Health Insurance (Miscellaneous Provisions) Bill 2011: Second Stage

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

I welcome the Minister of State at the Department of Health, Deputy Róisín Shortall, to the House.

I am pleased to address the House on the taking of Second Stage of the Health Insurance (Miscellaneous Provisions) Bill 2011. As Senators will be aware, the Bill passed through all Stages in the Dáil last week without amendments. The main object of the Bill is to continue for a further year in 2012 to ensure the burden of the costs of health services is shared by insured persons. The Bill was supported by all sides in the Dáil.

Senators will be familiar with the commercial aspects of insurance where the risks of adverse events and the associated costs which arise when some of these events occur are pooled or shared among the total number of people participating by way of paying an insurance premium. The commercial aspect is very much in evidence when one considers travel insurance, for which older people pay more than younger people, and motor insurance where the reverse is the case. The variation in pricing is due mainly to the greater frequency and higher cost of claims which insurers must meet for higher risk customers. Therefore, while there remains some element of risk pooling and cost sharing, the contribution of each person to the pool rises with his or her risk profile. This is known as a risk rated model of insurance.

When the risk rating model is applied to health insurance pools the inevitable result is that older and less healthy people have to pay substantially more for the same cover. In recognition of this, successive Governments and the Oireachtas have been committed since 1994 to maintaining the principle of community rating rather than risk rating of health insurance. This mirrors the approach we take on overall funding for health care costs where the young support the old, the healthy support the sick and the better off support the less well-off.

Private health insurance has had a long history of contributing to the cost for individuals of health care in this country. As a result, successive Governments have sought to adopt key principles within health insurance, particularly the principles of the young supporting the old and the healthy supporting the sick, and have therefore supported the community rating of health insurance policies. The objective has always been that the price of a policy should reflect the risks and costs of the entire pool of insured persons in the community, rather than the risks and costs on a person-by-person basis. The sharing of risk between younger people and older people — the latter predominantly cost far more in terms of claims — is known as intergenerational solidarity, that is, younger people pay more for health insurance than the level of risk they present would demand, while older people pay less as a direct consequence.

The pricing of risk across the community of insured persons clearly requires robust mechanisms to share costs when there are a number of companies in the market. If a mechanism to share risk and attendant costs is not present, an insurer with a less profitable risk profile can quickly find itself in a perilous position financially. The standard transfer mechanism is known as risk equalisation and is a key element of health insurance internationally. Only through the use of risk equalisation can solidarity and cost sharing be effectively implemented between the generations who hold insurance.

The Health Insurance Acts 1994 to 2007 provide the statutory basis for the regulation of the private health insurance market in the interests of the common good. The regulatory system is based on the key principles of community rating, open enrolment, lifetime cover and minimum benefit and aims to ensure that private health insurance does not cost more for those who need it most. The system is unfunded, meaning there is no fund built up over the lifetime of an insured person to cover his or her expected claims cost. Instead, the premium contributed by insured people is expected to cover the cost of claims and expenses in that year.

Under community rating everybody is charged the same premium for a particular health insurance plan, irrespective of age, gender and the current or likely future state of their health. The only exceptions to this rule relate to children under the age of 18 years and students in full time education. Community rating therefore means that the level of risk that a particular consumer poses to an insurer does not directly affect the premium paid. The system requires intergenerational solidarity, with younger people supporting older people. It also requires solidarity between healthy and less healthy people. Younger and healthier people effectively subsidise older and less healthy people on the understanding that these younger people will themselves be subsidised by later generations when they reach old age and-or suffer ill health. In effect, older people who have been paying health insurance premia for many years will have contributed to intergenerational solidarity when they were younger and can reasonably expect to benefit from it now in their older age.

It is worth pointing out that in December 2009 when the three insurers in the open market, Aviva Health, Quinn Healthcare, and VHI, attended the Joint Committee on Health and Children to discuss the health insurance market all three expressed full support for community rating. Where they differed was in regard to how community rating should be supported. I would point out it is recognised internationally that community rating requires a mechanism to discourage or prevent insurers from engaging in the practice of cherry-picking lower risk and therefore more profitable customers.

Other important principles in health insurance are open enrolment and lifetime cover which provide that, except in limited circumstances specified in legislation, health insurers must accept all applicants for health insurance and all consumers are guaranteed the right to renew their policies regardless of their age or health status. An exception to these provisions is that they do not apply to certain restricted membership undertakings. These undertakings mainly provide health insurance to certain vocational groups and their families and account for approximately 4% of the health insurance market. In addition, under the current minimum benefit regulations,all insurance products that provide cover for inpatient hospital treatment must provide a certain minimum level of benefits.

I refer to market statistics. The total premium income for the three insurers for 2010 was €1.9 billion, an increase of €300 million, or 19%, more than the 2008 figure of €1.6 billion. As of end-September 2011, 2.174 million people, or 47.5% of the population, had private health insurance in the form of inpatient plans. These numbers are broken down thus: VHI had 1.246 million, or 57 %; Quinn Healthcare had 458,000, or 21%; Aviva Health had 382,000, or 18%. Restricted membership undertakings accounted for 87,000 people, or 4%.

VHI Healthcare's market share has consistently fallen since the market was opened to competition and this trend has accelerated. The fall in market share has mainly been in the younger age groups. Quinn Healthcare and Aviva Health combined currently have 47% market share in the 30-39 age group but only 9% of the over 80 age group. VHI Healthcare continues to have a much greater proportion of members in the older age groups compared to the other insurers but there is some reduction in the difference. Its number of policyholders under the age of 60 years has reduced by 108,000 in the last year, amounting to 10% of its customer based aged under 60 years. In the first six months of 2011 the number of insured persons with Aviva Health aged over 60 years increased from 23,000 to 40,000. In the same period VHI Healthcare had eight times the proportion of members in the over 80 age group than that of Quinn Healthcare and six times the proportion in this age group than that of Aviva Health.

I wish to remind the House of some recent background to the introduction of risk sharing in the Irish private health insurance market. The risk equalisation scheme, which was affirmed by the Oireachtas in 2003 and approved by the European Commission in the same year, provided a mechanism for sharing the costs of providing necessary care among the insurers. Although all political parties and most academics and professional bodies, including the Society of Actuaries, supported the risk equalisation scheme, that scheme and its supporting regulatory regime were challenged in the courts by BUPA Ireland. These challenges were rejected by the European Court of First Instance and the High Court in Ireland. However, they ultimately succeeded when, in July 2008, the Supreme Court found the manner in which the risk equalisation scheme was implemented to be ultra vires.

It is important for the House to note that the Supreme Court decision did not strike down the principles of community rating, open enrolment and lifetime cover or, indeed, the principle of having a scheme of risk equalisation in place. The court found the scheme to be ultra vires because the legislation did not provide for an explicit link between community rating and the specific mechanism provided in the 2003 regulations. The Chief Justice of the Supreme Court subsequently clarified that the decision which found the 2003 scheme to be ultra vires was not an obstacle to the Government bringing forward a new scheme. Following the judgment there was a need for a prompt response to maintain confidence in the market. It was necessary, therefore, to introduce measures in order to support community rating and ensure, as far as possible, that market fragmentation did not become prevalent due to the introduction of plans aimed at younger, healthier lives.

