JOINT COMMITTEE ON HEALTH AND CHILDREN debate -
Thursday, 8 Jul 2004

OECD Health Project: Presentation.

Chairman

We are delighted to welcome the secretary general of the OECD, Dr. John Martin, on the outcome of the OECD health project. Some of us were delighted to have the opportunity to meet Dr. Martin at an OECD seminar where we discovered he has many Irish connections. He indicated to us that he would be willing to address the committee, which we thought an excellent idea. I will now invite him to make his presentation.

I remind witnesses of the absolute privilege accorded to members of the committee. Unfortunately, witnesses appearing before the committee do not enjoy the same privilege.

Dr. John Martin

It is a great honour and a real challenge for me to follow my old friend and colleague, Mr. Colm McCarthy. I would like to correct one of the nice things the Chairman said about me. I am not secretary general. If I was, my boss would be worried. I am the director for employment, labour and social affairs, including responsibility for health. As the Chairman has said, I have many Irish connections. I am, in fact, a Dubliner and it is a pleasure for me to be back in my native city.

Members of the committee have in front of them two documents connected with this presentation. I apologise that one of them has some hand-written scribbling of mine on it because my assistant was unable to open the relevant file. Please excuse the scribbles; they do not include anything insulting or too rude.

One of the documents is what we call a chart book. The reason I have provided it for the committee is that one of the things the OECD does, as mentioned by Mr. McCarthy, is to collect a large amount of data and indicators on a range of health related issues. Out of the most recent edition of our database just released last month, I have selected for the chart book about 25 different indicators which cover issues, ranging from financing to inputs to the health sector and outcomes from the health sector. In all of them, without question, members will see we have presented data for Ireland compared with a large range of other OECD countries. This is just a small selection of the data available in the database OECD health data. It will give a flavour of what is available in the hope of encouraging the committee to dip further into the database which is available in a friendly CD-ROM version.

I will now say a few words about the OECD health project. This was a special project which was set up three years ago with special funding. Its remit was to look at the challenges facing OECD countries with regard to health systems, with a particular eye on sustainability and value for money in health care systems. The report was finished in May and was presented to a meeting of OECD Ministers of Health, including the Irish Minister for Health and Children, Deputy Martin, on 13 and 14 May.

I will now give some details about the background to the project and what I will talk about in this presentation. As everybody knows, there is increased spending on health in almost every country. This occurs in a context in which virtually all countries face challenges to financing health care in a sustainable manner and is combined with a situation in which there is an increasing demand by populations for better performance. Better performance has a number of different dimensions, including quality of care, responsiveness of the system to the needs of patients, and issues concerning access to good quality health care which varies across groups in the population. These add up to a common desire to improve the efficiency of health systems or provide value for money.

The first issue I want to discuss concerns the common pressures that face all OECD countries, namely, the pressure of the continued cost and finance pressures facing them in the coming decades. These costs arise from a culmination of factors well known to this committee. Some of these are the costs arising from advances in medicine and technological progress, whether in the form of drugs or new medical technology or procedures; the ageing of populations and the incipient demands for health care accompanying that; and the pressures of economic growth.

All countries have faced this increasing health spending pressure. The chart supplied to members shows figures for 1970 compared with 2002, which is the latest year for which we have figures. On the chart we can see that Ireland is below average for both years. However, we should mention that on the chart health spending is measured relative to gross domestic product. It is well known that Ireland has a large gap between gross domestic product and gross national product, reflecting the important role of multinationals and the repatriation of profits. This means that it might be more appropriate, in the case of Ireland, to measure the health spending effort with regard to gross national product rather than gross domestic product. If we do that, Ireland turns out to have at least an average, if not an above average, share of health expenditure. It is important to bear that point in mind because, unlike most countries, there is a large gap between GDP and GNP here.

The health spending effort and the increased demand on it means an increased demand on public budgets. In Ireland, as in almost all other OECD countries, approximately three quarters of total health care spending comes from the public budget. There are some differences across countries but Ireland is around the OECD and European Union average in terms of the amount that comes from the public sector. There is also private health insurance and out of pocket payments by individuals and other private funds.

We all know that health care expenditure increases in line with real income. The chart supplied to members shows a positive correlation clearly. However, there are variances across countries. We can note, for example, that the United States is a large positive outlier and spends significantly more on health, in relation to its real income, than any other country. That is consistent. Last year the United States spent something close to 15% of GDP on the health care sector. It is well known that a large proportion of that spending is through private insurance and private spending.

It is worth noting that, last year, the United States spent approximately a little over 7% of its GDP on public health care through its two main public health care programmes, Medicare and Medicaid. Medicare is for the elderly and Medicaid is for low-income groups. That would have put the United States a little bit above the OECD average for public spending on health care, in addition to the extremely large share that goes through private insurance and private spending.

What are the ways in which one might worry about trying to deal with these cost pressures and seek to put some kind of sustainable financing base in place for the future? Some countries have done this through a variety of budgetary and administrative controls overpayments, prices and the supply of services. The most common is budgetary caps, that is, where countries put in place fixed caps and decide that no more than a certain amount can be spent. These work quite well in single pair systems but they give rise to distortions over time. Other countries seek to control the prices of doctors and medical inputs. This also can work but it can give rise to problems connected with the supply of inputs. I listened earlier to the committee discussing the problems of increasing the number of doctors. This is an issue which also has major implications.

