Dáil Éireann díospóireacht -
Wednesday, 29 Nov 2000

Vol. 527 No. 1

Health Insurance (Amendment) Bill, 2000: Second Stage (Resumed).

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

Mr. Farrelly

I welcome the opportunity to contribute to this debate. Its prohibitive cost means that health insurance is not available to everyone. The manner in which the VHI, the main health care insurer in Ireland, is treating elderly people, who possibly pay the highest annual subscriptions, is quite disgraceful.

A private nursing home recently applied to the VHI for nursing home cover. The majority of the people who would go into these homes for a two week period to convalesce would expect to be able to claim on their insurance. While it is Government policy to allow the private sector provide such homes, the main health insurer, with 1.5 million insured people, will not cover these homes until such time as certain things happen. The reply from the VHI to the person stated the VHI had carried out a review of convalescent care in 1997 and that it was decided at that time that the VHI would establish a new directory of convalescent homes and that all health board registered nursing homes should be invited to apply for inclusion in the directory. The criteria and procedures for selection were accordingly notified to all health board registered nursing homes in November 1998, two years ago. The criteria included evidence of current registration with the health board and that the home be capable of being inspected on the date of application. The selection procedure was open to all interested health board registered homes and it was decided to establish a directory which would run for three years, after which the process would start again and whereon the VHI would open the process to all new and existing nursing homes.

It was stated that during the course of earlier research it was discovered that convalescent benefit for which VHI cover was available accounted for only 3% of nursing home insurance and that 97% of nursing home income arose from long-term and respite care. It was stated that VHI benefit was not available for long-term or respite care as its procedures are more geared towards the provision of acute care in acute facilities.

The VHI in its reply also stated:

We have received a number of applications after the closing date and we are unable to consider these applications as they arrived after the selective process was under way or indeed completed. There are 118 nursing homes currently approved to provide convalescent care to the VHI members. We are confident that these homes can provide the required service that our members are seeking and we will review our requirements for additional nursing homes prior to the expiry date of the current directory.

In other words, the VHI made a decision that it will not revisit this area until 2002, four years from November 1998. The Government decided nursing homes could and should be built by individuals on the basis the Government decided it would not build further homes for elderly people. There are thousands of people awaiting operations, many of whom are elderly and have paid subscriptions to the VHI. The main health insurer will not allow the new nursing homes to be inspected and put on the register. The VHI is a State agency, and a decision should be made to enter negotiations with it on reopening this matter and to instruct it to look at nursing homes which are coming on stream and which are providing badly needed respite care for many people who are looking for hospital beds and recuperating from hospital treatment. Currently, the VHI tells people to go to particular nursing homes and that they cannot go to one beside them. This is a monopoly.

In his response I would like the Minister to outline the Government policy on risk equalisation. We are aware of what the VHI is doing and it seems it has partly written the Bill on the basis of negotiations and discussions it has had with the Department and the Ministers. The VHI wants an equalisation fund put in place so that the other main player in health insurance, BUPA, which has in the region of 180,000 clients, can subsidise the VHI which has 1.5 million clients. The VHI has convinced the Minister to provide for equalisation in the Bill. This is in the context of the VHI not allowing any new nursing homes onto its directory and the fact that the majority of people who are in the VHI and who need two weeks convalescent cover have been members of VHI since it was founded. Now that they want a little care the VHI is reneging in terms of providing cover for new nursing homes which are being built in line with Government policy. This is amazing and I would like the Minister to say if he will return to Government to re-examine the matter. Alternatively, is the Government prepared to play ball only on the basis of VHI rules and not the rules of the elected Members of the House, which seems to be the case?

In the past three and a half years, since the Government came into office, 150,000 medical cards have been withdrawn from ordinary people. Is the Minister satisfied those people can afford VHI or BUPA cover? I and other Members know they cannot afford such cover. The allowable proportion of people who can have medical cards under the rules and regulations drawn up many years ago is 40%, while the current figure is 31%. In addition, the number of visits by people who had medical cards, and by their families, to doctors over the course of a year has dropped substantially as they cannot afford doctor and chemist costs. We are now providing the most inadequate health service ever, while the Department of Finance is awash with money.

The State, VHI and BUPA look after health in the country. On a weekly basis in the region of five people come to my clinics who have had medical cards withdrawn because the person's partner took up a part-time job, which he or she was encouraged to do. The result is that children are being neglected.

The cost of health care to the State is enormous. Another group of people in the health care area are carers and home helps. We have been increasing and tampering with the amount of money paid to carers and are still nowhere near even half of what it would cost for a person to be cared for by the State in one of our homes. These people should be properly paid for the work they do. Home helps receive £3.50 per hour and the majority of them work twice the number of hours for which they are paid.

Even though extra money has been put into the system in all health board areas, if extra hours are granted and extra people come in, another person's of hours are reduced. There are five different areas where health care is an enormous issue. There are hundreds and, perhaps, thousands of people who save the State a small fortune – carers and home helps – and are paid a pittance. Has the Minister had any influence with the Minister for Finance before he arrives to give his Budget Statement next week? Have the issues of medical cards, carer's allowance and home helps been addressed in a positive and substantial way so that those who are saving the State substantial amounts of money will be given the opportunity to have a decent living for the work they do?

In the area of home health care the VHI has a monopoly. It has not done a bad job but it has had many problems over a period. We should not put ourselves into a position, as the Minister, Deputy Molloy, did – whenever he arrives back from Mexico – in dealing with deregulation in one area. Yet another Minister comes in here and, because of one particular organisation, ensures there is no deregulation and no fair play in relation to equalisation and equalisation risk in a situation where one company has 1.5 million insureds while another has fewer than 200,000 and has to make funds available to the larger company. How can the Government see its way to inserting such a provision in the Bill at a time when there is meant to be equal competition when we have been instructed by Europe to do things many of us do not like? I ask that these areas be taken on board. I hope the Minister will table amendments on Committee Stage to deal with this issue. I do not believe we should allow a sitution develop where there are different standards in different Departments for dealing with different issues. If we are prepared to go down the road of deregulation and make everything fair across the board from a competition point of view fairness should also apply in this area.

I do not accept the main insurance company should be allowed put a derogation on any new cover for new nursing homes being built throughout the length and breadth of the country. Unfortunately they are required, otherwise they would not be built. How can it say that for four years it is putting a derogation on cover for new nursing homes? The people who live in that region, such as my home village of Kilmainham Wood, and who have paid voluntary health insurance for many years, are being told to come back in 2002 or 2003 when it will consider when to reopen the gates to cover new nursing homes. This is outrageous and disgraceful. The Minister should ask the chairman of the VHI what is going on and tell him that our constituents who have paid for cover want to go to their nearest home which has been registered by the health board under the rules and regulations approved by this House. However, the VHI say it does not want to know about these new homes until 2002 or 2003. Therefore, those who have paid most and received the least in the area of health cover from the VHI are being told they can go to one of 118 homes but it could be 50 miles away, but not the near one. That is not acceptable in the year 2000. I ask that the Minister and his Secretary-General to resolve this matter. If the Government informs the VHI of his views on this issue the matter will be resolved.

Mr. Kenneally

I welcome the opportunity to speak on this Bill. I welcome it as a timely and desirable Bill and compliment the Minister on tackling a subject which, at best, can be contentious and, at worst, can produce an unseemly war of words between the rival service providers. I welcome its introduction and I have only minor reservations about one or two of its provisions. It is said that the whole area of private health insurance will expand enormously in the coming years.