The current interim scheme of age-related tax credits and community rating levy was introduced for the three years from 2009 to 2011 in order to provide direct support to community rating. It achieves this by way of a mechanism which provides for a cost subsidy from the young to the old. This Bill seeks to continue the scheme for a further year in 2012. It is designed to be Exchequer-neutral and ensures that every customer has the benefit of a community rated health insurance premium. Restricted membership undertakings are excluded from the scheme as their insurance products are not available to the general public.

The scheme was approved by the European Commission for the four-year period 2009-12. In announcing its decision to approve, the Commission referred to the wide margin of discretion enjoyed by member states in the organisation of health services. It acknowledged the important role of private health insurance in the overall health system in Ireland. For this reason, and particularly in view of the special obligations to which it is subject — community rating, open enrolment, lifetime cover and minimum benefit — the Commission concluded that private health insurance qualified as a public service.

The Commission went on to find that although the interim scheme constituted state aid it was compatible with the Single Market because it satisfied the conditions laid down in the EU framework for state aid in the form of public service compensation. These conditions are focused on ensuring the public service, in this case the provision of private health insurance cover, is clearly defined and the basis for the calculation of the compensation provided under the scheme is established in advance in an objective and transparent manner. The conditions also focus on ensuring that arrangements are in place for avoiding overcompensation, including provision for repayment in the event of any such overcompensation.

The interim scheme works by allocating tax credits for persons in three age bands and funding this by the collection of an annual levy on health insurance companies based on the number of lives covered by policies underwritten by them. The scheme provides that health insurers receive higher premiums in respect of insuring older people but that older people receive tax credits equal to the amount of the additional premium. This ensures all people continue to pay the same amount for a given health insurance product. In this way, community rating is maintained but insurers receive higher premiums in respect of older people to partly compensate for the higher level of claims.

The scheme is designed in order that loss compensation is only applied up to the most popular benefit level in the market which is up to and including a semi-private bed in a private hospital. This means that approximately 20% of benefits are excluded and broadly speaking these are so-called luxury products as well as primary care cover and some other benefits.

Taking this into account, the scheme allows for insurers with additional costs arising from insuring older people, who have a preponderance of claims, to be compensated for up to, but no more than, 65% of these additional costs. The amounts of the tax credits by age group have been chosen such that where an age group gives rise to higher than average claims costs, the system should reduce the excess of claims costs by 65%. The choice of a 65% reduction in average claims costs at older ages is designed to strike a balance between reducing the incentive for insurers to avoid older customers, while also allowing for a competitive market in which individual insurers are not required to share efficiencies in their own claims management with their competitors.

The actuarial evidence available in 2009 indicated it was from the age of 50 upwards that the cost of claims of an insured person increases to above the market average. For 2009 and 2010, the scheme provided for a modest level of support for people in the age bracket 50 to 59 years which amounted to a tax credit of €200 for each year. The Health Insurance Authority, HIA, analysis during 2010 indicated the claims experience of this age group was close enough to the overall market average. This meant that insurers with a higher than average proportion of customers in the 50 to 59 age bracket would not be disadvantaged by having to cover higher than average claims so no tax credit was required in 2011 for that age bracket.

On current estimates, the scheme will transfer some €275 million from younger to older lives, those aged 60 years plus, in 2011. Of course, much of this money will stay in each insurance company's funding base given that younger customers are supporting older customers in the overall company structure. Accordingly, in a perfectly balanced market with each company having the same ratio of younger to older customers, there would be no financial impact, negative or positive, on any insurer. To the extent that any company does, in fact, experience a positive financial impact, this is purely a consequence of having a greater proportion of older customers than its competitors. Insurers for which there is a negative financial impact arising from the scheme are significantly compensated by their much lower claims costs.

A key issue for the Minister for Health and the European Commission is to ensure there is no overcompensation of any insurer under the scheme. The net beneficiary has, of course, been VHI since Quinn Healthcare and, especially Aviva, continue to have a significantly younger age profile than the market as a whole. In the case of VHI, the HIA has determined there was no overcompensation in respect of 2009 and 2010. It also concluded the net impact of the tax credits and levy which were put in place for 2011 would be significantly less than the estimate of the extra cost of providing cover to older people.

Although it is the greatest beneficiary of monetary transfers under the scheme due to the older age profile of its customers, in 2010 VHI made a small loss of €3.1 million. Based on current financial projections, it is not anticipated that this financial position will materially change in respect of VHI's performance for 2011.

The interim scheme consists of two elements, namely, age-related tax credit granted to individuals who hold private health insurance and a levy charged on private health insurance companies to be used to finance these credits. At 2011 rates, the amounts of the tax credits for persons up to age 59 sees no tax credit is paid; for persons aged between 60 and 69 years, a tax credit of €625 is paid; for persons aged between 70 and 79 years, the tax credit is €1,275 while for those aged 80 years and over it is €1,725.

Each private health insurance company is required to pay an annual levy to the Revenue Commissioners. The levy is remitted to the Exchequer and forms part of overall Exchequer funding. It is charged on all adult insured lives and the rate for 2011 is €205. The rate for insured lives under age 18 is €66. The scheme is designed to be Exchequer neutral — money in equals money paid out. The levy is charged on health insurance companies in respect of each insured life and not on individual subscribers. It is a matter for the companies whether to pass this levy on to their customers. Neither the Minister nor my Department has any role to play in the setting of premia prices by any of the private health insurance companies, including VHI.

The interim scheme for 2012 will be improved by requiring insurers to submit more detailed information returns by product and year of age. The Minister is proposing the use of five-year age bands from 50 years of age and above for tax credits for 2012, as recommended by the HIA in its report on risk equalisation. Only ten-year bands are used which is somewhat less precise. The more detailed information returns now being provided for will allow for this refinement.

Despite the existence of the interim scheme, there is significant segmentation of the private health insurance market with an increasing number of plans being designed, marketed and priced to attract lower risk, that is younger, healthier customers only. Competition is effectively confined to this group. This means older and less healthy people have less choice and inevitably face higher premium costs. I have heard it said that a risk equalisation scheme will be proved to be effective when insurers begin to advertise for older customers or customers with a particular chronic disease. In an ideal situation, an insurer will be assured that risk equalisation will provide sufficient compensation for taking on new customers who are suffering from a chronic illness, for example, diabetes, and even allow for making a reasonable profit. In that situation they will seek to provide the best care package at a competitive price and so attract new customers.

That certainly is not the case in Ireland's private health insurance market. While health insurance is one of the most heavily advertised products on television, it is all directed at the low-risk groups. This Bill is one of several important elements of reforming the private health insurance market. The programme for Government contains a commitment to put a permanent scheme of risk equalisation in place. This is a key requirement for the existing PHI market and also in the context of plans to introduce universal health insurance from 2016. The Minister intends to bring forward proposals shortly with a view to introducing a permanent scheme with effect from January 2013.

I will now turn to the specific provisions in the Bill. These are exclusively technical in nature, providing for a one year extension of the scheme in 2012 with small modifications to allow for a more precise level of support for community rating.