The second area which countries have explored is cost sharing requirements to increase what is called the personal responsibility for health care by making individuals pay something out of their pockets and also seeking to expand the role of private health insurance. These can work and are being tried, but they raise real difficulties. The more one increases out of pocket payments, the more one runs into problems about persons on low incomes and those who have difficulties with budgets. It means that, in many countries, one must exempt large groups in the population from any significant out of pocket payments. That limits the amount of cost control one can expect to increase. Private health insurance is another route, but up to now, looking at those countries that have relied on private health insurance, it does not appear that it has had a major impact on restraining the growth of total spending on health simply because, in most countries, the public sector is still the largest source of financing for health care. There are very good reasons that might be the case.

An increasingly popular resort is to try to reduce the size of the basic package of health care services that is made universally available to most people at extremely low or zero cost. It can be seen that in quite a number of countries, coverage or the degree of coverage is reduced for so-called ancillary or luxury services. I put the word "luxury" in inverted commas because many people might disagree that certain types of dental or optical care or other forms of orthopaedic care should be regarded as luxuries as distinct from necessary services that should form part of the basic health care package. It is important to note that there is a trend across OECD countries and two recent examples are the reform proposals in both France and Germany where the basic health care coverage package is being tightened and reduced by requiring much larger cost-sharing payments for a number of services in the dental, optical or orthopaedic field.

One should not be too pessimistic about the future for financing because it is possible to save money while improving health system performance. That is an extremely important proposition to bear in mind. Inefficiency exists in health care systems and in all health care systems across OECD countries.

Chairman

I must draw the attention of the committee to the fact that there is a vote in the Dáil. If Deputy Mitchell wishes to stay, we can arrange a pairing arrangement to keep the meeting in session, otherwise we can suspend for 15 minutes. I apologise to the visitors.

Sitting suspended at 11.05 a.m. and resumed at 11.20 a.m.

Chairman

I apologise for the delay. I ask Dr. Martin to resume.

Dr. Martin

It is kind of the Chairman to call me Dr. Martin, but I have to point out that I am not a medical doctor in any sense. I am another kind of doctor. It is not clear whether the investment that was made was worth it.

I wish to discuss the evidence of inefficiency in health care systems. There are large variations in inputs and outputs seen across all OECD countries, for example. The figures are documented in the chart book which has been circulated. I may refer to some of the statistics later in my presentation or during the question and answer session. The numbers constitute strong prima facie evidence that there is room for improvement. As economists and policy makers, we know that the health sector is characterised by what economists call a wide range of market failures. There is strong public intervention in inputs and outputs. There can be excess spending or wrongly allocated spending in such circumstances. What evidence is there in respect of potential avenues which are worth exploring if we are to increase efficiency? We could use demand management tools to examine demand, for example, by using general practitioners or other practitioners as gatekeepers. This well known tool has been used in many countries such as Australia, Canada, Denmark and the United States.

There are many issues relating to waiting lists, particularly in systems in which one has to wait for a long time for elective surgery. A mechanism which introduces more clinical prioritisation of waiting lists is widely used in New Zealand and is believed to have had some success.

I spoke earlier about sharing costs, encouraging greater use of cost-effective care and developing ways of refining cost-sharing mechanisms. The dissemination and practice of evidence based medicine is popular. Everybody is in favour of it, but it is proving difficult to put into practice. Who could be against it? It is quite difficult to encourage practitioners to be aware of what appears to be best practice and to ensure they always use it. If they do not follow best practice, it is difficult to develop mechanisms to encourage them to move closer to what is regarded as best practice.

It is right that I should discuss the appropriate skill mix of health professionals in the immediate aftermath of Colm McCarthy's presentation which focused on Ireland's much lower ratio of doctors per head of population than many other OECD countries, a statistic which is clearly borne out by international comparisons. It is a long-standing issue in Ireland. Problems are caused by the numerous clauses system which restricts strongly the entry into medical schools. Such restrictions are common across OECD countries. Many countries are seeking ways of alleviating the shortages they experience. One should bear in mind that even if one increases the number entering medical schools, it takes a long time to produce fully experienced and practised clinicians. One cannot double the number of places in medical schools by waving a magic wand overnight, as one will have to wait for at least seven or ten years. We have a large stock relative to the inflow.

Some countries are seeking to recruit fully trained practitioners from abroad. Many OECD countries are seeking to recruit doctors and nurses from other countries, including non-OECD countries. It is a long-standing tradition in Ireland, for example, to recruit nurses from the Philippines. Many problems are associated with draining skilled health care professionals from developing countries which may have a greater need. It is a somewhat more complicated matter than it might appear when one listens to those who say the rich countries are poaching health care professionals from poor countries.

We recently conducted a detailed case study of South Africa, which is an attractive country for recruitment for a number of OECD countries, including Australia, Canada, the United Kingdom and, to a limited extent, Ireland. While doctors and nurses are leaving the South African health care system to go to such countries, many of them are doing so because they have great concerns about education, conditions of work and the quality of the South African health care system. It is interesting that the number of professionals in the South African health care system has not decreased because South Africa has been recruiting in the rest of the sub-Saharan region. It has been draining professionals from Zimbabwe, Uganda and Mozambique. Interestingly, South Africa has recruited a large number of health care professionals from Cuba.