We are only seeing the tip of the iceberg in regard to stress related illnesses here. I recall speaking with a Dutch hospital executive ten years ago. He told me that people were working themselves into hospital in his country. I smiled to myself and thought that, with our somewhat laid back approach to work, it could not happen in Ireland. However, the pace of life has increased out of all proportion in recent years. When we hear 15 year olds say the years are flying and that they have no time to do anything, we must sit up and take notice. People who had an easy and relaxed lifestyle a decade or two ago and who should today be in even a better state financially and otherwise and have less pressures, now find the cares of living and the pressures of society becoming quite intolerable. Unfortunately, unless there is a change in these trends, which is unlikely in the short-term, we are likely to see more people work themselves into hospital in the future.

While the Celtic tiger has brought many benefits, the increase in house prices is said to take its toll on our population. Couples paying huge mortgages leave for work at 7 a.m. and return 12 or more hours later and have little time for relaxing at home or having a social life. The pace of life generally has increased considerably and while it has benefits in increased national productivity, in time it will take its toll on the health of the nation.

We are now encouraged to develop "wellness" within ourselves. There is a whole range of commercial services to help us achieve this. Often we do not have either the time or energy at the end of a working day to apply ourselves to it. Undoubtedly there will be a fall out from this in years to come. We are sowing the seeds of great problems in the future. This is not the fault of this or any Government. We are on an international merry-go-round in a world of ever diminishing size and no one seems to know how to slow it down; many do not even want to.

The Health Insurance (Amendment) Bill, 2000, is the first legislation arising from the White Paper on private health insurance and provides a blueprint to address the under-developed private insurance market, a key issue in regard to Ireland's competitiveness. I welcome the Minister's proposal to regulate this sector and provide certain safeguards, just as I welcome the opening up of the whole new private health care insurance market generally.

BUPA was the first to come to this country and offer an alternative to the VHI, which had operated a monopoly. I have no doubt that others will arrive in the future and the Minister's proposal to regulate the sector is both timely and wise. I said before in this House, and it bears repeating, that I am not in favour of monopolies. They are inherently unfair and, as we have seen from other elements of the public service, they are not always effective. A realistic level of competition is healthy in any sector. This has been acknowledged by those operating services in a monopoly in the past. Were it not for the fact that private coach operators forced themselves into the market to the disquiet of CIE, students would still be paying the equivalent of a quarter of a week's wages just to travel home for a week-end. Could we have envisaged cheaper phone calls and speedier connections and repairs in the telephone system if there was still just one State operator? The same applies to air travel. Would we still be paying a small fortune to travel to London and other places were it not for the advent of Ryanair? I had a bad experience recently with Aer Lingus, but I will not discuss that issue now.

The country is littered with services where providers had to get their act together when competition loomed on the horizon. There is now competition in the private health insurance market. As well as the nationwide insurers, limited services will be offered by employers, some of which could be very large. I note the Minister intends to regulate the situation where an employer pays the fees or charges incurred by employees in respect of hospital in-patient services and will be defined as a provider of health insurance.

Professor Ray Kinsella of UCD gave this Bill a warm welcome. He said it paves the way for the kind of substantive reform of the whole health care system which is now imperative. The private health care insurance market in Ireland is under developed. At present the products being offered are way behind what are available in Europe or the US. Effectively, all that consumers can buy is hospital cover. They cannot buy insurance cover for primary care, dental or occupational health care. In addition, the buoyant labour market is creating a significant demand from employers for a greater range of health benefits, occupational health programmes and other services such as child care and wellness management.

Everyone would like to see the speedy implementation of the Bill and the other legislative and regulatory changes outlined in the White Paper which will facilitate the introduction of new products and services. When enacted, this Bill will pave the way for the launch of new products other than community-rated hospital plans such as primary care and occupational health care. As a result of market regulations, such as community rating, lifetime cover, open enrolment and tax relief on premiums, the commitments to which are reiterated in the White Paper, there is a substantial take-up of private health insurance in Ireland.

Approximately 45% of the population is privately insured compared to between 12% and 15% in other European countries where the market is risk-rated. At present two companies are competing in the Irish health insurance market. Further competition in the marketplace is to be welcomed. Clarity regarding the regulatory environment guaranteeing market stability is essential to attract even more players. Any delay in processing legislation and revising the regulations will hinder the advent of other health insurers into the Irish market. As such, entrants are seeking certainty of market rules before making a final commitment to the marketplace.

I welcome the reaffirmation in the White Paper of the Government's commitment to community rating as the cornerstone of the Irish private health insurance system. Community rating makes it possible for people to afford effective health insurance throughout their lives. Ireland's community rated market has 45% market penetration for health insurance. While the risk-rated UK market, with four major health insurers, has only 12% penetration, risk equalisation, which spreads the cost of claims among insurers in proportion to their share of the market is the foundation stone of community rating according to all the experts, including actuaries from Ireland, the US, throughout Europe and Australia. It prevents new insurers from cherry picking the least risky subscribers, leaving the higher risks to existing insurers. If we are to look after all our people, particularly those who are vulnerable due to any one of a number of factors, then we must continue to embrace the philosophy of community rating.

I note that BUPA is unhappy with this proposal but, while allowing it to operate in this country, we must also ensure it plays on the same type of pitch as the insurer who operated here in the past. We need only look at the Dutch experience in the 1970s and 1980s when, due to the absence of risk equalisation, several insurers had to be saved from bankruptcy due to being caught in a premium spiral of a worsening risk pool and increasing premiums. Risk equalisation offers the most effective method of reducing cream skimming because it reduces the incentives for risk selection.

The White Paper does not propose, however, that people who enter the health insurance market aged 35 and over may be levied an additional amount on top of the normal community rated premium. We must encourage people to take out health care insurance as early as possible in life. The more who participate in the scheme, the greater and cheaper the benefits for all. The proposal will also limit the ability of people who have never contributed to the health insurance fund from taking advantage of those who have contributed all their lives.

I note that section 10 gives insurers entering the market the option to avail of a three year exemption from risk equalisation from the date of commencement. This is logical and there is a need to ensure that new insurers are not frightened away by what might potentially be an imbalanced clientele. This was originally envisaged as being for an 18 month period but it is now proposed as a three year exemption. To ensure competition it might need to be extended a little further.

The question of tax relief is important. Success in enticing people to take out private health insurance depends on allowing tax relief on premiums. The White Paper states that the Government is committed to retaining tax relief for health insurance premiums. This is an important incentive which encourages people to join health insurance schemes, and I welcome its retention.

Tax relief on other health insurance products, which are not community rated, including primary care and occupational health care, is not clearly stated in the White Paper. Tax relief should be provided to give an incentive to people to voluntarily fund their health care costs and to be more proactive in their overall health management. Tax relief for products such as primary care cover and occupational health care programmes will encourage people to buy these products which support a pro-active preventative approach to health management, including early treatment in cost-effective settings, health lifestyle awareness and health management programmes. This will have a positive impact on the public health system.

To depart from the provisions of the Bill, I compliment the Minister and his predecessor on making constant inroads into hospital waiting lists. While there may be anomalous situations where people are waiting an inordinate length of time, there is a great improvement in the overall service. I touched on this some weeks ago when I noted the improvements in waiting lists at Waterford Regional Hospital which had been reduced from 742 to 591, a fall of 151. This decrease is a continuation of a very welcome downward trend which I am confident will continue for the remainder of the year. The national figure is down by 5,000 to approximately 31,000 since the beginning of the year. This is a direct response to the additional resources which the Minister has ploughed into the service via the blitz on waiting lists announced last May.

It bears repeating that the Government has invested an extra £1,500 million in health care since taking up office. This represents a 56% increase in the day to day resources in the services and this level of investment will be sustained. Health care was again one of the major items in the recently published Book of Estimates which shows that by the end of this year, the Government will have increased spending on health by almost 80% since coming to office. No one can say a reasonable proportion of the benefits of the improved economy is not being spent on health care. These figures are encouraging and are part of a countrywide trend. Things are still not good enough and the Minister is bringing about an improved situation daily, despite staff difficulties which are not within his control.