Section 2 amends section 6 of the Health Insurance Acts 1994 to 2009 by substituting a revised definition for "age group" and by inserting a new definition of "type of cover". These definitions will facilitate the provision of information broken down by each year of age and also by specific health insurance contracts.

Section 3 amends section 7 of the Act to provide for more detailed information returns to be submitted by health insurers to the Health Insurance Authority. The information returns will be broken down further by each year of age as required and also by type of health insurance cover. In addition, regulations made under section 7 may require separate returns in situations where the benefits payable under a type of cover have materially changed.

Section 4 amends section 7 of the Act to provide broader scope for the Health Insurance Authority in terms of using additional relevant information alongside the formal information returns submitted by the health insurers. This will assist the authority and the Minister in performing their respective functions under the Act.

Section 5 amends section 470B of the Taxes Consolidation Act 1997 to make the necessary changes required to extend the age-related tax credit in respect of private health insurance premiums paid by persons aged 50 years and over to include 2012. Section 6 amends section 125A of the Stamp Duties Consolidation Act 1999 to provide for the continuation in 2012 of the collection of an annual levy on health insurance companies based on the number of lives covered by policies underwritten by them.

I will briefly make some points about the vital issue of effective cost control within private health insurance. In 2010, my Department commissioned its actuarial advisers, Milliman, to review VHI's handling of claims management and cost control. This was in light of a very significant increase in claims costs over a two year period between 2007 and 2009. The review identified a number of means for VHI to address its claims costs and to make significant savings in this area.

The Minister is concerned about this issue and has placed significant emphasis on the requirement for this to be addressed. In particular, the Minister is concerned that any inefficiency in the management of claims is addressed before the introduction of universal health insurance. VHI will play a key role in addressing costs in the market, as due to the age profile and health status of its customer base, it currently pays out about 80% of all claims in the market.

VHI has made progress on the reduction of its cost base and has highlighted the recent savings it has made through cost containment measures. It has made annual savings of €100 million in the past two years through reductions in fees to private hospitals and consultants and through savings in administrative overheads. It has recently commenced a process of negotiations with private hospitals with a view to seeking further savings in this area. Contracts with consultants are due for renegotiation in mid-2012 and VHI has informed consultants that it will be seeking further savings at that point.

Subject to Government approval, the Minister intends to move quickly in the new year to prepare the necessary legislative changes in order to introduce a permanent scheme of risk equalisation to come into effect from 1 January 2013. I look forward to participating in debates with both Senators and Dáil Deputies when that legislation is going through the Houses. In the meantime the Government is satisfied of the need to provide a mechanism along the lines envisaged, that is, a continuation of the interim scheme for a further year in 2012, with the enhancements described.

The scheme has made a significant contribution to community rating since 2009 and is, to date, the only scheme which has succeeded in transferring funds from low-risk to high-risk groups. For that reason, I commend the Bill to the House.

I welcome the Minister of State to the House as always and thank her for an extremely comprehensive outline of the Bill, its provisions and its context. I do not recall one as long and as informative on an issue such as this in the past, for which I thankher.

Fianna Fáil will be supporting the legislation. It has its origins with former Minister, Ms Harney. As the Minister of State correctly pointed out, this is an extension of that Act. We look forward to more comprehensive risk equalisation in due course. I am interested to see what way that will play out in terms of the Government's plans for universal health insurance and am interested to hear the position on those plans.

Second Stage provides us with an opportunity to raise a number of other issues. Obviously, Fianna Fáil fully supports the concept of intergenerational solidarity, community rating, etc., as the Minister of State so eloquently outlined over the past number of minutes. As I stated, we will be supporting the legislation.

Today and yesterday, in the media, there have been reports of moneys outstanding. There is some €162 million of unpaid debts to hospitals throughout the country by the private health insurers, according to a report today. Yesterday, in a separate media report, the Minister, Deputy Reilly suggested that some €50 million currently owed by insurers was expected to be collected. How can we preside over a €162 million bill and allow that to take place without it being paid in its entirety? If it were a business, there would be a judgment against me if I did not pay a bill for €200 to whatever service provider. I would be interested to hear the Minister of State's view on this. If there was €162 million owed by VHI, Aviva and Quinn, then those bills need to be paid quickly. It is a considerable amount of money. Hospitals are having their funding cut throughout the country and in some instances, are being closed. I say "fair play" to Senator Whelan who secured the future of Abbeyleix nursing home, for now anyway. I am from the north west and Sligo is my local hospital. They have been trying hard to operate on an ongoing basis with budget cutbacks, etc., and have been doing that reasonably well. How can they now be expected to sustain losses when the Government is suggesting that it would be happy if one third of €162 million — some €50 million or so — will come in? How can we possibly run a service on that?

While measures are being put forward in the budget to bring in an additional €143 million whereby private patients will not be taking up public spaces, that will incentivise hospitals, which are already struggling on budgets and which, by the Minister's admission, will not get paid €162 million that they are due, to stuff the place with private patients because there will be money paid for those, and hence put the public patients at a further disadvantage in keeping them out of hospital beds.

On the wider universal health care approach and the Dutch model about which we have heard so much, I would be interested to hear the Minister's view on a statement yesterday by Mr. Michel Dutrée, the CEO of Nefarma, the Dutch pharmaceutical industry lobby group, who was here for a conference. He had strong views on that model. He stated that the Government here should think twice before introducing the Dutch-style health system because of escalating costs and a lack of choice in that system. He stated that costs of health care there would double in the next ten to 15 years if nothing was done and that Dutch people would be spending in the region of 25% of their annual income on health care, which is more than in the United States.

Mr. Dutrée also stated that under such a system one hands over one's life to the insurance companies and a public system, executed privately, is very difficult to manage. That seems to be the most up to date version of professional opinion of the Dutch service and, therefore, before we rush to create a similar model we might re-examine the position to see what is best. We are all for equality of services, risk equalisation and access to the same services as quickly, fairly and cheaply as possible but we appear to be having difficulty securing the best way forward in that regard. Naturally, the Government has all our support in its attempts to try to do that, with obvious criticisms if we disagree along the way.

The write-off of €100 million of the sum of €162 million referred to is unacceptable. It would not happen in private industry. People would be prosecuted and face the full rigours of the law to ensure those moneys were paid. The Minister might outline the Government position on that to the House.

Regarding the Health Service Executive and who is in control, I am aware the Minister was in the Dáil for this debate also when my colleague, Deputy Kelleher, would have made similar points. The Minister stated that having reappointed a new interim board of the HSE he was taking full control of the situation. We then had announcements from the HSE about not paying expenses and so on. The Minister has said that while he is not happy about that it was a decision for the HSE.

Who is in charge? I have put it to the Minister when he was in the House previously, and previous Ministers on many occasions, that the entire budget of the HSE must be taken back under departmental control to ensure the people's representatives, that is, the Government and those of us in these Houses, have an input and a say into the spending of the money. I criticised the former Minister, Mary Harney, many times from the opposite side of the House about the fact that we had effectively sub-contracted the health service to a third party organisation which was answerable to nobody and that we could hide behind the convenient, parrot-like responses we get to all health queries, as I am sure do the Minister's own backbenchers, which state, "Thank you for your letter. Under the 2004 Health Act the HSE is now responsible for that area and I have asked the CEO to respond to you directly". I may have missed a word or two but that is the basic reply and I have received many of them, as I am sure have other Members of the House. Who is in charge? Is it the Minister when it is positive news or a new outlook and the HSE when it is bad news? We need some clarity on that point.

