I thank the Chairman. I am pleased to have the opportunity to address the select sub-committee and thank it for giving me the opportunity to bring the Supplementary Estimate for Vote 40 before it.
The Estimate must be seen in the context of the challenges that faced the Health Service Executive this year. As Deputies will be aware, the revised scheme for the HSE was €13.4 billion, a reduction of €683 million or 5% on the 2010 provision. The underlying reduction was approximately €1 billion due to the need to provide for a number of key policy priorities in the areas of disability, cancer control, child care and older people, as well as meet the cost of pressures such as the projected increase in the number of medical cards, superannuation and additional funding for the State Claims Agency.
At the end of October the HSE projected that it would have a shortfall on its Vote of approximately €300 million. This reflected the underlying expenditure difficulties in the acute hospital, child welfare and demand-led schemes. This supplementary Estimate together with savings in my Department's Vote and measures taken by the HSE should ensure that the HSE achieves a balanced spend at the end of this year.
The total additional funding sought for the Health Service Executive is €148 million. However, savings of €40 million have been identified within the Department's Vote which will contribute to the HSE requirement. Thus, the net cost to the Exchequer will be €108 million. I will outline the details presently and the other measures taken to address this year's deficit. First I wish to outline to the committee the reforms initiated to provide an efficient, cost-effective service with equity of access for all.
As the committee will be aware, the Government is embarking on a major reform programme for the health system. The aim of this reform is to deliver a single-tier health service supported by universal health insurance that will ensure equal access to care based on need not income. There are several important stepping stones on the way and each will play a critical role in improving the health service in advance of the introduction of universal health insurance.
Significant reform of the acute hospital system is already under way. The special delivery unit, SDU, was established in June to unblock access to acute services by improving the flow of patients through the system. It quickly began work with the HSE to put in place a systematic approach to eliminate excessive waiting in emergency departments. The special delivery unit is establishing an infrastructure based on information collection and analysis, hospital by hospital, so that we will know what is taking place in real time. This is the first time we will have such information and it will allow us to begin to embed performance management in the system to sustain shorter waiting times.
The SDU's establishment has meant a change in the current role of the National Treatment Purchase Fund, whose resources have been refocused to align closely with the work of the SDU and to allow for a progressive improvement in the performance of the nation's hospitals. The NTPF has welcomed the new initiative and is working proactively with the SDU and the HSE to achieve the best possible results for patients. The NTPF has been re-focused as the scheduled care arm of the SDU. I have set challenging targets for both scheduled and unscheduled care. I expect these to be met and I have ensured there is assistance in the system through the SDU and the NTPF to help health providers to meet these. If they are not met it will highlight the areas and sites that need particular attention in 2012.
The SDU has seen improvement in some sites but the situation remains challenging. The test for hospital management, including clinician management, will be how they manage their patient flows during the Christmas period and into January. The SDU also works closely and in liaison with the clinical programmes that are at the cutting edge of developments in several areas. This initiative, which provides a major step forward in clinical leadership in the health service, is producing benefits of both a clinical and an economic nature.
With the development of programmes such as the productive theatre initiative, the acute medical programme and the developments in stroke units in our hospitals, it is expected that major savings can be achieved with the more effective use of hospital beds. It is worth highlighting these initiatives. The acute medical programme has resulted in the addition of an acute medical admissions unit in Cork. This has reduced by one quarter the number of patients who might have been admitted otherwise, thus freeing up 22,000 bed-days, amounting to an approximate saving of between €15 million and €17 million. The productive theatre initiative has resulted in a saving of €2.5 million across five theatres and it is worth noting that there are 200 theatres in the country. There is considerable scope for further savings throughout next year. The development of stroke units in hospitals will shorten patients' stays, reduce the disability that patients suffer as a consequence of stroke and will be economically effective.
