I am delighted to be before the committee this morning to consider the funding of health services in 2024. I am joined here by my colleagues from the HSE. Mr Gloster will introduce his colleagues. From the Department of Health resources division, I am joined by Ms Louise McGirr, assistant secretary, and Mr. Kevin Colman, principal officer.
Today we are discussing the budget allocation for the Department of Health of €22.5 billion for 2024 in the context of unprecedented investment in healthcare over the past number of years by successive Governments. Excluding disability services, which transferred to the Department of Children, Equality, Disability, Integration and Youth last March, since 2016, the budget for health has increased from €11.8 billion to €22.5 billion for 2024. In that same time, there have been record levels of recruitment with the number of whole-time equivalents, WTEs, employed rising by almost 40%. On a like-for-like basis, therefore, we can see an effective doubling in spend over the past eight years. This is more significant investment than many other developed countries. For example, if one looks at NHS England as a comparator, you can see that its budget has increased in the same period from £102 billion to £169 billion - almost 70%. Focusing on the past three years, we have added 22,000 healthcare staff, including 6,700 additional nurses and midwives, 3,100 extra health and social care professionals and 2,500 more doctors and dentists. Furthermore, the Government has increased our hospital bed capacity by over 1,000 and increased ICU capacity by around 25%.
In conjunction with this investment in services, the Minister has introduced a wide variety of affordability measures in line with the Sláintecare vision of universal healthcare, including the abolition of inpatient hospital charges. Free contraception has been rolled out to women up to the age of 30, access to State-funded GP care has been expanded in the largest expansion ever and the threshold for the drugs payments scheme has been reduced to €80 per household per month. The full year cost of these measures is over €240 million per annum.
This record investment is required to meet record increases in demand for health services. Ireland now has its largest population since 1850 and the profile of that population is aging markedly. For example, the number of people aged over 65 has risen by 21.7% since 2016 based on the latest census. It is interesting to consider the scale of the services being provided and the increases in demand faced by the acute system, in particular. I will focus on the acute system today even though it represents one third of the system and not the totality of it. In the 12 months to June this year, the HSE saw over 3.5 million people in outpatient clinics; carried out 1.16-million day case procedures; had 634,476 episodes of inpatient care; and saw 1.68 million patients in emergency departments and injury units. As these represent 178,000 additional patients treated in the year to date compared to the previous 12-month period, we are facing an increase in demand.
As well as treating more people, we also see improved outcomes for those patients who are treated. This can be seen across most specialties but to take one example, the number of Irish people who are living after cancer has grown by more than half over the past decade as survival rates continue to improve. New and more expensive drugs and treatments alongside more and better trained staff are to leading to better outcomes. So when we assess performance output indicators, which is a contested area, it is important to recognise that they do not tell the full picture.
Outcome indicators must also be considered. It is not just about treatment, but also the quality of treatment and the impact it has on citizens who have gone through the system.
While we recognise an increase in activity in our hospitals, with better outcomes for citizens, this has come at an increasingly high cost to the taxpayer. Investment in acute care activity has increased by more than 80% in the past seven years, with acute care expenditure now making up over one third of overall spending. In addition, the hospital workforce has grown by 36% in the same period. Using an economy-wide deflator of circa 25%, this indicates real increases in expenditure of approximately 50%. The number of patients treated has not kept up with this large increase in resourcing, however, with increases of between 10% and 20% in the same period, depending on which matrix is used.
Even accepting improvements in outcomes, this represents a substantial divergence between resourcing and activity. It is not entirely clear but there is what people call a "productivity puzzle" which can be attributed to several factors. People have their own views in this regard but it is fair to assume that some of the factors relate to poor physical infrastructure due to previous underinvestment, particularly in some larger hospitals; lack of IT investment, including digitalisation and capital per person employed; weak processes and outdated pathways; and inadequate consultant-led leadership, including an outdated contract which we have addressed in the context of the new consultant contract. Given this weak productivity, we need to look more deeply at how we can structure and continue to restructure the health service to ensure resources are used more effectively. We share this challenge with many other countries, as spending pressures in health are outpacing government revenue at a time of ever greater health need. To meet this challenge, we are reforming and must continue to change how we deliver those services.
As the health demands of the population continue to grow by 3% to 4% per cent per annum - that sort of increase leads to a doubling in the overall output in 15 or 16 years, so it is very strong growth - we will have to develop innovative and sustainable means of meeting this demand. We already have examples of this. I will not go through it in detail as it has been discussed previously at the committee. The clearly integrated services we have developed for older people, including those with chronic illness, through the enhanced community care programme, ECC, are an example of the shift to the left, however. That will be an increasing feature of service delivery into the future. This programme is helping hundreds of thousands of people manage their health in communities, outside the hospital setting. In the next week, ECC is extending to include an interface with public and private nursing homes to support post-hospital discharge. As part of this approach, it is expected that all patients transferring from acute hospitals to nursing homes will be assessed by, and necessary care interventions delivered by, the integrated care programme for older people and the wider primary care teams. This will help to improve hospital avoidance, support early discharge and reduce readmission to hospital. That is just one example of the impact the ECC is having.