The presentation of health statistics can sometimes be unnecessarily depressing. For instance, we are regularly told that one in every three of the population will contract some form of cancer in his or her lifetime and that one in five will die of the disease. Considering the morbid fear of this condition felt by most of the population, to the point that many cannot bring themselves to mention the word, could it not be pointed out that over 60% of the population will not contract the disease and that 80% will not die from it? This may not be the message the Department wishes to get across but outside of the necessity to give up smoking very few precautions can be taken to prevent the disease. There are means of early detection which should be availed of but this is not the message that is emphasised.

While on the subject of smoking, I appeal to the Minister to redouble his efforts to get the no smoking message across to young people. There is no more depressing sight than young students leaving their schools and lighting up as soon as they reach the footpath. In this regard, young girls seem to be most at risk. It is time we had a concerted blockbuster of a campaign to convince young people that smoking, to use their own jargon, is just not cool. National names and personalities, preferably from among the idols of the younger generation, should be enlisted for this purpose and every effort made to wean the at-risk teenage population away from tobacco. This is not to forget the other and worse addictions of illicit drugs and alcohol, but tobacco addiction and the wider social disadvantages of smoking could be emphasised more. Whatever the cost it would be more than recouped in the hidden savings of unfilled hospital beds in the future. Apart from the real and desirable improvements to health, the quality of our lives would be improved by the reduction in this unsocial habit.

I am pleased the Select Committee on Health and Children, of which I am a member, is making an in-depth analysis of the dangers of smoking. A number of months ago one of the biggest tobacco manufacturers in the United States, Philip Morris, issued a statement that smoking damages our health, despite saying the contrary for many years. The company did not do that because it suddenly became concerned about the health of people but because it and other tobacco companies had lost cases in the American courts and by putting out this warning it hoped to avoid being sued in the future. The Philip Morris company is concerned about its profits and not about the health of its customers. Cases are pending in this country but, to the best of my knowledge, no tobacco company here has said tobacco smoking is harmful although we are all agreed that it is. Measures to reduce smoking would help to bring about a reduction in hospital expenditure, with a comensurate benefit to health care insurance premiums.

I welcome the Minister's proposals which will bring improvements to this important area of Irish life.

Mr. Bradford

I share the view of previous speakers that we should try to ensure the passage of this legislation as quickly as possible. I agree with Deputy Farrelly that a broad range of issues is dealt with in this legislation.

I have serious differences with what Deputy Kenneally said about the section dealing with risk equalisation. Any Bill which is designed to encourage health insurance and to promote competition in the health insurance market must be welcomed. However, contained within these proposals is the Trojan horse of risk equalisation. Unless we are prepared to review the Bill's move towards risk equalisation we will help to bring about the death of competition in health insurance and ensure that no new competitors will come to the market. That would be a tragic mistake.

It is the aspiration of everyone in the House and everyone involved with health policy to encourage competition in the health insurance market, to have strong companies providing health insurance and to make health insurance available to every citizen. The proposals for risk equalisation could destroy these aspirations.

Earlier today in Leinster House I met the former Minister for Health and presidential candidate, Mr. Tom O'Higgins. It was he who, as Minister for Health, introduced private health insurance and established the mechanism for the VHI in the 1950s. The plan was farseeing and has proved worthwhile and effective. However, the Ireland of the new millennium will need a different set of guidelines for health policy and the health insurance market.

Every political party is addressing the health issue. We are now approaching a general election, whether it takes place in six weeks, six months or two years. In recent weeks we have seen the proposed policies of the Fine Gael and Labour Parties. Private health insurance is at the core of those policies. The Government parties share the view the health insurance must be accessible to all.

This legislation contains the possibility of killing off health insurance. Risk equalisation is a difficult concept. When the Select Committee on Health and Children discussed this issue some week ago members conceded that they found the idea of risk equalisation difficult to understand. Listening to speeches on the Government side it is easy to see how people are being confused. I suspect there is an element of deliberate confusion. We are allowing risk equalisation to be confused with community rating. Everyone in the House supports the concept of community rating, which means that customers of all ages pay the same premium. However, the notion is being spread that community rating is dependent on risk equalisation. Of course, that is not the case. Risk equalisation seems to be an extraordinary formula designed to provide a direct subsidy to one company – in this case, to the large company – from smaller companies. If I were to compare it to asking the credit union movement to subsidise the banks, I do not think I would be too far off the mark. In the Irish context, we are asking what is still a relatively small company, namely BUPA, to give a direct subsidy, on an annual basis, to the monopoly, the VHI. If we go further, we are asking a mutual society, which BUPA is – it is not profit making and is owned solely by its members – to subsidise and give a direct cash injection, on an annual basis, to the VHI. One would not have to be an astrologer to know that within the next few years, there is every prospect that the VHI will be privatised.

If the Minister's proposals become law we will, in effect, be asking a non-profit making organisation, a mutual society, to directly subsidise what will be a private company. We are asking that the shareholders of that company be subsidised and that their profits be aided by this risk equalisation proposal. That is at the very core of what will happen. Perhaps we are failing to get that message across and I ask the Minister to take that on board in his response

This will not divide the House on Second Stage because everybody supports the legislation but it will be the key issue on Committee Stage, and I know many of the Minister's colleagues share my view. It will cause political division in the House. However, I hope that between now and Committee Stage, the Minister and his officials will have further talks not only with the VHI, the major player, but with BUPA and that they will focus on the long-term interest of the country.

I hope the Minister will reflect on the fact that since we introduced health insurance competition, apart from BUPA, no other competitor has entered the fray. There is a message in that. If there was a large market and huge profits to be made, we would have more competition. The shadow of doubt in the marketplace and in the health insurance industry as a result of the threat of risk equalisation is the main reason we do not have more competition.

Everybody supports more competition. It is not my role to speak for BUPA or to raise BUPA's concern. My role is to ensure health insurance thrives in this country and that we have a strong VHI and BUPA and many other strong companies. As previous speakers said in relation to this Bill and during the debate on the Nítrigin Éireann Teoranta Bill, competition has helped to transform this country across a range of services, including transport. Competition has worked. The more competition we have in health insurance, the better. While the possibility of risk equalisation exists, we will not have competition in the Irish health insurance market. We will at best keep the minor player, BUPA, on side and at worse, nobody else will join the health insurance field and that would be a great tragedy.

I wonder why such pressure is being applied to the Minister's Department to run with these proposals. I wonder where Deputy Kenneally got his figures on international experience because according to the evidence available to me, there is no clear international evidence that risk equalisation is necessary or that it works. I am aware that risk equalisation has been withdrawn from a number of states in the United States. Various actuaries, and I believe the Government's actuaries, Mercer, have said, there is no clear evidence one way or the other. That is from where we should be working. There is no clear evidence of the need for risk equalisation.

I am a little concerned that the whole purpose of this risk equalisation provision is simply to prop up the VHI in advance of its privatisation. One of the direct consequences of that would be to weaken the market. It is in the interest of the Minister, the Department and everybody in this House to strengthen the health insurance market and, hopefully, to reach a stage where every citizen will be able to afford private health insurance. If we are to have that aspiration, it is vital that competition is not only secured, but expanded and that a multiplicity of companies, products and services are available. Although we have been advised this need not necessarily come in over night, the provision of risk equalisation, as contained in the Bill and as is being addressed, mooted and, in some way, supported by the Minister's Department, is a Trojan horse that could kill off health insurance and leave us in the same position we were in a number of years ago.

We should reflect on what competition has done to date, and it has been very limited competition. We are not talking about Ryanair versus Aer Lingus type of competition but about David and Goliath in terms of BUPA. Competition has reduced prices in the market and it has, in a very dynamic way, broadened the range of services and products available to the public. It has resulted in a significant increase in the number of people availing of private health insurance. That number could increase dramatically but it will increase only if competition is retained and expanded.