There is an issue relating not only to doctors, but also to the mixture of doctors and nurses. Should the number of nurse practitioners, or nurses who are taking on a range of tasks which were restricted solely to doctors in the past, be increased in some countries? The idea is being explored intensively in some countries as a way of increasing value for money and changing the balance of professionals.

I wish to discuss provider payment methods. How can we increase productivity, as economists would describe it? We could develop methods of payment which are much more closely related to activity and outcome. An interesting experiment is under way in the US Medicare system, for example. Payments are being made to hospitals on the basis of their performance ranked on a range of 35 quality indicators and the standard activity based formulae. The system is being monitored to see if it produces better performance, cheaper costs and better patient satisfaction.

The second area which shows great promise, although it requires a significant investment upfront, involves the use of automated health data systems and a greater use of information and communications technology. Among the most exciting innovations in this area in recent years has been the introduction by the administration responsible for US veterans' hospitals, a publicly funded system which was regarded ten years ago as extremely inefficient, poor in quality and very expensive, of a major series of investments in electronic patient records, information and communications technology and the electronic tracking of medication records. The first results of this investment are quite extraordinary. Medication errors have dropped by about 15% to 20%, the cost of treating patients has declined by 25% and measures of outcomes such as survival ratios have significantly improved. The investment has helped to ensure that doctors and nurses are fully clued in and paper records have essentially disappeared.

While the system is expensive, it illustrates how short-term investments in capital and software can lead to significant medium-term improvements. People who have struggled with health care systems in a number of European countries and have experienced difficulty with the volume of paper records and in trying to track patient information will acknowledge the significant potential of electronic mechanisms to improve efficiency.

The management of health technology is also important. One must decide what to do about increasing expenditure on drugs in most systems while the new drug treatments which are emerging all the time are becoming more expensive. Systems must be put in place to evaluate new drug treatments quickly and decide whether they offer a real improvement or constitute cosmetic or less essential treatments in respect of which reimbursement should not be made. There is also a need to put in place systems to make decisions on new health technologies. The National Institute for Clinical Excellence in the United Kingdom has shown that while systems can be put in place, the process is not easy. While the introduction of such systems will not yield enormous gains in the short run, any investment will probably be significant and useful in the medium and long term given the impact of technology and the continual pressure from pharmaceutical companies on health care systems to validate new drugs and innovations.

It is probably reassuring to everyone that even if we have better knowledge than in many other cases, improving health system performance is a difficult challenge which requires continuous effort and innovation no matter which country one is in. Given the wide range of goals of policy makers, there must be trade-offs. There are no simple, easy answers and trade-offs are inevitable in difficult areas such as responsiveness, equity of access, costs, efficiency considerations and quality. The experience of OECD countries over the past two decades has been that making major changes is very difficult. The record in some countries of major reforms which have been reversed or thrown out after a few years is quite extraordinary and sobering. It demonstrates the need to involve all stakeholders and reform in a very iterative way.

Coming from an international organisation, my next point is probably a little self-serving. International comparisons can provide useful guidance to national policy makers as monitoring and benchmarking are essential. I hope this presentation and the previous one by Colm McCarthy, in which he made some international comparisons, demonstrated that for committee members.

The OECD carried out twelve research projects under its overall health project, of which two have specific relevance for Ireland. The first was a detailed project on tackling excessive waiting times for elective surgery under which we produced two extensive, major research documents, copies of which I have provided to the committee's clerk. They are also available on our website. The second was a specific study on private health insurance in Ireland, a copy of which has also been provided to the clerk and which can be consulted on our website. That closes my formal presentation and I will be happy to answer any questions members wish to raise on this or other aspects of it.

Chairman

I thank Dr. Martin for a most enlightening presentation. The committee is grateful for his attendance which has given us a very valuable insight into the workings of the OECD. The reports he has made available are of significant interest to members, most of whom wish to ask him very intelligent questions, commencing with Deputy Mitchell.

Deputy O. Mitchell

That really puts it up to me. I found the presentation fascinating. I do not know if I was reassured or worried by the information I took from our meeting in Paris that the problems appear to be universal and we are not unique in Ireland. There are endless questions one could ask but I will concentrate on two matters.

I notice that in reference to containing costs and seeking value for money, Dr. Martin did not speak about shifting the focus of spending to public health type spending on prevention and containment. Is he of the school which believes that such spending does not save money as we will all die anyway? I am aware that some people hold the view that while one's quality of life may improve, one will end up costing money at some point.

The ultimate challenge for the health service is the difficult one of deciding where to establish its boundaries. Last year, I spoke to a person in Canada the health service of which is always held up as the perfect one. I asked if this was really the case and was told that while it was, there was no luxury service. That is not to say one does not receive, for example, a dental service. It means cutting-edge provision is not available. The man I spoke to gave the example that if he were to require brain surgery, he would receive surgery which was at the cutting edge ten years ago and which had side effects. If he were to cross the border into the United States of America and pay for an operation, he would receive brain surgery without side effects. That is the challenge for everybody.