Senator Whelan announced this morning that the Government has done a U-turn, on his advice and following other developments, on the closure of Abbeyleix community hospital on which we all congratulated him on the Order of Business. I drew the analogy between his success in attempting to do that and the failure of others in Roscommon, Cork and my own area of Sligo where pre-election promises were made by the Minister's colleagues, the Tánaiste, Deputy Gilmore, the Minister for Education and Science, Deputy Quinn and Senator Susan O'Keeffe all of who confidently submitted to the electorate of the north west that a full centre of excellence would be delivered under the Labour Party in government. That appears not to be the case.

The Senator cannot resist it.

One wonders if Senator Whelan could be consulted to lobby on our behalf. In addition, the Fine Gael colleagues in government, the Minister of State, Deputy Perry, and Deputy Tony McLoughlin, promised the return of cancer services within 100 days. That did not materialise. If it can be achieved for the people in the midlands regarding the community hospital in Abbeyleix one wonders if it can be achieved for the people of the north west.

Fianna Fáil Deputies left the party.

On the cancer issue, I am reliably told that there is a problem nationally in regard to theatre space for carrying out surgery on cancer. While clearly there are vacant theatres throughout the country for procedures, would it be an innovative, cost saving and life saving step for HSE West to allocate theatre space within Sligo General Hospital to facilitate the clear pressures for space in terms of undertaking cancer treatment procedures in University College Hospital Galway and here in Dublin?

The struggle for all Governments is to try to find equality of access for services. This Bill deals with that and we support it but as I have said many times in the House, whether it is the HSE, people in Hawkins House, the Minister of the day or whoever, increasingly, an "Animal Farm" situation applies to the health services in that some people are more equal than others. That certainly seems to be the case in the north west.

I thank the Senator for his contribution. He is over time. I am adhering to strict time limits.

I thank the Minister for being so comprehensive on this legislation which is supported but he might reflect on some of the points made on Second Stage.

I thank the Minister for giving a comprehensive presentation on the reason for the Bill. It is important that we have in place regulations and legislation which are for the common good. It is also important there is no price increase in health insurance as people get older and may be unfortunate to have an illness. That is one of the things the Bill provides for as was also provided for in 2009.

We are spending more than €13 billion on health care annually. That is a huge budget. While there is much criticism of the health care system many improvements have taken place for which we do not give credit, in respect of hospital care and out-patient care. The number of patients going through the hospital system has increased dramatically and we should give recognition to that. Also there are those who consider that health care is an important issue and take the trouble to take out health insurance. The Minister of State said that more than 47.5% of people have health insurance, which is a high percentage of the population. However, the Minister of State would accept there will probably be a decrease in that area in the next 12 months given that people are coming under more pressures. Therefore, in terms of competition, it is important to ensure we get value for money, whether in the private or public sector.

When the risk equalisation scheme was being dealt with in the courts, everyone had the same idea, that nobody should be penalised in respect of health insurance. While the Supreme Court held in 2008 that the way the mechanism was put in place was ultra vires it did not strike down the principles of community rating but the mechanism provided under the 2003 regulations.

The provisions between 2009 and 2011 which allowed for ten year bands are being amended to five year bands. This provides for a more comprehensive overview in respect of credits and benefits for the over 50 age group. That is a welcome development.

While the Minister made a comprehensive presentation of all the issues I wish to refer to VHI, the private health care sector and the lack of competition. There appears to be a view that what happened for the past 20 years must continue for the next 20 years. I do not agree with that. There are certain issues about which I have concerns. I raised this matter at the Joint Committee on Health this morning and previously with the Minister. I have taken the trouble to file a formal complaint with the Competition Authority in respect of the decision by VHI not to give cover for a new hospital in Cork. It cost over €50 million to build and equip four operating theatres with brand new MRI equipment and other state-of-the-art equipment, yet it cannot get VHI cover. The other two insurers have agreed to give cover. It is interesting that the Mater private, which intends moving into that facility, has now written to VHI stating it is prepared to quote 6% under the quote of the other major health care provider in Cork, which proves the point that competition brings down price and gives better value for money.

VHI is a State agency in real terms. Why is this happening at a time when we are debating the issue of giving protection to the insurer that has a large proportion of the over-50 age group, yet, at the same time, it is not prepared to take on board cost savings? It is a serious question and needs to be dealt with. I know the Competition Authority has met one of the parties although I am not sure if it has met VHI yet. It is anti-competitive that the major provider of insurance in this country is refusing to give additional cover.

It is interesting that the other major provider, while it is not happy another company is intending to come into its space, has a proposal and full planning permission to build a new 80-bed extension to its facility. This does not make sense when, in the not-too-distant future, I am sure VHI will give cover for that new 80-bed extension to the current occupier of the bulk of the private market in the Cork area. It is definitely an issue we should consider.

A growing issue in health care is the fact over 500,000 Irish people are aged over 65. In the next ten to 20 years, that figure will grow dramatically and it is predicted by 2031 over 1 million people will be over the age of 65, which means we will have to ensure adequate health care facilities are available. We need to begin planning carefully for this change, and while we are very restricted in regard to budgets and the money available, this does not prevent us from long-term planning. Whether it is a ten, 15 or 20 year plan, we should consider it now. I know we intend to go forward with the universal health care plan, which is very welcome and is about having everyone on a level playing field in order that all have an equal opportunity to access health care services and facilities, which is important. However, we need to do a lot of long-term planning, and now is the time to deal with that so we can achieve cost efficiencies.

In some cases, health insurers will provide cover where the person is admitted to hospital for a procedure whereas many procedures can now be done on an outpatient basis. I am not sure the health insurers have reviewed this issue in recent years. Many cost savings could result from making sure they provide the right cover, given they will not provide cover if the procedure is done on an outpatient basis but they will provide it if the person is admitted to hospital. The Minister of State has outlined the position in regard to admission on the night before a procedure and has sought and achieved some changes in that regard, with resulting savings. It is this type of area we can work on to bring down the costs health insurers have to pay. The insurers themselves have an important part to play in this, and they must be proactive in bringing down costs.

I welcome the proposal and the presentation by the Minister of State. She has my full support and that of my party for putting the legislation in place in the next 12 months.

I welcome the Minister of State. As always, it is a pleasure to debate matters with her. If I may take up some of the points she made, while she used the phrase "all political parties and most academics" on page 3 of her speech, we have never agreed with this policy and I will explain the reasons for that. The Minister of State said: "I have heard it said that a risk equalisation scheme will be proven to be effective when insurers begin to advertise for older customers." They did. On the 50th anniversary of Ronnie Delany's win —the 55th was this week — they advertised along the lines of "If you can remember Ronnie Delany winning, you should buy some health insurance".