If health insurance is provided by four or five companies rather than by one or two, it will put pressure on all those companies to ensure their products are competitive, that the level of service available to customers is improved and that they are stable and financially sound. That is why, before Committee Stage, the Minister and his colleague must reflect on any proposals that will threaten competition.

Risk equalisation sounds like a fancy arithmetic term and, in a sense, it is. However, when one strips it down to what it really means, we are talking about a subsidy being paid by one insurance company to another – in this case, a subsidy being paid to a State company. How will that fit into European competition law? I am sure that has received consideration from the Minister's Department. It is something which goes against the grain of European competition law in that we have been advised there can be no State aid to companies. I wonder what the Minister has to say on that. This is clearly being pushed by one company. That is understandable. If I were on the board of that company I would favour risk equalisation because it ensures the strong get stronger and the less strong get weak and eventually fade away. If that is what we want, that is fine but it goes against what we should be trying to achieve. We do not have a public health service that can deliver the quality of service required.

Deputy Kenneally referred to the constant political battles concerning hospital waiting lists and so on. We all concede extra money has been invested in the health services but there are still many problems. People are left on waiting lists not only for months but for years. That major problem must be addressed. As part of that, we must have a dynamic, competitive, modern system of health care insurance to help people move from total dependence on the taxpayer to the private health insurance market. We expected that competition would make a difference. The arrival of BUPA has helped and there is a significant increase in the number of people availing of private health care. However, we have not gone as far down that road as we should. We must aim for the total availability of private health insurance. We will not achieve that unless we have five or six companies in the market. Risk equalisation will blow that possibility out of the water.

Deputy Kenneally said that, without risk equalisation, there would be cherry picking. The new companies would take on younger people while it would be left to the established companies to look after older people and that would destabilise the market. That does not stand up. We have community rating. If a company has a good policy, product and a competitive pricing structure there is nothing to stop a person from joining it. Community rating is preserved in this legislation as is the right of a person to move from one insurance company to another. If we did not have risk equalisation, companies would put forward the best array of products and service at the most competitive price. There is nothing to prevent a person moving to a company that offers a better service. We should not view this from the point of view of cherry picking but rather see risk equalisation as a measure that will stop companies offering dynamic new products.

Deputy Kenneally referred to the academic arguments, mathematical formulas and international evidence to support risk equalisation. There is a strong counter-argument to that. Some States that had risk equalisation dropped it. The Government's actuaries said the case for or against risk equalisation has not been proven by actual experience. The well regarded Trinity economist, Seán Barrett, is on record as saying that he and Irish health economists would be opposed to the concept of risk equalisation.

I am a member of the Oireachtas joint committee and look forward to a full debate there. I ask the Minister to be cautious. The previous Minister, Deputy Cowen, could see the wood for the trees and that risk equalisation is fraught with danger. He gave it serious consideration and left it. I cannot guarantee that in five years' time there will not be any need for risk equalisation but the proposals in the Bill whereby risk equalisation can be slipped in overnight will blow competition out of the water and will stop any new entrant coming into the market. I do not want that to happen and neither, I am sure, does the Minister. I ask him to reflect cautiously and diligently on the proposal for risk equalisation and not introduce that Trojan horse.

Mr. McGuinness

This legislation comes on the back of other legislation dealing with health matters and informing the public on leading a healthy life so that people do not end up availing of the health services in their early years. Many people are now taking alternative options and leading the kind of life that will result in them living longer free from the risk of poor health.

Education and recent legislation dealing with smoking, alcohol and drug abuse will encourage young people not to indulge in these activities. We have been successful in dealing with those issues to date but our success rate does not compare favourably with other countries and we could do much more through the education process to discourage those activities.

Everyone involved in politics, not just at national but at local level, has seen major advances in medicine, new operations, procedures and the delivery of a health care system. Alongside that we have witnessed growing numbers of people on waiting lists wishing to access these new developments. While I respect the fact that the previous and present Ministers invested heavily in trying to reduce these lists, they have been with us for the past 20 years. It is fair to say that every Government and Opposition in every election over those years has tried to make political capital out of what it would or do when in Government, but I do not want anybody to seek political advantage from this matter. We should be mature enough to acknowledge that there has been a growing health problem for the past 20 years and a growing problem in relation to the waiting lists. This problem has not been dealt with adequately, despite the money invested recently.

I object to the current position which is unacceptable. I welcome the indication in recent Government announcements that the forthcoming budget will prioritise health and deal with the issue of waiting lists. This problem relates to personnel and the difficulty involved in recruiting many more consultants to deal with matters that arise daily in hospitals in terms of the delivery of proper health services to those who require them immediately.

Against this backdrop, there has been the developing issue of health insurance. The 1994 Act opened up the market, which BUPA entered in 1996. However, it is unacceptable that during this period a two tier health system has developed. Under this system if one has private cover one can get immediate attention. A lady in my constituency who was waiting for a cataract operation was told in January 2000 that it would be March 2001 before anything could be done for her. However, her family clubbed together and came up with the amount of money required for the operation. She received private treatment and had her operation on 10 October 2000. Such a situation is unacceptable.

The cases in the hospital in Kilkenny are mirrored throughout the country. I am not being parochial, but we are all informed by what happens locally and I am informed by the incidents in Carlow-Kilkenny. In the gynaecology unit in Kilkenny recently, two public patients miscarried – one in the ante natal section of the ward and the other in a corridor. This is a Third World standard in a country in which there is plenty of money and much progress. There is huge economic development but, in parallel to such development, an elderly person was not served by the State – she was not given the proper health care she deserved. In addition, patients in the gynaecology unit are being left on trolleys in a corridor.

In another part of the county, an entire ward in Kilcreene Hospital has been left idle. The Government invested in the maintenance and care of the building, but there is nothing in it. At the same time, elderly people are not being cared for properly during the winter months. One might say these examples are a health board management issue. However, that is not the case. It is an issue for the Government and the Department of Health and Children which should insist on better management.

Psychiatric services have been run down in the county and patients have been moved into the community with little or no support. The hospital in which they were once housed is being turned into another administrative centre. There has been a huge growth in administration centres in the South Eastern Health Board area – this has been replicated in other health boards – while hospital beds have been closed. I cannot marry this with the effort that is being made by the Government to invest more money in terms of personnel and health care infrastructure to deal with people who must be in hospital but who cannot afford private health insurance.

I intend to insist during my time in the House that this problem is addressed. It requires urgent and immediate investment. We can enjoy today's economy because of the efforts of the generation that went before us. They got little pay but they put much blood, sweat and tears into building up the economy. We should respect their place in it and ensure that a proper and adequate health service is made available to them regardless of whether they have a medical card or VHI cover, although my comments refer in the main to public patients.

I hoped the health insurance option would open up the market and give greater cover. I hoped it would educate people from a young age to ensure that they had the best possible health cover and to stick with it throughout their lives. I wish to declare a vested interest in that I have VHI cover. My experience is that it is something one must have, but the cost has shot through the roof. If there was greater competition in the market, many more people would take up the option of health cover. I commend the Minister for at least querying or holding off the 5.5% increase requested by VHI.

The 1994 Act opened up the market, which BUPA entered in 1996. This is the backdrop to this Bill. VHI has 1.5 million members while BUPA has 185,000 members. I am not making a case for BUPA, but I am using its name to illustrate the need to define the market and to identify the problems that will be created with the suggested contribution of £20 million by BUPA to VHI. Nine out of ten people are VHI subscribers while BUPA has 11% of the market. The underwriting profit of VHI was £52 million while BUPA did not even turn over half that amount. VHI offers 11 products while BUPA offers approximately four – it is growing its share of the market.

If risk equalisation is introduced into the market now, the growth of that small company will be harmed and Ireland will not be attractive to the many other competitors that could set up operations here and offer a much greater range of services and products. In terms of what is offered by VHI and BUPA, the market is a shadow of what is offered in America and Europe. There should be many more products and more competition in the marketplace.

