The Bill is designed to give effect to the decision of the Government to replace the present scheme of flat-rate health contributions by an income-related scheme of contributions and, subject to certain specified exemptions, to extend the obligation to pay health contributions to all those who have an income and are over 16 years of age.
The principle underlying the new scheme is that the payments will be assessed on an income-related basis, where appropriate, and, in the case of farmers generally on a notional income basis using a multiplier related to land valuation. As compared with the flat-rate contribution system it will work out in a fairer way for those on low incomes and, in the case of farmers, for those with farms which are in the lower valuation classification.
A substantial group of the population will not be obliged to pay any health contributions, such as widows with social welfare pensions and others who are listed in section 11 (2) of the Bill.
Neither will persons with medical cards be obliged to pay health contributions but the existing liability of the employers of such persons to pay health contributions on their behalf will be continued. This employer's liability will also extend to persons with agricultural employees and to those who employ female domestics.
The decision to extend liability for the payment of health contributions to all those who have an income and are over 16 years of age, with certain specific exemptions, follows logically from the decision of the Government to extend entitlement to further health services to the community generally.
The most important of the new benefits is the right to free in-patient and out-patient services in public hospitals. This will include the services of consultants except where a person's income exceeds the ceiling, which for the year commencing next April will be £5,500. In addition, the benefits of the drug refund scheme will be extended to everybody. Those who have medical cards will, of course, continue to have medicines and drugs provided free. The regulations providing for the extended benefits will be made under the Health Act, 1970, and will be submitted to the House in the near future.
The ceiling for health contributions specified in the Bill is £5,000. That ceiling is identical with that fixed for social insurance contributions in the Social Welfare (Amendment) Act, 1978, as both ceilings must be the same to meet the needs of the collection machinery. The ceiling was recommended by an inter-departmental working party which investigated very comprehensively the problems associated with the introduction of fully pay-related social insurance, health and redundancy contributions. The figure was calculated on the basis of the latest information then available on the average earnings in the transportable goods industries, but using a multiplier of 1½ to arrive at an appropriate ceiling. The purpose of using the multiplier of 1½ was to ensure that the ceiling would encompass the earnings of the vast majority of workers. Certain changes have taken place in the average earnings in the transportable goods industries since the working party reported and, as I have already announced, I intend to make regulations after the enactment of the Bill to fix the ceiling at £5,500. The power to make regulations to vary the ceiling is contained in section 9 of the Bill. The ceiling will not be static and will be reviewed from time to time taking into account the latest information available regarding the average earnings of workers in the transportable goods industries. I wish to stress, however, that the ceiling which will apply from April next for the purposes of determination of eligibility for consultant services will be the income accruing in the year ending on 5 April 1979, and not in the year commencing on 6 April 1979.
The rate of contribution specified in the Bill is 1 per cent. With a ceiling of £5,500 this would involve a maximum contribution of £55 per annum. The present flat rate contribution is £24 a year. If no change was being made in the existing arrangements regarding eligibility for services and if there were no proposals for the extension of health benefits, the £24 rate would probably have had to be increased in any event to take account of the cost increases in the existing limited eligibility services. The new rate required would probably have been of the order of £32. The decision to extend liability to the community as a whole to pay health contributions and to provide further health benefits has a further impact on the amount required to be raised in health contributions. There have been substantial cost increases in other sections of the health services apart from the hospital services and the new health benefits will cost a substantial amount in 1979. The income related scheme will ensure, however, that where they have to pay, those on lower incomes will be paying less than they would have paid if the flat-rate contributions had been increased to take account of all the factors to which I have referred. Again, as I mentioned earlier, substantial numbers of persons in the lower income brackets will not be paying at all.
It is estimated that if the scheme of contributions provided for in the Bill had been in operation from 1 January 1979, the income that would have accrued over the whole of 1979 would be about £30 million.
As the scheme is not scheduled to come into operation until next month the total estimated income from health contributions for 1979 is £26.6 million, including about £4.1 million which it is anticipated will be forthcoming from the existing scheme of flat-rate contributions in the period from January-March.
It is estimated that further income totalling about £700,000 will be received as a result of raising the ceiling from £5,000 to £5,500. This addition would raise the estimated yield from health contributions in 1979 to about £27.3 million.
The additional revenue that will accrue in 1979 over 1978 as a result of the introduction of income related contributions will amount to about £10¾ million. While it is not possible to be completely precise as to the cost in 1979 of all the elements provided for in the range of extended benefits to be introduced from 6 April next, it is estimated that they will absorb practically all the additional resources which will become available.
The increasing cost of health services is, of course, a matter for concern. The problem is not peculiar to this country. All countries, whether developed or developing, face the same difficulty. Efforts at cost containment have been and will continue to be made, but much more is required. It is not only a matter of looking for solutions within the services as they are now organised with the main emphasis on curative aspects. A more radical approach is necessary not only from the economic viewpoint but in the interests of producing a healthier nation. A major contribution to improving the overall situation can be made by devoting ever-increasing attention to health education and preventive measures. We have made a significant start on these fronts but it is essential that the impetus of the campaigns should be maintained. There must be no let up in the efforts to persuade people that they can do quite a lot to improve their own health status.