There are constant quantum leaps in what is possible and available and inevitably people will wish to take advantage. The question is how to pay for it, an answer for which I do not expect Dr. Martin to have. Is that not really the challenge and the reason it is difficult to address this matter? According to Dr. Martin's first conclusion, it is never easy. Demand is endless and the advances in technology mean we are always on the back foot.

Deputy McManus

I found Dr. Martin's presentation very interesting and the documentation provided quite valuable. While it is difficult to cover many points in a context such as this, I draw the conclusion that while it appears a great deal more money is being invested in our health service, by comparison with other countries it is no big deal. I am sorry for being local but it is inevitable that we will focus on Ireland. We have serious deficiencies, especially when one considers the ultimate measure of life expectancy. Ours is very poor despite our very rich economy.

One aspect of how that life expectancy arises, however, must concern the serious inequality within our health service. Has Dr. Martin considered this? Everybody has universal entitlement but half the population takes out private health insurance. There are two parallel systems enmeshed with one another. This works for the private patient because the system is incentivised to look after private patients who get the treatment they need. However, the system is different for the public patient. Incentives are not in place and the resulting inefficiencies are severe. Those who need care die whereas those who do not need as much care or do not need care as quickly get it because they are covered by insurance.

There should be universal insurance and the system should be fully integrated. Can Dr. Martin envisage a universal system for Ireland? To return to Deputy Mitchell's point, how would this be ring-fenced so that demand does not simply take over? How can we ensure the system is efficient and meets the real needs without bankrupting the country?

Deputy F. O’Malley

I thank Dr. Martin for his presentation. I am glad the situation with regard to the EU average in terms of health care expenditure has been clarified by an independent person. While it is easy to bat figures around, to know what the figures mean and how the expenditure is delivered is important. How does Dr. Martin think a universal health care system in Ireland might work? What does he know of the successes or shortcomings of the national treatment purchase fund?

The greatest health challenge Ireland faces is that of reform. Money is invested but there is no delivery. Dr. Martin's concluding point was that making a real change can be difficult. He stated that reverses can occur and that people and governments can lose their nerve. Unfortunately, politics is all about deadlines such as elections. Dr. Martin might provide encouragement for governments which like to see results before they seek a mandate from the people. What length of time would be needed before reforms are delivered? For how long would the Government have to bite the bullet and stand firm before the results of reform start coming through? Since the mid-1980s, the health care system in Spain has improved dramatically. From Dr. Martin's knowledge of Spain and Ireland, what might we learn from this?

Dr. Martin

Deputy Mitchell raised an important question, namely, whether we can expect to make significant improvements by investing more in preventative care in public health. One point to note is that OECD countries spend on average only 5 cent from every €1 of total health care spending on prevention. This seems to create a prima facie case that we should spend more on prevention, although this argument must be made carefully. While the evidence is clear and nobody denies there is a strong cost-effectiveness regarding investment in prevention of communicable diseases, the situation is less clear when we turn to non-communicable diseases.

The simple answer is that we do not know enough about what are the most cost-effective investments which could be made in the area of prevention or whether prevention is the best public investment in some areas. An example is the growing epidemic of obesity, which affects all OECD countries, including Ireland to judge from the latest results of the Slán survey which show an increase in the proportion of the population who are obese as judged by a value of the body mass index. Should we invest in public awareness campaigns and an attempt to change the eating habits of the population? On the other hand, should we decide we do not know how effective these methods would be and that it would be more effective to concentrate on early treatment of the complaints and diseases associated with obesity, for example, diabetes, cardiovascular problems and problems of the muscular and skeletal systems? It may be that there are more effective ways of treating these if we can diagnose early rather than trying to invest heavily.

The simple answer is that we do not know. One of the points to come out of the meeting of Ministers in Paris was a great desire on their part to have more evidence on the cost-effectiveness of prevention. The OECD, together with the World Health Organisation, plans to invest more in considering the evidence of the cost effectiveness of different forms of preventive care.

The second question is the difficult one of where one fixes the boundaries of the health care sector. Myriad issues are involved. For example, where does one draw the boundaries between the health care system and long-term care for the elderly, which will become a much greater source of funding and delivery pressure for all countries given ageing populations? Up to now, much of the care for the elderly has been supplied through informal care provided by families. In future, this mechanism of care delivery will itself come under extreme pressure. Health care authorities and social welfare agencies at national and local levels will have to face this delivery question.

The exact example chosen by Deputy Mitchell regarding Canada is an interesting one. The Deputy is correct that Canada is often held up as an example of a universal coverage public health insurance system that delivers good outcomes at a slightly more expensive share of national output than Ireland's. However, in recent years, as the Deputy outlined, there has been a growing debate in Canada as to whether the quality of the care delivered through this public health care system is as good as it should be. It is a difficult area to judge. The OECD is engaged with more than 20 countries, including Ireland and Canada, in collecting indicators of the quality of health care outcomes delivered. While we will not have detailed results until early next year, the preliminary results suggest that no single country, whether the United States, Canada, Ireland, Australia or France, will come out on top on most indicators of quality. It seems the pattern is extremely mixed. Some countries like the United States do well in certain areas such as quality and others do better in other dimensions. It certainly does not appear that the United States, which spends roughly 4% more of GDP, gets systematically better quality outcomes than either Canada or any of the other countries that might seem like a good buy for the extra spending that goes on it.