I support the general thrust of the Bill, with the exception of risk equalisation. Some 17 countries were surveyed and analysed but those involved were unsure about risk equalisation and the issue was set aside in the effort to get greater competition in the market. I ask the Minister to consider the issue of risk equalisation, particularly in the context of Committee Stage.

Perhaps he should regard it as something he could do if there was instability in the market place, rather than something he is introducing right now to deal with a possible instability. It is only when companies introduce their products into the market place that we will begin to see the negative effects of that. However, we have not seen many negative effects since BUPA arrived in 1996. Therefore, rather than introduce this at the outset, the Minister should have it as a tool which could be introduced at a later stage if there is instability.

The Government's general policy is that everyone should have access to affordable health insurance. My concern in that regard is for the elderly in our population. I do not believe there will be cherry picking. When the other elements in the Bill are put into place they will guarantee a level playing field for everyone. However, if equalisation is brought in on day one, the company with 11% of the market will have to subsidise the VHI to the tune of over £22 million. The Minister will have to address that.

If a company has a guaranteed income of £22 million, it loses its focus and edge if it is not requested to work for its share of the market, provide the product, compete on price and draw a cross-section of the community into its membership. I do not accuse the company of that. However, the commercial reality is that a company with a soft touch income of £22 million loses its competitive edge because it becomes lazy.

There is a need to encourage all those who can afford it to take out health cover, to encourage young people to focus on their health care and to take out insurance, and to ensure competition will deliver proper health cover to every section of the community at a reasonable cost.

There is huge growth in this country in the business of providing homes for the elderly. That is to be welcomed because the ones I have experienced in my constituency and elsewhere in the south east region are providing a quality service and are inundated with requests from families to take more people. The number of people availing of such care is growing. This is now an accepted part of the culture. However, the costs of this patient care are soaring and now run at anywhere between £300 and £360 per week. Such costs place a huge financial burden on families.

The subvention offered by the health boards is allocated in a number of ways. However, there should be only one approach to this – the cost of the bed, the cost of the care and a single subvention figure. Every family is entitled to that if they have to care for the elderly.

Health insurance cover should be extended to care for the elderly. That can be achieved in cer tain aspects of this Bill. We should not have to fight for the care of the elderly. It should be delivered immediately to families which have someone who is ill and of an age where they need to be taken into care.

In addition to the provisions in this Bill, we should look at the current position in relation to subvention. The bureaucracy of the health boards in this regard can often be unhelpful to families. They can often prolong the agony, in terms of finding out the family's worth and income. I know they have to do quite a lot of that, however, the primary issue here is the care of the elderly person. That issue needs to be addressed urgently in the context of the debate on this Bill.

I mentioned earlier the fact that many people under psychiatric care are now being moved into the general community. Families are concerned about this. There are people in those units with alcohol and drug problems who are almost suicidal. We have witnessed the suicide of some patients while they have been in our care. We must deal with that in the context of this and other Bills and ensure that a quality service and quality care are available, with supports, for families which have to look after such a patient.

I commend the Bill to the House, but I ask that the equalisation issue be addressed on Committee Stage.

Mr. Finucane

I have been following the debate on this Bill and much of the attention has focused on the risk equalisation aspect of it, which is right and proper. Over the past few days we have seen what happened as a result of the deregulation of taxis. That deregulation was required. There is a contradiction here, however, in relation to risk equalisation.

There are two players in the Irish market at present, VHI and BUPA. BUPA only arrived in 1996. As Deputy McGuinness said, it has 11% of the market, yet it is expected to pay £20 million over three years to VHI, which has been established in the Irish market for a long time. With the buoyancy of the economy and the numbers entering the workforce over the past few years, it is understandable that VHI's profits have increased considerably, as has the volume of business for both insurers.

However, competition could have a detrimental effect in regard to other insurers entering the market, because one would have anticipated four years after BUPA entered the market, particularly given the buoyancy of the so-called Celtic tiger economy, other insurers would have entered the Irish market. The Minister must ask his officials in the Department why other private insurers have not entered the market. The answer is staring us in the face – it is because of the risk equalisation factor.

That risk equalisation is being sustained in this Bill. The EU competition commissioner has taken various people to task over anti-competitive practices. Has the Department of Health and Children discussed this in the European context with Commissioner Byrne and asked his advice on whether this is an acceptable practice? It seems this risk equalisation does not happen in other countries.

I know the original concern of VHI was that the market would be cherry picked and it would be left with the older customers. Consideration must be given to how long the VHI has been established in the Irish market and its track record. I and my family have been members of the VHI for some time. It is not a question of people making comparisons between what VHI and BUPA charge, as they do with other consumer items. If people have an established record with the VHI they automatically include children in a group policy. There is enough business for both insurers and we should encourage others to enter the market.

This debate has concentrated on the VHI, yet 31% of the population have medical cards. Deputy McGuinness referred to the two tier system and I am aware of the case of a man in his eighties with a medical card who went into hospital to have his hand removed because of gangrene in his fingers. He was released the following day, slipped on the yard at home and is now back in hospital because of a broken hip. If he had been insured by the VHI or BUPA he would have been detained in hospital after his operation for a considerable period of time.

It is incumbent on the hospital authorities to recognise a sense of fair play when treating people with medical cards, as they do with patients insured by the VHI and BUPA because they are paying customers. I welcome Fine Gael's policy document on health, which recommends a huge increase in the guidelines governing the allocation of medical cards to replace the poverty criteria which currently apply and which preclude many people from consideration under the medical card scheme. Many people with medical cards who believe they will not get the care and attention in hospital they require also take out insurance with the VHI or BUPA.

The ageing population issue will have to be addressed by the Minister and the Department. In this context nursing homes subvention needs to be re-examined, including the process involved in assessing people. At present considerable discrepancies can arise between what people must pay and the maximum level of subvention. That causes severe financial hardship to many people. Often private nursing home residents find their savings eroded. This puts an invidious pressure on us as public representatives to have them transferred to the hospitals for the elderly under the control of the health boards.

St. Ita's hospital for the elderly in Newcastlewest has a marvellous staff complement working in very difficult conditions. It has been seeking a 12 bed Alzheimer's unit for a considerable period. Ministers have love-bombed west Limerick recently. The former Minister for Health and Children, Deputy Cowen, visited the hospital, fol lowed by the Taoiseach and the Minister, yet we still await the allocation of the magical figure of £1.5 million to proceed with the unit. When Ministers visit hospitals there can be tendency to show them the best or most modern wards. On his visit to St. Ita's, the Minister was shown the antiquated conditions in the wards. Considerable improvement is required and I would like to see action on this in the near future.

There is a lack of speech and language therapists in the country. Trinity College is the only institution involved in training them and it produces approximately 26 therapists each year. Speech and language therapy is a departmental service, yet many problems have arisen because of the lack of therapists. A special school in Newcastlewest with 30 children caters for a 20 mile radius. It has been without a speech and language therapist since Easter. The health board says it has advertised for therapists but it cannot get applicants. This reflects the national shortage. If Trinity College is only training a certain number of therapists each year it is necessary to advertise not only in Ireland, but in Australia, Canada and the UK. It is essential to deal with this matter imaginatively.

Children who are disadvantaged with Down's syndrome, autism or other such disabilities are trying to get a chance in life without the benefit of a speech and language therapy. It is a shocking indictment of the country that it cannot provide such a resource. I urge the Minister to grasp this issue and to try to recruit therapists from abroad. I will be disappointed to have to revert to the principal of the school to which I have referred and advise that there is no solution to this problem. Much greater creativity is required in the Department.

It is time to consider the dramatic expansion of the health service, especially with regard to the administration systems, where there appears to be a lot of empire building. Despite these developments there are no people at the coal face. The problems in recruiting nurses, especially in Dublin, is symptomatic of this.