In addition, care pathways are being radically reshaped. That is being led by Dr. Henry and Ms McNamara. We have developed 33 new modernised care pathways, which are being implemented. For example, our integrated eye team for paediatric and acute eye conditions is one such reformed pathway which is implemented as part of the Minister’s 2023 waiting list plan. This community-based service has seen significant results already.
New see-and-treat clinics are another example of reform. In the past two years we have seen a 9% drop in the gynaecological outpatient waiting list despite a 30% increase in referrals. Of our 19 new see-and-treat clinics, 14 are now open, with a further two starting by year end. That has resulted in significant reductions in the time people are waiting for care. Our job is to replicate and scale these models in order that all those who rely on the health service now and in the future can get the right treatment for them when they need it. This will involve significant ongoing investment, but also relentless focus on innovation, change and reform or, in other words, major gains in output and productivity across the system.
Turning to expenditure for this year and the pressures we are seeing, we in the Department and the HSE accept the forecasts for health expenditure need to improve, as does control of expenditure. We are responding to this challenge by improving our use of data, analytical capacity, performance oversight and corporate governance. Savings and efficiencies are also required in the acute health sector and will form part of the service plan which is being developed to give effect to the recent budget. Pay makes up 42% of the budget. There are two principal drivers of pay, namely, the number of people employed and the rate at which they are paid. The pay bill has increased by €3.2 billion since 2016.
Our analysis suggests that 51%, about half, of this growth is due to the recruitment of additional staff and the remaining half is due to pay increases agreed centrally. Measures will need to be taken on recruitment, overtime and agency staff as set out by Mr. Gloster already to arrest and start reducing - where we can - the cost of the pay bill, while ensuring patient safety.
Excluding medicines, non-pay expenditure in the acute sector includes expenditure on medical and surgical supplies, laboratory equipment, heat, lighting, cleaning, maintenance and so on. They are the basic services that are included in the provision of services in hospitals. This expenditure has increased significantly more this year due to both higher demand and higher prices. It is now estimated that expenditure apart from pay and medicines will be almost €2.4 billion this year, which is close to €600 million more than forecast. A large part of the acute overrun, which has been the focus of tension for this year, relates to non-pay expenditure.
To give some examples, while I will not go through all the numbers, we have seen a 23% increase in expenditure on medical and surgical supplies; an 18% increase in heat, power and light; a 28% increase in laboratory costs; a 27% increase in the cost of X-ray and imaging; and a 37% increase in the cost of catering. It is a combination of higher demand and much higher prices that hospitals have to pay for basic items that are required. As part of the initiatives that we are looking at now, we have been challenged by the Government to look at procurement processes and stock management to see how we can drive efficiencies in this area. It will be difficult but we are committed to doing that.
As we have discussed before, a growing area of spending in our health system, along with other countries in the developed world, relates to medicines. The pharmaceutical budget has more than doubled in the last decade from €1.3 billion in 2012 to €2.6 billion in 2022. This year, expenditure is likely to be €2.9 billion. Including payments to contractors such as pharmacists, this expenditure will rise to around €3.2 billion. Nearly €1 in every €8 of funding for health in the public system relates to the pharmaceutical bill. This level of growth is clearly not sustainable and we need to strive to maximise the available investment to provide as many people as possible with access to these medicines.
The pipeline of new drugs is extremely strong. There is significant demand for these life-changing drugs. Higher prices for innovative medicines are a key contributor to growth in the overall budget. Next year, for example, a new class of drugs for Alzheimer’s disease is to be announced. This drug, if approved, could have a budget impact of €100 million annually at list price for an estimated 4,000 patients requiring treatment. That is just in respect of one drug. I believe we can do much more to better use our budget to free up resources for new drugs and innovative drugs by greater use of generic and biosimilar medicines. The new arthritis drug, for example, is now consuming more of the high-tech drug budget than any other medicine and the number of patients requiring it continues to grow.
To address these costs, a best value biologics programme has been launched by our colleagues in the HSE to make use of biosimilars rather than the branded version of these drugs. As a result, 80% of patients have now moved on to the more affordable biosimilar. Recently, the manufacturer of the branded biologic has dropped the price. This is an example of the type of change that is required in order for us to sustain, mitigate the increase in the cost of drugs and provide leeway to fund new medicines that are coming on.
In conclusion, we need better budgetary control, which we are all aware of, and we need more efficiencies and savings in the short run while continuing to deliver reform of our health services. Sláintecare offers a roadmap for achieving this reform and productivity as we need to deliver greater amounts of care closer to home and promise more accessible health services at a lower cost. We need improved pathways, new ways of working and further development of our community-centred model of care. Public health initiatives, in particular the early and continuous prevention of illness, and the promotion of healthy ageing, will be integral to the effective functioning of our healthcare in the future. There is no prospect of continuing to treat ever increasing numbers of ill citizens in our acute settings under the existing structures and pathways of working. It is not sustainable. Ultimately, we are aiming for a country where patients are able to live longer, better lives and are not only treated, but supported by our healthcare services in achieving this.