What has happened is that generations of Ministers have accepted the same nonsense from the Department — that is the problem we have. I hope a reforming Government, a reforming Minister and a reforming Seanad will question some of that. The Department in the past never produced a single person who had been denied cover by the other companies. This was the victimless crime. The Department could not show anybody who had been refused cover. The whole edifice is built up to protect VHI from competition. The stuff about the old is nonsense, and demonstrably so. It is masking a social goal to maintain protectionism.

The recent European court judgment in this regard stated VHI continues to carry out all its business activities without having received authorisation from the Financial Regulator. The White Paper in 1999 — that far back — stated:

The Government consider that there is a compelling case for change in VHI's corporate status. They consider that maintaining the status quo would only contribute to, or perpetuate, perceived problems in relation to the dual role of the Minister for Health and Children as ‘owner' of VHI and regulator of the private health insurance market.

An bord snip nua also recommended that it transfer to the Financial Regulator. That is the dilemma for the Department. It is protecting VHI from competition, as was rampantly illustrated in the Supreme Court judgment to which Senator Colm Burke and others have referred.

We were supposed to be abolishing monopolies in this area since 1992. It is now 19 years later and we are still asking whether we can keep it going for another year and looking to find some other backdoor method of subsidising VHI on the unproven basis that the other insurers do not insure old people or sick people, even though we could not produce any witnesses.

We were convicted by the European court in regard to the failure of a member state to fulfil its obligations. Ireland must pay the costs in that case and we must also pay the costs of losing in the Supreme Court — I gather the damages will come up on 31 January next, meaning more costs to enrich the legal profession. As Senator Burke said, there was no dispute about community rating, lifetime cover and open enrolment. The dispute, in the Chief Justice's verdict, arose because the Department usurped the powers of the Oireachtas to implement a draconian regime which required the smaller companies to pay more than their profits across to VHI. It was founded upon an erroneous interpretation of the Act of 2004 and sought to usurp the function of the Oireachtas. The Chief Justice stated:

It is unconvincing to suggest that the Oireachtas would have left such a different meaning to be somehow detected inferentially from the use of the phrase in a subparagraph of a paragraph of a subsection of a section. In short if the Oireachtas intended a different meaning, with all the implications involved, to be given to community rating in that subparagraph it would have said so.

He continued:

For the Court to determine that community rating had the meaning argued for by the respondents [the Health Insurance Authority, the Minister for Health and Children and the Attorney General] and the notice party simply because such an interpretation is thought necessary from a policy point of view for the effective implementation of a risk equalisation scheme would be to usurp the function of the Oireachtas.

That is what the Chief Justice stated. The document also states, "The issue before this Court is not the intention of the State, or State bodies but the intention of the Oireachtas as the legislature." We should be pretty annoyed over what occurred and how it came to be. Why can we not have competition and the benefits that Senator Burke mentioned?

There is increasing evidence that the proposals are even misguided actuarially. Three or four studies I have to hand show that, in the last six months of life, one's health expenditure is considerable. This does not seem to arise in earlier stages. I could quote the figures to the House. The legislation is based on sand in this regard.

The court also notes — this may come up on 31 January — that there are constitutional and competition implications. One gets the results to which Senator Burke referred. I attended some of the hearings. The transcript indicates the officials from the Department of Health said they did not consider the competition implications of the legislation. That makes me feel that, in their words, they were seeking the protection of VHI. The claim they were looking after old people was always bogus.

What does one get when one protects a monopoly in this way? One gets the abuses referred to in every page of the Milliman report mentioned by the Minister. The report implies utilisation management yields savings regardless of risk profile. It refers to considerable sources of savings and to steps not being taken. It refers to VHI being unable to provide annual reports identifying the drivers of claim cost increases. It mentions a case, in one of the few tables that is not redacted, in respect of which VHI would have somebody in hospital for 10.6 days as opposed to 3.7 in what it calls a well managed system. Protecting this monopoly is increasing the cost of the health service and not benefiting old people, who were never refused cover by the other insurers.

Although half the content of the version of the Milliman report I received has been redacted, or blacked out, virtually every page points to rampant inefficiencies. When one protects a monopoly, the result is a health service with an extremely high cost. Competition was a dynamic but was driven out of the Irish market on legal grounds that were disputed by the Supreme Court and the European Court of Justice. This may cost the Exchequer large amounts of money when the damages are being decided. The position was not soundly based.

I am surprised that there is support for this legislation from the other political parties. I will be tabling amendments later. The legislation does not do what it says on the tin and, therefore, I will be opposing the Minister of State on this issue.

I welcome the Minister of State to the House. It is great to see her.

This is a technical Bill to extend for another year the regime that has been in place for the past three years. Health insurance is based on four principles: community rating; open enrolment; lifetime cover; and minimum benefit. The aim is to ensure private health insurance costs no more than it should for those who need it most. This is only proper. The Bill arises from legal confusion surrounding the mechanism by which risk equalisation was delivered. It is helpful and welcome that the Commission, in 2009, recognised the scheme as a public service. An extension period of four years was approved.

It is very important to bear in mind the social democratic nature of the scheme. While the four principles I outlined are unquestionably ideological in nature and the ideology is clearly social democratic in nature, Senator Barrett's views are not quite as neutral as he presents them to be. His views are tinted somewhat by neoliberalism, which posits the market as taking care of health care. I would like to debate this further with the Senator, not today but in the context of a general debate on health policy. Perhaps this would make for some interesting exchanges.

It is unfortunate that Senator MacSharry cannot stay with us. When it became apparent in 2009 that there was something wrong with the scheme, I wondered why the then Government did not place it on a permanent footing. It is strange that it did not even begin preparatory work in this regard to leave us with some foundation such that we would not have to start at the beginning again. The previous Government has left us with many things with which we are not happy.

The current Government is determined to proceed as outlined. Senator MacSharry is mixing up our proposal on universal health care a little with the Dutch model. The model proposed by the Government takes some elements from that but it is different. Our model will form an important element of our policy.We must bring in this legislation and ensure the continuity of the principles I have outlined. It is very important that we support the Bill.

I have some comments on the points made by Senator MacSharry. His colleague and spokesperson on health in the other House made some comments on the radio this morning suggesting his view is that private beds in public hospitals should be subsidised by the taxpayer. I am not sure if that is Fianna Fáil policy or just early morning ramblings by the Deputy in question. The views expressed were very much contrary to those expressed generally in Ireland about fairness and equity in the health system.

The Minister, at the meeting this morning of the Joint Committee on Health and Children, commented on media reports, seemingly propagated by the Opposition, that private health care costs will increase by approximately 50% due to changes made in the recent budget. The Minister sees no reason at all for increases of this nature to be necessary. He pointed to some cost-saving measures within the industry that would be greatly ameliorative.

Let me outline a case recently brought to my attention by a woman whose son went to the Mater Private Hospital for a procedure that required two overnight stays. He entered the hospital on Tuesday, had the procedure on Wednesday, stayed over on Wednesday night and was discharged on Thursday. VHI charged a bill of €16,000 for the two nights, and that was just for the accommodation. Clearly, huge savings can be made in this regard. These savings could offset most of the costs anticipated on foot of recent changes.