Our health education campaigns have so far been concentrating mainly on controlling the abuse of alcohol, pinpointing the dangers of cigarette smoking and improving the standards of hygiene. We have also embarked on a major campaign to cut down on the use of drugs and medicines where they are not medically necessary. Many of the modern most lethal diseases have their origins in factors related to life style. Prevention rather than belated attempts to cure should be the guiding rule.
It is unfortunate that so many believe that drugs can cure almost every ailment. There is no denying that they have made highly significant contributions in support of the advance of medical science but resorting to them for even trivial ailments is both unnecessary, uneconomic and sometimes damaging. The amount spent on drugs and the volume of consumption is increasing annually at a rate that must be regarded as alarming. As I mentioned at the recent international symposium on "Alternatives to Drugs" it is estimated that we will be spending about £35 million on drugs in the health services in 1979. It has been shown that a very considerable amount of the drugs prescribed are not eventually used by patients. The wasted moneys could be put to far better use in other branches of the health services. I am arranging for a nationwide publicity drive in the media to focus attention on the situation and a commencement will be made in the near future. The wholehearted support of the medical profession has been forthcoming and I am confident that a sustained effort will produce worth-while results.
Returning to the question of overall costs and the need for the making of increased direct contributions towards the cost of services, I would point out that the Exchequer contribution towards the cost of health services in 1979 is about £419 millions—£79 million more than was provided for in the Estimates for 1978. The estimated total net cost of health services in 1979 is about £453 million. I have already mentioned that the estimated income from health contributions in 1979 is £27.3 millions. That figure represents only about 6 per cent of the total estimated net cost of the services in 1979.
The explanatory memorandum which was circulated with the Bill indicates that for the purposes of collection the community will be divided into three groupings. In the case of employees the collection of health contributions will be integrated with the collection of social insurance contributions through the PAYE system. It would be extremely wasteful to set up special machinery for the collection of health contributions separately from social insurance contributions. Employers will benefit from the system as administration will be simplified. They will also benefit in that the dangers in the handling and custody of insurance stamps, which included provision for the health contributions of employees, will be eliminated.
The Revenue Commissioners will also look after the arrangements for the collection of health contributions from the self-employed, from persons with investment income and from a limited group of farmers who have other trades or professions and who are directly assessable for income tax.
The Revenue Commissioners being so closely involved in the collection arrangements will have available to them considerable data regarding health contributions and the reckonable income, earnings or emoluments of individuals in respect of whom health contributions are payable. It is necessary that this information should be made available to my Department and to health boards as far as this is found to be necessary for the purposes of the administration not only of the Health Contributions Bill but also of the Health Act, 1970. Section 14 of the Bill makes provision accordingly.
In the case of farmers generally the regulations to be made under the Bill will provide that the collection of health contributions will be a function of the health boards as it is at present. The amount of health contributions payable will be determined on total income from all sources, including farm income assessed on a notional basis using a multiplier related to valuations and the ceiling of £5,500. The systems in operation for the collection of contributions from farmers are being redesigned and strengthened with a view to improving the collection rate.
Senators will have seen the press notices, publicity and commentaries on the new schemes being offered by the Voluntary Health Insurance Board. I would like to draw special attention to the low-cost scheme for consultant cover which the board will be introducing as from next month to coincide with the introduction of the new health benefits scheme. This special scheme will be of particular interest to those who wish to avail of free maintenance at public ward level in public hospitals and who will not be entitled to free services of consultants. The scheme will provide for cover against the cost of consultant services associated with treatment at hospital level, maternity benefits, a relaxation of the existing rules governing payments in respect of day surgery and where miscarriages are involved, provision for special nursing and for cases requiring convalescent care.
The scheme will allow for a relaxation of existing entry restrictions regarding previous medical history. There will be no entry age limit or no waiting period as regards elegibility for benefits. The age loading for persons over 60 years of age will disappear. Provision will be made for payments by instalments.
The premiums payable will enable the biggest families to be covered for consultant services for somewhat less than £33 per annum which, for persons paying the standard rate of income tax, will mean a net payment of about £22. The cost for a single person will be less than £11 per annum, before allowance is made for income tax concessions. I should, perhaps, emphasise that this low-cost scheme for consultant cover will be available to the community as a whole.
I commend the board for the very attractive scheme they have produced, and I would strongly recommend the scheme to all those who may need cover for consultant services.
I might also point out should the circumstances in individual cases present difficulties the existing hardship clause will continue to operate.
I have dealt with the main elements of the Bill and certain other relevant matters associated with the new health benefits scheme. There may, however, be other matters which I have not dealt with on which Senators may desire to have information and which may not be covered in the explanatory memorandum. If so, I will give further explanations when replying.
I commend the Bill for Second Reading.