Deputy McManus referred specifically to the Irish case. It is clear we are, and have been, spending a great deal more in recent years on heath care. She asked the important question of whether the country as a whole is getting the kind of outcomes required from that investment. One cannot just hold the health care system responsible for all of those outcomes, including life expectancy, quality of life, disability adjusted life years and so on. At the same time, one also has to look at a range of other circumstances. Health care spending is not the sole determinant of those outcomes, one also has to look at a range of other risk factors that determine life expectancy. These would, for example, include consumption of alcohol and tobacco and road traffic deaths through a range of other circumstances and lack of investment in the past. In many cases, life expectancy outcomes are determined by decisions in areas other than health care which took place many years in the past. Nonetheless, it is important to ask questions about whether as a society Ireland is getting a sufficiently good return for the investments it has been making in recent years.

Deputy McManus also raised the question of the balance between a mixed form of funding and whether it would not be better to move to a universal publicly funded system. It is true that Ireland has a mixed——

Deputy McManus

I did not say publicly funded, I spoke of a universal insurance system that would be part private and part public.

Dr. Martin

Okay. That is a very interesting question, which is discussed in some detail in the report I referred to earlier. The kind of private health insurance that we have developed here is apparently attractive to growing proportions of the population. The coverage of private health insurance has more than doubled over the past 20 years to a level where it now covers roughly half the population. Most people are, apparently, purchasing it because it gives them more responsiveness of care and a more rapid treatment whether in the public system or in the private system.

Why does that occur and, if we wanted to change it, what would be the cost? We must bear in mind that private health insurance is now only financing less than 10% of total health expenditure in Ireland as there has been such a large increase in public spending. In addition, private sector spending only covers specific treatments. One also has to look at the nature of the private health insurance market in Ireland which is unique when compared to other OECD countries as there is only one important player in the market. We have a very strange market system for private health insurance. Essentially we have a duopoly at the moment, that is, there is one dominant supplier of insurance, the Voluntary Health Insurance system, which has a very specific relationship with the public sector. In recent years, one significant private insurer, BUPA Ireland, has entered the market. It now has a market share of the order of 13% but is still a tiny player relative to the dominant insurer, the VHI. There is not much evidence at the moment of a great deal of competition between these insurers exerting much pressure on the providers to improve their efficiency.

There are some very difficult issues, of which I am sure the committee is well aware, connected with how to try to improve the efficacy of a private insurance market in terms of increasing competition and efficiency while at the same time trying to deal with the difficult problems that arise from selection of risks and cream skimming of risks. This raises the issue of whether one would want to introduce a risk equalisation system and what would be the implications of such a system given the very particular market structure to which I referred. I know the committee and the VHI has been examining this issue for some time.

Deputy O'Malley asked me if the national treatment purchase fund is a good idea. It is clear that Ireland has some very specific problems in terms of waiting times for elective surgery. On balance, the creation of the national treatment purchase fund is a good thing, in the sense of trying to allocate resources specifically to reduce excessive waiting times. The question is how much funding is available for that, how it is being used and if there is a good return on that investment. I can elaborate on the matter if the Deputy wishes. The international comparisons in the report to which I referred suggested Ireland has a number of specific characteristics that lead to excessive waiting times being an inevitable outcome of the system. We have relatively low capacity in terms of the number of doctors and specialists but also in terms of the number of acute beds per head of population. We also appear to have rather low rates of surgery productivity. Although it has improved somewhat in recent years, this is still below the rate of many other countries. Another factor is the mix of insurance and how private insurance helps a certain part of the population get rapid access to elective surgery and condemns or at least restricts others who rely entirely on the public system to have to wait much longer for treatment.

Is the national treatment purchase fund able to make a major dent in those issues? I will leave that to the committee to judge. The members know the system much better than I do. Some important issues must be taken into account. Waiting lists is an area where international experience does throw up some lessons which are useful. One has to operate on all fronts. One has to try to expand capacity where it is lacking, put in place methods to increase productivity, experiment with different forms of provider payment mechanisms to improve productivity and one may also have to consider the more systematic management or clinical prioritisation of waiting lists.

None of this will be cheap. It is clear from our study that it can be costly. Across the OECD countries that have waiting list problems, it appears that if one is in the category of a long waiting list country, it costs about 1% extra of GDP to move to the category of a country with average waiting lists. To move to the category of a low waiting list country one may have to spend another 1% of GDP. Nothing is cheap in this area but it is a question of the trade-offs in one's priorities. We should bear in mind that, contrary to what some believe, the optimum waiting time is not zero, at least from the perspective of economists. Many are quite happy to wait some time for non-essential surgery. It is interesting that in a few countries where people on waiting lists were asked how much they were prepared to pay to move themselves rapidly up the waiting lists, they were prepared to pay relatively little. If they were waiting for a hip replacement, for example, they were asked how much they would be prepared to pay if that waiting list shortened by one month. These kinds of experiments, which economists call "willingness to pay" experiments, reveal rather small sums. Typically people are not willing to pay more than €150 or €200, depending on the country, to be moved up one month a waiting list if it is for a non-essential procedure.