I have a lot more to say but want to wait until Committee Stage to do so.

I am glad to have an opportunity to speak on this Bill. As was stated, it is just a technical Bill extending for another 12 months the circumstances that have obtained since 2009. As every Senator has been saying, the Minister of State's contribution was very comprehensive. It certainly gives the background to where we are today, and the reasons therefor.

I support many of the comments made on health care and the need to introduce efficiencies and reduce costs. VHI has been mentioned by many speakers. Senator Burke mentioned the current circumstances in Cork where VHI is not extending cover in respect of a new hospital proposed to be opened by the Mater Hospital. This decision reduces competition. One provider in the Cork region provides about 88% of private health care in the region. In Dublin, no hospital provides more than 25% of the private care available. This suggests a lack of competition in Cork.

I question why a provider in the Cork area could refuse cover regarding a certain hospital. Surely if one buys one's own private health care, the money should follow the patient. A patient, when covered, should be accommodated by the health insurers.

I refer to a situation in my own area when a Dr. Pillay tried and failed to open a private hospital in Cork in the early 1990s and, therefore, people in the Cork and Kerry region do not have a choice and there is no competition in the market in the area. The Minister, Deputy Reilly, spoke recently about the fat that needs to be cut out of the system. In my experience, VHI does not seem to be proactive in its dealings with hospitals in order to reduce costs and much more could be done in this regard.

I listened with interest to the Minister's comments regarding private beds in public hospitals. The Minister of State, Deputy Shortall, has previous experience of this issue when she, like me, was a member of the Committee of Public Accounts. The 80%-20% rule applies by which only 20% of beds in a public hospital are available for private cover. As the situation stands, if this figures goes over 20%, the hospitals cannot look to the private health insurer for that cover.

The Minister has proposed changes in the budget. I hope there will not be a temptation on the part of the public hospitals to bring in more private patients. It might suit them to increase the ratio to 30% which would mean taking away public beds. It is a question of who will police this practice and it is open-ended as it stands. Private hospital care is not available in all regions. There is no private hospital in the Limerick region and the public hospitals consistently have more than 20% private beds. This is a concern. I am pleased the Minister has addressed the question of universal health care and its introduction is crucial. The money will always follow the patient and hospitals will find it in their interest to deal with patients who carry insurance. Universal health care is a progressive policy and it will take time to put it in place.

The Minister of State is directly responsible for the primary care system which plays a crucial role in reducing dependence on acute hospitals. The primary care system is being developed slowly across communities. I can quote three centres in my own area which have been developed and they have the support of the local GPs. They are providing a range of health care services for the community with the ultimate aim of reducing our dependence on acute hospitals. This Bill is a technical measure to extend the existing provisions. The ultimate aim is to provide efficient health care on an equal basis for all citizens.

I call Senator Marie Moloney.

I was called three times.

I have no problem with Senator Cullinane speaking ahead of me.

We have the time available.

I need only a minute as I have one brief comment to make. I thank the Minister of State——

Senator Cullinane can have 19 minutes.

No, Senator Bradford is offering.

I will not delay. I thank the Minister of State for such a comprehensive report because she has provided us with the answers to many of the questions we intended to ask. I have been a member of VHI for more than 35 years. I struggled at times to pay my health insurance when my husband was unemployed and when I was unemployed but I dug deep and I was able to pay the premium. VHI now tells me I am coming to an age when I will be a higher risk. When VHI had a monopoly on health insurance and all the young and healthy people were paying for health insurance, VHI was not jumping up and down and saying we were costing money. VHI was well able to take our money and put it in its pockets——

It is true. A member of my family went to have a minor procedure performed which involved the removal of a small particle from an eye. When the object was removed with a cotton bud, the patient was informed that this procedure was covered by VHI. We supplied the VHI number and received a statement from VHI which was three times the amount the patient would have been asked to pay if he had been paying it himself. This is not good enough. We reported this payment amount to VHI and it did nothing about it. A lady in Kerry told me she had written to VHI to inform the company that she was being charged for procedures that had never been carried out. She contacted VHI by telephone, yet the company did nothing about it and the bill was paid. If VHI is State-owned then we must take upon ourselves to instruct it to investigate legitimate complaints.

I presume the tax credits are deducted at source because otherwise they are of no benefit to an elderly person who does not pay tax. I ask the Minister of State to confirm this.

There must be something in the water this morning because I find myself in complete agreement with Senator Gilroy and disagreeing with Senator Barrett——

We will have to cancel the debate so.

This is a market system which shows health care as a commodity, not as a fundamental right. We are dealing with an unfair system as regards funding and access to health care. Senator Barrett made a point that there is no proof that people could not access private health insurance from some operators. The issue is not whether people are prevented from obtaining cover but rather that the cost of cover for some of those people is driving up the cost and making it impossible for them to access cover. This is what is being addressed in this Bill and the reason I support it.

I also wish to record my support for one of the measures in the budget to increase the cost of accommodating private patients in public hospitals. The full cost of private patients in public hospitals should be applied as well as ending the practice of consultants carrying out private practices in public hospitals and making a profit on the back of the public system. All these issues need to be addressed.

The health insurance market, given the importance and often precarious nature of the market, requires safeguards and a great deal of care. We cannot allow the elderly and the sick to be exposed to market forces. They need to be buttressed with protections and supports. In particular, we need to ensure that where some providers may choose to cherry-pick their customers by offering attractive plans for the young and healthy, there is an incentive for providers not to cherry-pick and to insure the elderly and the infirm at a reasonable and affordable price. The explanatory memorandum states that the purpose of the Bill is to provide a mechanism to support intergenerational solidarity in the health insurance market. There can be no question but that this is absolutely necessary, and it is something my party fully supports. Indeed, the explanatory memorandum states: "there are incentives for insurers to design products that are attractive only to healthier lives, undermining intergenerational solidarity and the common good protections", which accords with the point I just made that we cannot allow the market to dictate what is a fair price.

This is far from what I would consider the ideal way of running a health care system. I believe, as I said a few minutes ago, that health care is a right which should be available at the point of access and funded through progressive taxation. However, it would surely be a retrograde step not to balance the inequalities created by the sheer will of the market. We are left to enact legislation to try to regulate the distortions and inequalities brought about by the private health insurance market, or at least some in that market. This is, as I said earlier, primarily a market, not a system of funding health care. Therefore, in order to maximise profits, it tends to discriminate in favour of the healthy and against the old and the sick. The State has a moral obligation to intervene to redress this balance. However, this raises the question of why the Government insists that an insurance-based system is the way forward for health reform in this State. It would be far better if the Government were to move towards a model of universal health care funded by just and progressive taxation and not an insurance-based model.

The programme for Government states: "A system of Universal Health Insurance (UHI) will be introduced by 2016, with the legislative and organisational groundwork for the system complete within the Government's term of office." In the Dáil, my colleague Deputy Ó Caoláin tabled a question in which he asked the Minister the timeframe for the publication of the White Paper on reform of the health care system and the health insurance system, and the answer he got from the Minister was: "While universal health insurance is the ultimate destination of this Government's reform programme, there are a number of important stepping stones along the way and each of these will play a critical role in improving our health service in advance of the introduction of universal health insurance." He cited the special delivery unit, strengthening primary care and the money-follows-the-patient concept which he has spoken about on many occasions. He also stated that the Government had given approval for an implementation group for universal health insurance, which will have the responsibility of assisting the Department in preparing the White Paper. However, he then went on to say that the White Paper would be published within the Government's current term of office. Given the commitment in the programme for Government that this would happen early in the Government's first term, the question must be asked: when will we see these reforms?