An Leas-Cheann Comhairle

We are moving far away from the substance of the Bill.

Mr. Finucane

Previous speakers were given considerable latitude once they stayed within the confines of the Health issue. The speakers following me will expect the same latitude.

Mr. McGrath

Including the Minister of State.

An Leas-Cheann Comhairle

You should confine your comments to the Bill, if possible.

Mr. Finucane

I will do so, but the Minster of State has been taking notes on my comments on speech and language therapy and the position in St. Ita's hospital. I hope he will stop the love bombing by Ministers of west Limerick and give us something tangible by making an immediate allocation of £1.5 million. I am sorry for transgressing, a Leas Cheann-Comhairle, but there are many difficulties and it is incumbent on us to respond.

We appear to be pumping money into the health care industry, yet there continues to be huge waiting lists, including those waiting for cataract operations, which is most important for elderly people. If a family clubs together, the person can get a cataract operation within one to two weeks. Yet a person could be waiting two years if they do not have the finance. An elderly person's dignity could be maintained if they could read again.

I knew a person in her eighties who was almost blind. I was approached by her daughter, who was working on a part-time basis and could not look after her, to see if it would be possible to get her into the local hospital, St. Ita's. She was assessed and when the specialist for the elderly noticed she still had some sight, he sent her for further tests. She then had a cataract operation which gave her a new lease of life. It was not necessary for her to go into St. Ita's Hospital and her daughter is able to work. Her daughter met me last week and said it was a miracle. Her mother also says it is a miracle in her life. The person dealing with the elderly realised it was possible to do something tangible rather than putting her into care. Her quality of life has improved considerably as a result of that cataract operation.

I was in the Mount Herbert Hotel recently where a group of 40 people were staying, all of whom had cataract operations in a Dublin hospital. I remember noticing at breakfast time that most people were wearing an eye piece. A Lions Club from a rural area took it upon itself to do something for the elderly in its community. This can be done in certain specialities where there are waiting lists.

Cataract operations are important. I ask the Minister of State to show a sense of vision in the health care service. There are four ophthalmic surgeons in Limerick. I am sure this service has been expanded around the country. We must show creativity if we want to reduce the numbers on waiting lists, particularly for cataract operations. The waiting list has probably improved considerably for orthopaedic procedures.

The Minister of State must look closely at the risk equalisation system. It is not compatible with what we want to achieve in 2000. We should try to encourage other insurers into the market. The VHI had a monopoly for a long time. It has a huge commercial advantage over other private insurers coming into the country. It is necessary for the cake to be divided more evenly. It is a deterrent to BUPA to force it to give £20 million over three years because it has a better claim risk than the VHI. That is not the right signal to send. It is possible for us to attract other insurers. We should encourage competition. We encouraged competition recently and we have been better for it. There is no reason competition should not exist in the health service.

The Minister of State must also consider the nursing home subvention and the dramatic proliferation of private nursing homes around the country. As the population gets older, these nursing homes will expand further. It is necessary to consider a uniform nursing home charge because there are wide variations in the community. If we do not consider that, the subvention rates which have applied since the early 1990s should be increased to a level compatible with the consumer price index. This was a major issue at a meeting I was at recently which was attended by approximately 300 people. Although private nursing home owners were present at that meeting, people were talking about the financial difficulties they experienced trying to ensure their mother, father or other relative remained in a private nursing home. This area has not been considered and it should be because the population is getting older.

One thing the Minister of State could do, which would help me greatly as a public representative based in Newcastlewest, is to ensure that St. Ita's is looked after. I am glad the Minister of State has taken note of it.

Mr. McGrath

The Deputy will get a letter tomorrow.

Mr. O'Flynn

I wish to share my time with Deputy Conor Lenihan.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Mr. O'Flynn

The provision of health services on an equitable basis and of affordable and fair health insurance are fundamental political issues in any society. This Bill represents a progressive, caring and socially equitable policy of the type we have come to expect from the Minister for Health and Children, Deputy Martin. I welcome and strongly support it.

Deputies are aware that health care and insurance polarised the American electorate and that was the reason the recent American presidential election was so close in the state of Florida. This House has seen many political battles over health. Vested interests in the health sector in every country have sought to keep Government intervention in health service provision to a minimum. In the eyes of vested interests, health is a lucrative business. However, in the eyes of the public and of responsible politicians, health is a social necessity for the well being of society where people must come before profit.

In Ireland there are a number of reasons we do not have a comprehensive free health service for the entire population. Until recently, the main reason was the relative poverty of our country and our small tax and population base compared to the European average. There was also resistance from the medical profession to socialise medicine and through the limitation of the market for private fee earning practice. The Health Act, 1970, limited the provision of general medical services, or what is commonly known as the medical card, to 40% of our population. That limit was necessary to get the agreement of the medical profession to enter the scheme.

During the 1980s under the Labour Party Minister, Barry Desmond, the limit was approached as a result of high unemployment and higher than projected eligibility for the medical card. The Fine Gael-dominated Government was not prepared to face down the medical profession and instead agreed to remove students from the medical card to avoid breaching the 40% limit. Many Deputies may not be aware of that but that is the reason most of our population must rely on private health insurance. Unless the Government is prepared to negotiate for a higher proportion of the population to be eligible for general medical services and society is prepared to pay the taxation necessary to support such a move, the situation will not change.

Society is not screaming for such a change at present. It would prefer the money we can afford to be spent on better public hospital facilities and reducing waiting lists. The philosophy is that free medical services should be for the most needy sections of our society and that those who can afford it should take out private medical insurance. In such a health service regime the regulation of private health insurance assumes the highest importance for the general population. The Government has a duty to its citizens to intervene strongly in this area. Health insurance is a social necessity for at least 60% of the population rather than a luxury upgrade for the better off.

As regards public and private health services, it is a scandal that paying for private medical insurance moves a patient up the waiting list. Only medical diagnosis should determine the order in which patients are treated. Anything less is a perversion of the highest ideals of the medical profession as expressed in the Hippocratic oath which, after religious beliefs, is the ultimate expression of a medical doctor's moral code of honour in society.

I want to outline a clear vision of the role of private health insurance in Irish society. What I will say amounts to a straightforward charter for the way Irish society should organise payment for its health services. Not alone do I expect to get the support of my party but I expect to hear the leaders and spokespersons of other parties back me or explain what they object to.

We have made a political choice as a society to organise our health services on the basis of providing free, fully publicly funded health services for the least well off minority, not more than 40% of our population, and to provide partially publicly supported hospitals combined with fee charging health services for the rest of our population. It is accepted that a minority of Deputies in this House on the left stand for global public health services for reasons of ideology. However, they have always been a minority. It is also accepted that a minority of Deputies in this House on the right stand for minimising public health services for reasons of ideology. They too cannot get electoral support for such a policy. The rest of us stand for providing affordable, secure, high quality, equitable, people-centred health services for reasons of common sense.

The people who are ineligible for public, free medical services require general private health insurance as a necessity. For this majority of the population, general private health insurance is not an upgrade from the basic public health system. General private health insurance is the public health system, and for this greater sector of the population to the end of ensuring social justice the Government has every right to intervene in private health insurance. This is not a place for the ideology or language of profit, market deregulation and unfettered competition.

Regardless of who is paying for the treatment, patients should be treated in order of medical need. To that end, the Government should give serious consideration to allowing for each medical practitioner and facility a single waiting list for each service or procedure graded only in terms of medical need. Many of the more advanced treatments are, of necessity, expensive in that they have been recently developed as a result of costly research. Nevertheless, it would be unChristian not to make those available to the entire community. A good example of this is the Relenza anti-'flu inhaler. We cannot as a society decide that some people should be prescribed this medicine while others, such as those on medical cards, will not be prescribed it on cost grounds.