If one wanted to have a very short waiting time for most surgical procedures, one would have to have very large capacity. Given the stochastic, random nature of the way in which conditions arise for many treatments, much of that capacity is not utilised. This problem has arisen in France, where there is no waiting list to speak of. It has a serious problem of under-utilised capacity in the public hospital system. It is grappling with how it can maintain a system with no waiting lists and simultaneously try to reduce the inefficient practice of having a large amount of capacity under-utilised for significant periods throughout the year.

I was asked about reforms. There is a huge problem in this area. Once a country has identified a satisfactory reform strategy and blueprint to put in place - this is a huge challenge in and of itself - it must ascertain how this can be explained and justified to the population. In this respect, the experience of other OECD countries is extremely sobering. There is no substitute for telling it to the people as it is and for explaining clearly the nature of the challenges. After all, this is the job of members. I, as an academic and policy adviser, can sit here until I am blue in the face and outline to the committee my views and those of organisations such as the OECD, but the Oireachtas must make choices on them and then explain them to the people.

Many will feel extremely uneasy because health care is not just like telling one how to buy a doughnut or even a car. We all feel extremely involved in health care at a personal level and therefore it is hard to tell people they must accept changes to the systems, practices of doctors, reimbursement procedures and their own lifestyles.

It will take five or ten years, or more, to arrive at a solution and there are no quick fixes. As we discussed, even if one recommends an increase in the number of doctors by 20% or 50%, it will take ten years or more before the new doctors, who I hope would have better training and more effective skills and patient sensibility, start treating patients. We are talking about ten or 15 years, or more, and, therefore, a considerable challenge lies ahead of us. I am glad it will be faced by the committee rather than me as an economist and adviser.

Chairman

To show that we are rich in general practitioners at this committee, we will take questions from Deputy Devins, Senator Fitzpatrick and Deputy Cowley, all of whom are doctors.

Deputy Devins

It is fascinating to meet Dr. Martin again. I have many questions for him but I will confine myself to one or two issues because time is limited. It is a delight to have him in attendance. I was at the conference in Paris and felt very proud as an Irishman to see a fellow Irishman occupying such a prestigious position.

Dr. Martin touched on one of the issues I was going to raise, namely, the importance of distinguishing between the perceptions of the individual regarding costs of prevention and treatment. If each of us could have a single test to prevent something happening to us, we would much rather this than to first contract a disease and then be treated, although it may be cheaper to do it the other way around in national terms.

Dr. Martin, when speaking of increased efficiency, spoke about real change and involving the stakeholders. Far too often there is confrontation between the Minister and the various stakeholders rather than consultation, which should be the way forward.

The most topical point on which I wish to raise concerns is our total spend on health care. I notice we as a nation are still very low on the league table in this regard but that our per capita spend is probably one of the highest in recent years. I know Dr. Martin is not a politician but will he state whether Ireland should be increasing its spend to improve its health services?

Senator Fitzpatrick

I welcome Dr. Martin, a fellow Dub. I was equally impressed and depressed by his presentation.

Dr. Martin

Because I got it right.

Senator Fitzpatrick

I will lob a dirty question at him, in response to which I am not seeking an answer advocating a quick fix. If he were Minister for Health and Children, are there one or two areas on which he would concentrate?

Chairman

I am sure the Minister for Health and Children is hanging on those words.

Deputy Cowley

I apologise for missing Dr. Martin's excellent presentation, the main points of which I speed read. I was at another committee meeting and could not be present. As a general practitioner, I am very interested in what Dr. Martin has to say. His figures are very clear and he has given the lie to the view that we are spending too much on health. We were spending a deplorably small amount. In 1970 we were spending 5.1% of gross domestic product on health, and this has risen to 6.5%. We are still definitely behind in our health spending. The myth that we are pumping money into a black hole is nonsense.

I do not understand the statements being issued to the effect that we must feed the private sector to get a service. The Tánaiste stated some days ago that we need to feed the private service to obtain basic health services such as radiotherapy. The Hollywood report speaks about feeding the central agenda.

I became involved in politics because of orthopaedics. Under the Hanly report recommendations my area would never receive an orthopaedic unit although there are 1,700 people in Mayo waiting for basic services. The Institute of Orthopaedic Surgeons said the services should be available in Galway. Galway is almost as far from the end of Mayo as Dublin and therefore one can imagine the incorrectness of the institute's statement.

Does Dr. Martin not believe the treatment purchase fund is very much a quick-fix solution? In our area, where 1,000 people are waiting for urology services, the waiting list extends back eight years to 1996. Since the people in question have never been seen by a consultant, what good is the treatment purchase fund to them? We have no consultant in Mayo and are depending on a consultant who is almost as far away as Dublin is from Galway. Rather than having the quick-fix solution represented by the treatment purchase fund, would it not make much more sense to put the money into local services? In areas of health care where we have local consultants, we have few, if any, waiting lists and there is efficiency and equality.

Where there are no urology consultants, for example, there are problems. A man with cancer has been waiting since last December for an appointment to see a consultant urologist, which is scandalous. If we had a consultant urologist in Mayo, that would not happen. Where there are no consultants, there is a long waiting list. More than 1,700 people are waiting for orthopaedic services and 1,000 people are waiting for urology services. A woman is going blind waiting for ophthalmology services because we have no consultant. Is there not a bias towards centralisation?