The Minister, Deputy Reilly, the Minister of State, Deputy Lynch, and the Minister of State who is here in the House, Deputy Shortall, have strongly and rightly criticised a two-tier health system in the past, yet that is what is apparently being maintained for the future.

No, it is not.

The Bill arrives in that context and in the context of a declining health insurance market. VHI has said it expects up to 200,000 people to give up private health insurance by the end of 2012 as a result of rising unemployment. The proportion of the population with health insurance declined from 49% in 2007 to 47% in 2010. The numbers qualifying for and receiving medical cards have increased. Some 30% of the population have a medical card, while 23% have neither a medical card nor health insurance and must pay as they go through every part of the health care system. A total of 53% of the population depend entirely on the public health system, from which the other 47% also benefit — for example, through the use of private beds in public hospitals, which I spoke about earlier. Data from the OECD shows that the largest proportion of funding for health care in the State — 80% — comes from the public finances.

In light of these facts, how does our existing structure make sense? This Bill simply addresses one aspect of that structure, which I welcome — the need for what is called societal and intergenerational solidarity in the health insurance sector. It does this by continuing up to the end of 2012 the arrangement whereby the burden of the costs of health services are shared by insured persons through a cost subsidy and age-related tax credit funded by the collection of a levy on all insured lives. There is a need to protect our health system from a predatory approach by health insurers, which would see older people and those with illnesses being forced to pay higher health insurance premiums. This Bill seeks to achieve that for another year. However, it is a stop-gap measure, and I hope many of the changes the Government has promised will be implemented, although I do not accept all of them. I do not like the fact that the response to the health care situation is based on health insurance because I am opposed to health care being driven by market forces. I would much prefer if the Minister was to move towards universal health care, because health is a right and it should be provided at the point of access for all and funded through progressive and just taxation.

I support the Bill in what it does. There is a problem in the market at the moment whereby some health care providers are discriminating against older people and others in the market, and the Bill corrects this. That is why I support it.

Once again we are back on the subject of health insurance. This is a matter that is close to my heart politically because I was involved in the original debates in the other House at the time of the decision by the then Minister for Health, Deputy Michael Noonan, to allow competition into the health insurance business, which we all thought was a major step forward. In latter years I was one of those people who was critical of the concept of risk equalisation as it was then being proposed and was subsequently implemented. I recall that at the time my views were aggressively disputed by VHI, which in my view simply wanted to ensure it would remain king of the market. The risk equalisation debate was concluded and the legislation was introduced and then found to be inappropriate. Now, to use that awful phrase, we are where we are, and this is a necessary Bill to ensure that health insurance cover is available to the vast majority of our citizens.

I support the legislation; there is no alternative at the moment until we find a longer term solution. I want to talk about the longer term solution and about what is very much the elephant in the room, the cost of medical care in this country. It is an absolute disgrace.

The Minister is introducing a system of universal care which everybody supports, including the previous speaker. The phrase the Minister used and that we used, mantra-like, at election time was: "The money follows the patient." The money follows the doctors, the consultants and all the people who are literally making themselves millionaires out of the provision of health services. I resent that, and it needs to be aggressively tackled.

Arising from the Minister's budget proposals, the word came out that VHI charges would increase dramatically, as would the charges of other companies. We were told about the costs of hospital beds and about changes in the public-private patient ratio. When we hear about hospital beds costing €1,300 or €1,400 per night, we ask how we can pay for it and who foots the bill, but the question we should really be asking is this: how is it that a hospital bed, a doctor, a consultant or any medical intervention costs so much by international standards?We must declare that the day of doctors and medics and professionals being the new elite is over.

We have dealt with monopolies in other services, and sometimes, in our desire to solve problems, we can go too far. There was a time when there were not enough solicitors, barristers or accountants in this country. The word "professional" and the phrase "I am a professional" were allowed to be uttered only by a small, privileged minority. We have allowed the medical profession to remain a small, privileged minority, and until such time as we significantly increase the supply of medical expertise, including GPs, consultants and other specialists, we will continue to have appalling health bills, the new BUPAs and VHI will have to charge more and more, and this endless debate will go on. I wish it were simple but it is not. We must tackle the question of the cost of the health service. It is not justifiable that a GP can charge between €60 and €80 to sign a prescription for the local chemist who then charges €40 for an antibiotic.

During a debate on similar legislation in the past, I recounted how when in France some years ago I went to a local doctor at the onset of an ear infection who, with some reluctance, took €10 from me. When I went to the chemists with the prescription, the medicine cost me only €4. Why should this be the case in France and not in Ireland? Why should a GP here demand seven times as much as a French doctor? Why should medicines cost so much more? Maybe my argument is too simplistic and I am missing the point. If I am correct, however, this has been going on for a generation. We cannot allow the majority to be unable to pay for the services of a relatively privileged elite profession.

Most fair-minded people in the body politic were pleased with the general tone of the budget, notwithstanding the enormously difficult choices faced by the Government. As a result of the tax and social welfare measures, people are relatively no worse off than they were last week. That is a solid political achievement. If, with a stroke of a pen, VHI and other health insurance providers increase their charges in January, then all that economic good from the budget is wiped away. Middle Ireland — the working man and woman who have to pay for everything — will be penalised. Many will drop out of private health insurance cover or remove their children from polices. That is bad for both the health of the country and the economy in the long term.

Will the Minister of State, along with her senior Minister, begin an aggressive campaign to make the provision of medical care more affordable and reasonable? When the EU and the IMF came to town, we did not cheer them from the rafters. However, if the cost of health care comes under their deep and probing spotlight, I wish they would hang around until the cost of medical care is resolved. Until we sort out the charges for medicines, doctors and consultants, it will be increase after increase in the cost of private health insurance. Property they say is location, location, location. Medicine is now cost, cost, cost.

I agree with Senator Bradford on the cost of health care. Last week in the Seanad, I brought up the same issue. It is wrong a GP can charge €50 for stamping a medical card application form. It is wrong a GP can charge €50 to write a letter stating a medical cardholder has backache. It is wrong a GP should charge €30 to take a medical cardholder's blood. It is wrong a GP will take money off old dears who believe that by giving him €50 they will get a better service even though they are entitled to free medical cover.

GPs are milking the private health insurance fund. I know of a person who recently went into a private hospital to have a small procedure done in a day. Two days later, she had to go to her doctor to have the stitches removed, for which the doctor charged €50. Several days later, when the doctor learned she had private health insurance, he claimed a further €230 from the insurance company for a procedure he was willing to do for €50 only two days before. Many people have medical cards as well as private health insurance. Under no circumstances should a GP have a choice between a private health insurance claim and a medical card claim. In the case I just cited, the GP should remove the stitches for free instead of milking money out of private health insurance companies for which we all pay.