A further critical aspect of reform of the acute hospital system is the implementation of a new, more efficient funding system for hospital care. A money-follows-the-patient funding mechanism and a purchaser provider split, whereby hospitals will be established as independent, not-for-profit trusts will be implemented. Various initiatives to facilitate achievement of the money-follows-the-patient funding system are already under way. These include a patient-level costing project that tracks resources actually used by individual patients in hospitals and a pilot project in respect of prospective funding of certain elective orthopaedic procedures at selected sites. Previously in Navan, no patients had been admitted on the day of a procedure but within one month of introducing the measure some 80% were presenting on the day of the procedure, saving a great deal of money. The same applies in Cappagh National Orthopaedic Hospital where there has been a 45% increase in the corresponding number there. Throughout the country this has saved us €6 million so far this year. It is important to mention the VHI in this regard. The VHI has a role in addressing the issues in private and public hospitals in respect of length of stays and in respect of what they pay out. We will meet the VHI to discuss this change as one of the many methods used to bring down costs to the insurer and thus to the insured.
The reform agenda also involves enhancing and expanding our capacity in the primary care sector to deliver universal general practitioner care with the removal of cost as a barrier to access for patients. This commitment will be achieved on a phased basis to allow for the recruitment of additional doctors, nurses and other primary care professionals. Taking this step will allow us to move away from the old hospital-centred model, whereby health care was episodic, reactive and fragmented to deliver a more proactive, joined-up approach to the management of our nation's health. In other words, we will monitor people and support people with chronic illness so that they can keep themselves well rather than waiting until they fall ill and then receive treatment in hospitals which is expensive and not good for patients. Once the foregoing fundamental building blocks are in place, we will be ready to proceed with the introduction of universal health insurance. This system will give patients a choice of health insurer and will guarantee that everyone has equal access to a comprehensive range of curative services.
I will now set out the items making up this year's Supplementary Estimate. As the committee is aware, in 2010 the Government approved a voluntary early retirement scheme and a voluntary redundancy scheme for certain categories of staff in the public health service. The purpose of the schemes was to achieve a permanent reduction in the numbers employed from 2011 onwards and to facilitate health service reform. Both schemes were voluntary and it was up to the individuals concerned to assess their situation and to make an informed decision on whether to accept an offer. On this basis, it was not possible to determine exactly the eventual numbers of staff who would leave the system as a result of the schemes until early in 2011. Funding to meet the lump sum costs was made available through a Supplementary Estimate last year and the Vote for the HSE was reduced by €123 million for 2011 based on the numbers expected to avail of the schemes. These figures remained provisional at all times. Ultimately, fewer people availed of the schemes than originally estimated and the final figure of actual departures and consequent payroll savings was €65 million. Thus, there was a shortfall in funding of €58 million.
This shortfall was eventually funded by means of an adjustment to the primary care reimbursement service budget pending clarity on the trends in primary care reimbursement service's expenditure in the year. However, expenditure in the primary care reimbursement service, PCRS, has exceeded its budget and cannot absorb this shortfall. Therefore, as part of this Supplementary Estimate I seek €58 million to reinstate this funding. In other words, the voluntary exit scheme was supposed to yield €125 million and it fell short in the amount of €58 million. We would have been reimbursed regardless of whether it fell short. This is part of the reason that we seek €58 million today. The committee will see presently that the supplementary amount we seek from the Exchequer will cost only €50 million. The €58 million will cost the Exchequer but the point is that it was due to us at the beginning of the year.
The HSE has experienced some remarkably difficult budgetary issues during the course of 2011 in the acute hospital sector. I recognise that the management of funding allocations by public hospitals poses a serious budgetary challenge. Greater demand for services resulted in activity exceeding service plan targets. This, combined with significant overtime and agency costs for many hospitals and reduced employee numbers, has resulted in several hospitals exceeding their budgets in the current year.
Many hospitals will break even in the current year. Cost containment measures have improved the situation from earlier in the year but it has not been possible to address the entire deficit in the current year. However, any hospitals with a deficit must deal with their accumulated deficit next year within the overall financial resources available.