I have mentioned the term "community"– our nation is based on family and community. We choose to organise our health care system by means of a public-private mix. That, however, does not imply that we choose a two tier health system. Such a system is abhorrent to the decency of any caring society. For that reason, we have strong laws to impose the principle of community rating in the field of medical insurance. I support those laws and will continue to support them – they matter to my constituents in Cork and to their families. Health insurance should not be seen as a business or an industry. It is a social service and an essential one for all the people who are outside the medical card system.

The European Commission and elements of the European movement have been carried away with the notion that unbridled free enterprise and bans on State intervention are European and that anyone opposing them and standing for social protection is in some way anti-European. Nothing could be further from the truth. Unbridled competition is not appropriate in some areas and health insurance is one of them.

I appreciate that we all want cheaper health insurance. Unlike some people, however, I also appreciate that we want access to affordable health insurance. A society in which the young, lower risk sector of the market gets cheaper health insurance at the expense of the older, higher risk sector is what the poet WB Yeats might have called "no country for old men". Community rating is necessary to ensure equitable access to health insurance for all. Control of health insurance premiums must be achieved across the board. In Britain, many older people cannot afford health insurance and in some cases, will not be admitted to health insurance schemes for reasons of age. We in Fianna Fáil are determined to avoid this happening in Ireland.

It is the policy of the Government to get as many people as possible of all ages to take out private health insurance. This Bill aims to strengthen the provisions necessary to protect the rights of elderly people, in particular, to affordable health insurance. To that end we will extend the enrolment provisions of the 1994 Act to the over-65 age group. Late entry premiums will be permitted under certain circumstances but controlled. Some flexibility is necessary as it is not the aim of the Government to unjustly hobble the insurance companies. This is a landmark provision for senior citizens which I strongly support. Any Deputy considering voting against this provision should think long and hard on how he or she will justify it to the senior citizens at the next election.

With the limited late entry premiums, we are also sending out a clear message to younger and middle aged people – get into private medical insurance early and stay there. People should regard their premiums as part of a social justice umbrella for the entire community. We need to start thinking as a society and a community rather than always focusing on the hit on our own pockets. I challenge any extended family of three generations to compare how they would fare with and without community rating.

Community rating is very simple. The wage earners must contribute more in the years when they are earning to avoid large bills when they are older or retired. Community rating protects the consumer from insurers who would certainly cherry pick the lower risk customers for profit leaving the more socially democratic insurers, if I can put it that way, to pick up the higher risk group with no alternatives but to offer high cost insurance.

With this Bill we are adding an additional social protection for the provision of health insurance. We cannot allow the risk profile of one company or group of companies to endanger the other players in the market. To that end we propose to introduce the concept of risk equalisation. Simply put, the market will be balanced financially. It is an interventionist measure but I have no problem supporting it as I fear the alternative from a social point of view.

Like most Deputies, I have received lobbying material from one insurer campaigning against this measure. I am faced with a choice between commercial and social interest. I have no hesitation in supporting the social interest in this case. We had plenty of time to discuss the issues in the White Paper, now is the time for decisive action to implement the provisions. I genuinely hope that a large majority of Deputies, including many from the Opposition, will join me in supporting the Bill. I will be disappointed if those in other parties who campaigned for a socially just, inclusive, non-ageist Ireland could not support the positive realistic measure to advance that cause.

Mr. C. Lenihan

It is great to hear a lion of free enterprise making the argument in the House for social solidarity. I applaud what Deputy O'Flynn said and I will re-emphasise in what I will say the idea he has promulgated that medical need not ability to pay must be one of the defining features of the health care system we hope to build now that we are a more prosperous country. We must build it properly so that there is no discrimination and we eliminate the perception that by going private, one somehow gets up the ladder or the list. That is utterly wrong and something that this party does not stand for and will not stand for in the long run.

Deputy O'Flynn outlined the false comparison which is this debate over Europe, whether we are looking towards Berlin or towards Boston. We in Fianna Fáil and the people of Ireland should look clearly at choosing the middle way, the middle course between those two points.

The 1999 Act was concerned with protecting and preserving the core principles and values of this country's unique system of health insurance. These core principles are community rating, open enrolment, lifetime cover, minimum benefit across a range of services and risk equalisation. The aim of the principal Act was to safeguard the core principles while facilitating entry to and competition in the marketplace. Only one insurer, BUPA has entered in competition with VHI to date. It entered the market in January 1997 and has now provided cover for over 160,000 people. Health insurance legislation must strike a successful balance between the common good and the values of community solidarity enshrined in our system and the development of a truly competitive market designed to deliver quality choice and service to consumers at an affordable price.

The purpose of the new provision is to restrict the definition of hospital in-patient and day-patient services leaving ancillary services such as outpatient, general practitioner, optical and dental outside its scope. The stated purpose of this is that the insurance market for ancillary services has not developed owing to the primary focus on providing protection against the potentially severe costs of major illness or injury and that by removing it from the scope of the legislation there will exist an incentive for greater insurance activity and growth in this sector of health care. I would ask the Minister to consider what safeguards might be necessary, in moving in this direction, to ensure that the growth of insurance products for the ancillary care market does not in any way encroach upon or in any way undermine the principle of community rating by completely deregulating this market and permitting it to be operated on a purely risk rated basis.

Some concerns have been expressed by experts and operators in the health insurance market that the new entrants could, by maintaining the price of the health insurance product while discounting the price of primary health care products to younger better risk groups, undermine in the medium to long-term the concept of community rating. I would ask the Minister to consider what measures, either legislative or by way of ministerial regulation of the primary health care insurance market, might be necessary to avoid precisely such a scenario. I am fully supportive of the move to remove any ambiguity in relation to the provision of insurance in respect of long-term nursing care by excluding it from the definition of health insurance.

I am a little troubled by another aspect of the change of definition. The Principal Act defined the contract as having as its "sole and principal purpose" the provision of hospital in-patient services. The new definition changes this to "one of the purposes". Has the Minister considered that, under the 1994 Act, it could have been possible, for instance, to sell at a commercial rate a policy for the supply of a television, as the principal purpose was for the payment of non-medical services provided in a hospital? Now, under the Bill, such contracts would have to be community rated because it enshrines in law the principle that non-medical hospital services, where they are sold in conjunction with hospital services, no matter how small, must be community rated. Did the Minister consider that this might tie his hands unnecessarily and stifle innovation? Can the matter be reconsidered to ensure that this type of thing does not occur?

The decision to introduce late entry loading for the over-35s can only serve to strengthen and underpin the community based values and solidarity of our existing system. It gives a real incentive for young people to take out health insurance early and to maintain their cover throughout their working life. It is an entirely fair and equitable approach to late entrants. The opening up of the open enrolment principle to the over 65s is a welcome move in the light of a population which is ageing and is entirely consistent with the new system of late entry loading. It makes practical sense.

A major part of the Bill deals with risk equalisation, which is of vital importance to a health insurance system based on community rating and open enrolment. Risk equalisation is designed to eliminate the incentive to engage in what is often termed cherry picking or, in the jargon of the industry, preferred risk selection. It is designed to promote the stability of the competitive system which we now have. In introducing a risk equalisation scheme, the new Health Insurance Authority should also take account of the impact of any scheme on potential damage to competition within the industry and the obvious implications for inflation in the health sector. The prescribed field of discretion to be accorded to the new authority in relation to any threat to market stability should have regard to, among other assessment criteria, such considerations as the possible down sizing of the market, the exit of older age policy holders and the impending collapse of one or more insurers. Any requirement for risk equalisation must be considered in such a broader industry context and not simply be an academic, mathematical or actuarial review of risk profiles. I am pleased that the Minister intends to set out the detailed arrangements for the operation of risk equalisation in a statutory scheme. I hope, in the interests of making such schemes fully workable and securing the willing co-operation and involvement of industry participants, that there will be full consultation with all concerned parties in the preparation of any statutory scheme so that they will have every opportunity to fully articulate their concerns. I am glad that in the current Minister, Deputy Martin, we have a Minister who will fulfil that mandate. It is no secret that members of the teaching profession rated Deputy Martin highly—

Mr. McGrath

In comparison with the present Minister.

