other and I am sure we will.

I have to take issue with the list of incidents Deputy Tóibín alleges happened. I am a doctor and nobody would stop breathing following a panic attack for 35 minutes. Anybody who stopped breathing for 35 minutes would not survive unless he or she was on life support.

Deputy Peadar Tóibín

I will give the Minister the details of the case.

Deputy James Reilly

The Deputy can but I can tell him, as a doctor, a panic attack will not do that to anyone. In a panic attack, one may stop breathing for a few minutes before the reflex kicks back in and one starts breathing or else one is not having a panic attack.

Deputy Peadar Tóibín

I am not sure the Minister can diagnose from this distance.

Deputy Bernard J. Durkan

The Deputy is though.

Deputy Peadar Tóibín

That is what the lady said herself.

Deputy James Reilly

Some of the cases the Deputy cited are bordering on the fanciful but that is nothing new coming from the party he represents.

Deputy Billy Kelleher

Represented.

Deputy James Reilly

I beg the Deputy's pardon.

Deputy Tóibín stated the health service is in crisis. I accept and acknowledge that we face a serious challenge and that a great deal of money has been taken out of our budget and many staff have left but if it is in crisis now, the Deputy should consider the position before I became Minister. A total of 34% fewer people have to endure long trolley waits now than in 2011. On one day in January that year, 569 people lay on trolleys throughout the State. We have reduced that number by 34% but there are still too many lying on trolleys and we continue to work on this. I commend the men and women working in our health service who have achieved this, despite a 20% reduction in budgets and a 10% reduction in staff.

More than 90% of people last year were treated within nine months of going on an inpatient waiting list and during 2011, we had reduced the waiting time to a year. Prior to that, people were waiting two years. In addition, more than 90% of patients have been seen and had an endoscopy within the 12-week target we set while more than 90% of children have undergone inpatient treatment in less than 20 weeks. That is not a health crisis spiralling out of control; that is a health service, which is recovering and starting to do things in a different way. I again thank the men and women who work in the service.

I am sure there have been sad cases of loss of life due to meningitis. It is a dangerous, septicaemic-type condition but, thankfully, vaccines against a number of strains of the disease are available now and these have reduced the death rates. I would like the details about the ambulance wait to which Deputy Tóibín referred. He also raised the issue of strokes. Our clinical programmes have taken us from the bottom to the top of the league in Europe through the use of thrombolysis. In two years, we are at a point where we are saving one life a day as a result of a stroke through the use of stroke units and thrombolysis and we are also preventing three people a day from going into long-term care. There have been considerable improvements in our health services but we have a long way to go. We face serious challenges, as does the country. We expect to exit the bailout next month and that is another key step along the road to recovery. Deputy Tóibín will be very much in favour of us taking back our financial sovereignty and making decisions for ourselves.

The Bill is about supporting community rating through the methodology of risk equalisation and it is not about making health insurance more expensive for people.

It is about enshrining the concept of social and intergenerational solidarity to which all sides of the House espouse. I commend the Bill to the House.

Question put.

An Ceann Comhairle

In accordance with the Order of the Dáil today, the division is postponed until immediately after the Order of Business on Tuesday, 26 November 2013.