In addition to budgetary difficulties in the hospital sector, the general medical service and the community drug schemes are also incurring expenditure beyond budgeted levels because these are demand-led schemes. Very ambitious saving targets were set for the PCRS in 2011 which were expected to yield over €400 million. The measures included further price reductions and other measures agreed with industry, that is the Irish Pharmaceutical Healthcare Association, reductions in GP fees following formal consultation process under FEMPI and savings accruing from further examination of fees paid to community pharmacists under FEMPI.
Due to the ongoing economic difficulties and demographics there has been increasing demand on the GMS and other committee drugs schemes. Unavoidable delays in delivering expected savings in 2011 have increased pressure on the budgets of demand-led schemes. Measures taken under FEMPI to reduce payments to community pharmacists were implemented in June 2011 which means the full year savings will not be achieved until 2012. Similarly, fees paid to GPs in respect of immunisation programmes will not have their full year effect. As a result the full savings target for 2011 was not achieved.
The HSE has also experienced budget deficits in the area of child protection. The executive has a statutory duty for the care and protection of children as set out in the Child Care Act 1991. In meeting these statutory responsibilities the HSE delivers a range of preventative and support services in co-operation and partnership with children and their families.
The HSE may also intervene to protect children from harm or neglect and in exceptional circumstances may seek the permission of the courts to take a child into care. The most up-to-date information indicates that there are over 6,000 children in the care of the State and approximately 27,000 child protection referrals are dealt with by the HSE annually, with this figure subject to increase in recent years. There are significant financial and service pressures on the HSE's child protection and welfare services. Earlier this year the services were projected by the HSE to generate an overspend of €72 million by the end of this year. The projection is now in the region of €60 million.
These budgetary difficulties reflect the growing pressure on the child protection services over recent years which have been influenced by greater societal awareness of the importance of child protection and changes in underlying social issues, such as drug and alcohol misuse. There was an 8.5% increase in children in care in the first eight months of this year alone and within this overall increase there has been significant growth in the requirement for high tariff alternative care placements. In other words, we do not have the required facilities here.
Often such placements are required for older children with significant behavioural issues and risk-taking conduct. For the first six months of this year the HSE reported an increase of almost 90 special arrangements to meet the needs of specific children. The HSE has undertaken a series of measures to seek to limit the extent of the overspend but there is a limit to such measures, given the statutory nature of its responsibilities and the imperative to protect vulnerable children.
While the extent of the excess expenditure has been curtailed there is an estimated shortfall of €60 million in the current year. A comprehensive reform programme is underway within child welfare and protection services. This reform agenda will lead to the establishment of a new child and family support agency which will provide a dedicated focus on child protection and support families in need.
The implementation of these reforms will allow for the best possible services to be delivered within the resources available. There are a number of other measures being taken to address the HSE's deficit and achieve a balanced Vote at the end of the year. The HSE has identified €30 million in once-off savings in the corporate area and aims to increase its income by approximately €80 million by year end. It will also have an underspend of approximately €40 million in its capital programme this year. It will be reallocating these resources towards meeting the deficits in service areas.
Given the extent of the reductions to the budget of the HSE in 2011, the extra funding being requested through the supplementary estimate is relatively small. The shortfall on the exit packages was not within the control of the executive and, while €90 million for specific service pressure points is sought, my Department is contributing savings of €40 million towards this requirement, thereby reducing the call on the Exchequer.
The executive has been through a challenging year and faces an even tougher year ahead. My intention in proposing this Supplementary Estimate, together with the other measures I outlined, is to reduce the incoming deficit for the HSE as it faces into a difficult year in 2012. The executive will still have to address the underlying expenditure problem in the hospitals and, co-operatively with the new Department of Children and Youth Affairs, the issues in child welfare and protection services.
In short, in 2011 the HSE sought effective savings of €1 billion and has managed to achieve €800 million. Similar savings are required in 2011 and this Supplementary Estimate will go a small way towards mitigating the effect on patients and health service users. I seek the committee's approval for the Supplementary Estimates for Vote 40.