There is a proverb which states: "Give a man a fish, feed him for a day; teach a man how to fish, feed him for life". The treatment purchase fund is a quick fix which will "feed" people for a few days or weeks. However, if local services are provided and consultants out in place, there will be efficiency. Why is there this black hole? We need money for local services and for consultants. Rheumatology is another area in which people wait for four years for treatment, losing the window of opportunity which exists for up to a year, after which irreparable damage is done to joints.

Chairman

The Deputy cannot make a Second Stage speech. We are taking questions.

Deputy Cowley

Does Dr. Martin not agree with the philosophy of building up local services and providing local consultants to ensure people do not go through this deprivation as they do in County Mayo?

Dr. Martin

Deputy Devins put his finger on an extremely important point with regard to prevention in that we must make choices. Each one of us would prefer some kind of preventative test, but to screen the entire population for a range of potential or current conditions is extremely expensive. It may become easier with new technologies but that may raise difficult ethical questions. The choice is really about whether it is good to make an investment up front or wait until the condition has manifested itself and then decide, from the point of view of the allocation of resources, what is the best investment society can make. This is an extremely difficult question and is an area in which insufficient information is available to decision-makers. That is why the OECD and the World Health Organisation are looking into this in more detail.

I could not agree more with Deputy Devins about the necessity for health care reform to take place in an atmosphere in which there is consultation of all the stakeholders. In some countries there has not been consultation but rather confrontation. For example, there has been confrontation with the medical profession or other interested parties such as private insurers, hospital associations and the like, which is usually a recipe for disaster because one cannot carry forward reforms in health care systems without having all the major actors involved. Equally, one must bear in mind that they have their own interests. Therefore, any discussion must include consultation, bearing in mind where the different interests see their own perspectives.

On the issue of the total spending on health care and whether we should spend more, I wish to reiterate two important points I tried to make earlier. First, in the past ten years, Ireland has spent a lot more on the health care sector. Whatever figure one wants to choose, whether it is per capita spending or health care spending relative to gross domestic product or gross national product, one must ask whether we are getting a good return for that spending. Second, are we under-spending on health relative to other comparable countries? This is a trickier question.

In my presentation, I emphasised the distinction between GDP and GNP, about which Colm McCarthy wrote an article last year in the Irish Banking Review pointing out what a difference this makes to one’s assessment of the position of Ireland relative to the European Union average or the average of OECD countries. There is a gap between GDP and GNP. In Ireland it is of the order of 20% or more, which is much larger than in any other OECD country where typically the gap is of the order of 5% or less. That the gap is so large in Ireland reflects the very large role of multinational corporations and the repatriation of profits associated with those companies abroad.

One might, therefore, ask oneself whether GNP is a more appropriate measure of the national taxable base from which we can fund our health care spending. If one takes that perspective, Ireland is at the average or above the European and OECD average on its spending on health care. However, if one uses GDP as one's measure of national output, we are still below average. I will leave it to the committee to decide which of these two is the more appropriate benchmark to use.

Deputy McManus

On a point of information, the total health spend in Ireland includes quite a few items which would not be considered health spending in other countries. For example, spending on disability, rent allowances and so on. Services are lumped into the health spending figures which should be stripped out for us to get an accurate picture. Has that been done in the figures which have been presented here?

Dr. Martin

Yes, it has. We have a standardised basis for what we call public, private and total health spending. It excludes a number of items which in some countries are lumped under the heading of health care spending. It is essentially a definition of health spending which is in line with the system of national and health accounts which we have developed and implemented. If the Deputy would like further details, the database to which I referred at the beginning and from which the chart book is drawn has a detailed description of the definitions of health spending which are applied across countries and the changes and modifications which are made to ensure that they are as comparable as possible.

Chairman

Does Dr. Martin have any more questions to which he needs to respond?

Dr. Martin

I was hoping to avoid the one where I might have to pretend that I am my namesake, the Minister for Health and Children, Deputy Martin. Since I am due to see him this afternoon, I will ask him what are his two priority issues rather than express a personal view on the matter. I have addressed the first of the questions about whether we are spending too much or too little.

There is a very important question about the role of the private sector in health care which touches not only on insurance and financing but on issues of equity and effectiveness. The evidence we have from looking across the role of the private sector suggests a number of lessons. First, having a significant private sector role increases the responsiveness of the health care system to the needs of patients. In that sense, it seems to meet one of the desires for greater quality in most countries.

Second, there is little evidence that having a significant private sector at the moment is yielding major cost-efficiency gains. This seems a little paradoxical to many because they ask why, if we have a significant private sector, does it not lead to greater competition between insurers, thereby producing more cost-effective outcomes. They ask why private insurers are not able to exert greater discipline on the providers whether in the private or public sectors so as to drive down costs. The simple answer is that at the moment it does not appear that is often the case. In most countries where there are significant private sectors, there does not appear as yet to be evidence that they are able to mobilise the forces of competition to produce greater cost-effectiveness outcomes. Part of this is because there appears to be quite a degree of unwillingness or lack of information to lead citizens to move between private insurers to realise better or less costly packages. In countries such as Switzerland, the Netherlands and Australia, where there are significant private insurers, there is relatively little switching between private insurance schemes. Part of this may be due to a lack of transparency in information available about the different insurance packages, but it also appears to be the case that for many consumers, particularly in the area of health care insurance, it is a case of better the devil you know. People are suspicious of other insurers offering better packages and health care.