Mr. C. Lenihan

—in relation to the manner in which he consulted widely before engaging in any legislative action or enacting any regulations. The current Minister, Deputy Woods, is not excepted. He is doing a very good job in a very difficult area, given the outlandish 30% claim which it would be difficult for any Government to deal with and given that the whole partnership process is in jeopardy and emergency meetings of the Cabinet are taking place to deal with that.

Mr. McGrath

He should sit down and talk. He should make that phone call.

Mr. C. Lenihan

Minister Martin will deliver in Health, as he did in Education. If anything has happened in Education in recent years, it is because of the success of this Government in delivering prosperity to the ordinary citizen.

Mr. McGrath

It is heartening to note that Deputy Lenihan, having begun and finished in typical Lenihan form, had a long part in the middle of his speech that was very technical and complicated, and different from what we usually hear from him. His opening remarks are ones that I am sure he will be delighted to read when the "blacks" come out. In those he said that Fianna Fáil would not stand for people moving up the ladder to obtain health services by virtue of their membership of VHI, BUPA or any other insurer. That is an interesting concept. I am a member of VHI and have been for quite a number of years. I have not had reason to use it too often, but members of my family have, and they have used it to good advantage. When sickness comes to one's door and if one happens to have been a member of the VHI for some time, one is glad to avail of it. If that means moving up the queue, that is what happens. If Fianna Fáil is so set on not allowing that, what measures are being brought forward to change it? I see nothing in the Government's manifesto that would change that scenario. It was interesting to hear what Deputy Lenihan had to say. In the heat of the moment Deputies say things like that.

Mr. C. Lenihan

It was not said in the heat of the moment. It was said quite deliberately.

Mr. McGrath

I am delighted to have the opportunity of contributing on this Health Insurance (Amendment) Bill. It gives me an opportunity to address a number of issues. I must declare an interest. As I said earlier, I am a member of VHI and have been for quite a number of years. I was also involved for quite a number of years on a committee of this House that reviewed VHI. I am coming from a position of advantage, or disadvantage, in relation to this Bill and would have fairly set views on it.

For a long time VHI had a monopoly. It was set up in 1957. As a youngster I remember my late mother advocating to my late father that they should join. My father was a policeman and money was not too plentiful, but I think he did join at that time. VHI served this country well. A local man from my area, the late Mr. Paddy Shaw, a gentleman of renown, a lawyer, served on the first board of VHI. He was a man of integrity, a man of great intellect. He was involved at the coal face and he often told me about the long meetings the board had. In those days being a member of a State board was in an honorary capacity – one put one's shoulder to the wheel and did what one could without remuneration. We should compliment the people who had that vision and who put in the work for us for so long.

The whole question of deregulation of the market and of opening it up to competitors was looked at by our committee some time ago. There was much concern about the whole question of deregulation and what would happen, whether outside competitors would come in and set up here and cherry pick the clients. The whole question of community rating was looked at in some depth. We can talk about community rating and offering an across the board package to anybody of any age or from any community. However, the big question is how does one go about it? If one advertises in magazines that are read by young people, or by a particular type of clientele or by particular groups, they rather than others will be attracted to the company. The question of how to attract customers and not having all young customers must be looked at very carefully. That is contained in this legislation. We must be careful not to go overboard.

We all welcome the entry of BUPA into the health insurance market because VHI held a monopoly position for a long time. In fact, I believe it abused that position. The advent of BUPA created competition in the market. Approximately 1.6 million people are VHI members and BUPA has approximately 185,000 members. A further 1.2 million people hold medical cards, leaving approximately one million people without any form of health cover aside from basic hospital cover. By international comparisons, quite a high number of Irish people – in the region of 45% of the population – have private health insurance. The 45% figure is high compared to the 12% of people in Britain who have private health insurance. Of course, Britain has a different health care system to ours in which everyone is entitled to equality of treatment.

I am somewhat concerned by the definition of the "health insurance contract". I am sure the Leas-Cheann Comhairle also has concerns about this. For example, what constitutes long-term care? If people with a mental illness or some other serious condition are in hospital for lengthy periods, will the insurance companies provide cover if the hospitalisation period lasts longer than 90 days? They will not do so in regard to mental illness, a regrettable change which has come about in recent years. Mental illness can be very serious and we should not discriminate against sufferers in any way.

I welcome the provision in regard to premiums for the over-35 age group. The Department should launch an advertising campaign which would encourage people to avail of health insurance prior to 35 years of age. The companies for which two of my children work actually pay their health insurance premia. Perhaps the Minister could offer incentives to such companies in order that they would encourage their workforce to obtain health insurance.

I want to return to the VHI's monopoly position. One of my bugbears in regard to health insurance companies is that if one has a dispute with such companies, there is no facility to take the matter up with an independent adjudicator. Where can people seek redress if VHI decides they are not covered? I have interceded with VHI on behalf of some of my constituents and found the company's approach to be very dogmatic and dictatorial. I want to outline two cases in particular, one of which cost VHI members huge amounts of money. I refer to St. Francis's Medical Centre in Mullingar, with which members of the medical fraternity will be familiar. A dispute arose there in regard to cover and went on for some time. VHI indicated its intention to delist the centre. As someone who lives in Mullingar, I must declare an interest in this matter. I was greatly concerned for the centre's staff and patients and spent a great deal of time trying to devise ways in which VHI and St. Francis's Medical Centre could arrive at a solution. I spoke at length to representatives of VHI and the hospital and advanced various proposals, one of which was that an independent arbitrator should be brought in to assess the dispute and attempt to resolve it.

I brought a person from the hospital's board to Dublin to meet with a senior VHI representative. We travelled up to Dublin on a snowy January morning to keep the appointment only to discover that the meeting had been called off without any explanation. Reading between the lines, I was led to believe that the Minister of the day – a fine lady who only held the office for a very short time and in whose constituency the hospital was – had given strong indications that the meeting should not proceed. We were left high and dry. The hospital was subsequently delisted and the case went to court. Several court hearings, including a Supreme Court hearing, were held and the hospital was awarded a settlement which amounted to millions of pounds. I do not begrudge the hospital the award but it turns my stomach that members of the legal profession received hundreds of thousands of pounds when the matter could have been simply resolved if the VHI had been prepared to enter into discussions. Instead, the company used subscribers' money to fight the case through the courts only to lose it eventually. I am disappointed that the Bill does not provide any means of dispute arbitration.

The second case I wish to raise concerns a decent, honourable and unassuming elderly man who lives in Mullingar. The man's wife was hospitalised in St. Francis's during the period when the hospital was delisted. The man was a member of VHI all his life and his wife spent the last 14 days of her life in the hospital. Her husband assumed she would be covered. VHI refused to pay the meagre amount of cover to which the man was entitled for his wife's hospitalisation. The total bill of £700 was very small in VHI terms but was quite substantial for a pensioner on low income. I raised the case with VHI which only dug in its heels. I subsequently took the case to the Insurance Ombudsman. Incidentally, the State Ombudsman does not deal with VHI matters.

I dealt with a very fine lady in the office of the Insurance Ombudsman who issued very favourable correspondence to me. However, because she was too good at her job and was being too fair, the insurance companies made it impossible for her to retain her position and the job was given to someone else. Unfortunately, the poor man in Mullingar was left out in the cold. It is very important that if disputes arise with the health insurance companies, people have some facility to take the matter up with an independent arbitrator. The majority of health insurance company members are ordinary decent people who do not want to have to take their cases to court.

Debate adjourned.