Another important area is the need for appropriate regulation to deal with a significant private insurance system, particularly where it co-exists with a significant public health system. That regulation must deal with a wide range of issues concerning dissemination and quality control, cost, the selection of risks and the treatment of private insurers.

I agree with the Deputy who raised the question of the geographic distribution of health care resources. Mr. McCarthy referred to this in his own presentation. This is a major problem in many OECD countries. I will illustrate this with the example of France, which is a country I know rather well because I have been living there and using its health care system for nearly 30 years. The largest proportion of doctors, consultants and medical practitioners in France per head of population reside in the south of France in three departments in the Côte d'Azur area. Large swathes of departments in France are crying out for doctors and medical specialists. The Deputy mentioned his experience in a western constituency.

Deputy Cowley

I come from County Mayo.

Dr. Martin

It is exactly the same. This is a major challenge. Even if we increase the number of doctors and practitioners significantly, how can we put in place sufficient incentives to ensure that this will match the geographic distribution of needs? We must consider payment and reward systems as well as working conditions and attractiveness. Why would practitioners want to come to Dublin or Cork, given the daunting house prices which mean I myself cannot purchase a residence in order to move to Ireland?

Deputy Cowley

That is where the jobs are. That is the difficulty. The Government will not create jobs in the areas which needs doctors.

Dr. Martin

That is a major challenge. The Government must match the distribution of resources, whether in the form of hospitals, acute beds, practitioners or nurses, to the geographical distribution of needs, bearing in mind that there is an overall financing constraint. It might also want to consider offering specific incentives to practitioners to move to certain areas for a time. Some countries have experimented with offering special payment incentives, particularly to new graduates and new practitioners, to go to certain areas.

Countries such as Canada and Australia, for example, which are importing significant numbers of practitioners from abroad, actually require as a condition of entry to the country that they spend their first five or ten years in areas in which there are specific shortages. As a result, roughly 20% of practitioners in Saskatchewan, which those of you who know Canada will know does not have a temperate climate but one of the worst climates in the world, come from abroad. They are required, as a result of Canadian immigration policy, in obtaining the right to practice in Canada, to spend the first five to ten years of their time in Canada in these areas. I am not suggesting that we should suddenly have a requirement for all foreign medical practitioners who come to Ireland to go west to Mayo or to Cork, although there are worse parts of the country, dare I say it——

Chairman

God forbid.

Deputy Cowley

Many people are in Canada because they cannot get jobs in Mayo. That is the difficulty. There are wonderful surgeons and neurologists who would love to work in Mayo.

Deputy McManus

Does Dr. Martin believe that in systems with very strong primary care, there tends to be a more efficient and effective health service? In the matter of health promotion and disease prevention, is it true that if a country does not have great inequality and where there is not a major gap between rich and poor, as in Scandinavia, there tends to be better health?

Deputy F. O’Malley

What does Dr. Martin think would be the effect of the arrival of a third insurance company to the Irish market? Would it have a significant impact?

Dr. Martin

I wish I could answer the questions asked by Deputy McManus. Her first question is an extremely important one about the distribution of investment in the health care system. Should there be more investment in prevention and in the primary care sector? I am afraid that at this stage I am not in a position to answer that with any degree of accuracy. It is a priority of the work we are doing to consider carefully the primary care sector, where a number of interesting initiatives are taking place across a number of OECD countries, to find out whether initiatives such as these - reorganising the structure of primary care or grouping a wide range of primary care specialists into particular teams and groups and distributing them across the country to specific areas - yield better outcomes. Unfortunately, we do not know the answer yet. However, we and a number of countries are interested in examining this.

On the question of inequalities in health and their effects on outcomes, there is some prima facie evidence that where there is less inequality, there are likely to be better outcomes on average. However, I stress that there are many exceptions to this. It is probably a good rule of thumb to start with but less inequality is not by any means a magic bullet.

Deputy O'Malley asked about the effect of a third insurer or subsequent insurers on the Irish market. That is an important question. At the moment the Irish private health insurance market is unusual because it is best described as a duopoly. There are really only two significant insurers and it is a strange duopoly because one of the two is a dominant player that is not at arm's length from the public sector. That has specific effects that are worthy of further reflection.

The committee must consider how further entry could be induced into the Irish private insurance market. If that takes place, we must make sure the entry of further insurers produces a better range of options at lower cost to citizens and serves to exercise some discipline on the cost structure of providers - doctors, practitioners and hospitals. Attention must be paid to the regulatory framework that would be put in place to oversee these circumstances to achieve a better range of outcomes for individuals and society as a whole from a more dynamic private insurance market.

Chairman

I thank Dr. Martin for his presentation which was most impressive. His expertise and knowledge was apparent to us all and we are gratified that he agreed to address us.

The joint committee adjourned at 12.45 p.m. until 9.30 a.m. on Thursday, 22 July 2004.