I thank the Minister for her comprehensive address on this legislation. Two years ago, on a point of principle, I dropped my health insurance because of how it has been abused by health insurers and others. I did not do it lightly as I am married with four children but it was based on two experiences I had with health insurance providers.

My wife required a minor procedure and was in and out of the hospital in 15 minutes. The bill came to €970 but owing to the fact that our insurance would only cover €880, we had to pay €90. I felt the whole procedure should have cost €90. My wife was charged €550 for the bed she was on for ten minutes. That is wrong and immoral.

When my wife went for her 16-week scan with our last baby, she was given an appointment for another scan two weeks later. Those were the worst two weeks I have experienced because I convinced myself something was wrong with our baby. When my wife returned for the scan, she was told to go to a doctor's private rooms. She refused and stated we had our first three children in the public service which were excellent and it would be the same with our fourth child. My wife was informed the visit to the rooms would cost her nothing as we had VHI cover. How many scans are pregnant women having when they are on private health insurance? To the best of my knowledge, consultants are rarely at the births too.

A couple I know both had their hips done, coincidentally, in different hospitals. The man was kept in hospital for five days after his operation while his wife was kept for 11 days. She is progressing better than he is. The difference in the two hospital bills was €50, however. How can that be?

I agree with Senator Bradford that the pricing structures in health need to be tackled. In any business, a bill is itemised. Health insurers must justify the costs they charge. If one goes to a GP to get some steel out of one's eye, it should cost €50. If, however, one is on health insurance, he will get €300 for it. That is a wrong and immoral abuse of the system. Until it is tackled, we will not have a fair and equitable health insurance system.

I thank those Senators who contributed to this interesting debate. I am encouraged by the Senators' contributions. We are all at one in identifying abuses in the systems, problems in the services and the need to reform them.

The provisions in the Bill are exclusively technical in nature providing for a one-year extension of the interim scheme of age-related tax credits and community rating levy for 2012. They include small modifications to the scheme to allow for a more precise level of support for community rating.

The broader issues in regard to risk equalisation will be dealt with in the coming year by the Minister for Health. The concept of risk equalisation will be more vital than ever in the context of a universal insurance health system. The programme for Government includes a commitment in this regard.

In addition, the Minister for Health is particularly concerned to ensure claims costs are kept to a minimum to mitigate any requirement to increase premiums. He has approved the commencement of a review of claims costs to address this critical market issue. It will commence presently.

The aim of reform in the health area is to deliver a single-tier health service which will ensure equal access to care, based on a person's need and not on their ability to pay. The programme for Government provides for this in a universal health insurance context. These major reforms will require detailed preparation and intensive work over time. The Government is realistic about the timescale involved and believes it cannot be done in a short time. It is also being ambitious in aiming to introduce full universal health insurance in the early stages of a second term in government, if the Government is lucky enough to be given that opportunity.

However, there are several important stepping stones along the way and each of these will play a critical role in improving the health service in advance of the introduction of universal health insurance. Given the complex nature of what is planned, the Government has approved the establishment of and terms of reference for an implementation group on universal health service. The details of the group are being finalised and it will commence work shortly. Its work will pave the way for the introduction of universal health insurance in the medium term.

Significant reform of the acute hospital system is planned. The special delivery unit was established in June 2011 to unblock access to acute services by improving the flow of patients through the system and to put in place a systematic approach as a priority to eliminate excessive waiting times in emergency departments. This has been identified as an absolute priority. The special delivery unit is establishing an infrastructure based on information collection and analysis, hospital by hospital, in order that we can know the situation in real time. New systems have had to be implemented to collect this important data. This will allow us to begin to embed performance management into the system to sustain shorter waiting times. Accurate data systems are integral to assisting in the introduction of such fundamental reform.

The National Treatment Purchase Fund is working to support hospitals in the delivery of a 12-month maximum waiting time for inpatient or day-case surgery by 31 December 2011. The Minister, Deputy James Reilly, has stated on several occasions that he is committed to meeting that objective and every effort is being made to ensure this happens by the end of this month. We expect to be able to move forward to reduce further that waiting time, year by year. A further critical aspect of reform of the acute hospital system is the implementation of a new, more efficient funding system for hospital care which will be a mechanism whereby money follows the patient. This will end the block grant payment to hospitals and the lack of transparency as to what it actually buys. For example, we will have a unit cost for, say, a hip replacement. This will enable a drive-down of costs and achieve better value for the taxpayer. It will include a purchaser and provider split, whereby hospitals will be established as independent, not-for-profit trusts. Various initiatives to facilitate achievement of the money follows the patient funding system are already under way.

The programme for Government provides for a significant strengthening of primary care services with the removal of cost as a barrier to access to general practitioner, GP, services. In line with this commitment, access to GP care without fees will be extended in 2012 to claimants of free drugs under the long-term illness scheme. This week's budget allocated €15 million to start this important and fundamental reform programme. Up to 56,000 people will benefit from this initiative.

Full universal health insurance is a medium-term project which is under way but the reforms promised on opening universal access to GP care are reforms we intend to deliver in this term of government. It is the Government's intention to move the bulk of chronic disease management away from hospitals to the local primary and community care setting. This will be the real game changer and will be responsible for introducing real reform in the health service.

The purpose of the reform provided for in the programme for Government is to have early intervention to encourage people to access care at an early stage and achieve better outcomes, earlier diagnosis and a much more user-friendly health service. People want to receive health services locally from their local health professionals. This also entails having a much more cost effective health service. This is what we intend to achieve in the term of the Government.

I thank Senators for their thought-provoking contributions. Senator MacSharry referred to a figure of €100 million owed by health insurance companies to hospitals. I am not sure how he arrived at this figure.

The outstanding moneys actually come to €162 million.

No, the Senator claimed €100 million was to be written off.

In yesterday's edition of The Irish Times, the Minister for Health said he hoped to get €50 million back from owed moneys. With €162 million owed, that means €112 million will be written off.

Given the enormous pressures on the public finances and, particularly, on the health service, it is a grave concern this money has not been collected. I was made aware of this in the Department six months ago. It is incomprehensible that this amount of money is owed to the health service which so badly needs it. Action has been slow in this area. I have been told it is a priority and that action will be taken. As far as I can see, however, no progress seems to have been made in six months. This is a management issue. I cannot understand how people charged with managing the health service, for which they are paid handsomely, are not capable of brining in the money owed to the service.

I also cannot understand why consultants, who are also exceptionally well paid and better off than their counterparts in any other country in Europe, are holding up this process by their failure to sign the necessary paperwork. That matter was brought into sharp relief this week in the context of the threats to the health budget and the cutbacks that must be made in respect of a range of areas across all Departments. I will be writing to Mr. Cathal Magee in the coming days because it is entirely unacceptable that this matter cannot be managed in a satisfactory way. The chief executive of the HSE, the Secretary General of the Department of Health and the CEOs of the various hospitals concerned must pull out all the stops in respect of this issue. The least we can expect is that all of these senior personnel will ensure that the money in question will — one way or the other — be brought in before the end of the year.

If our extremely well paid consultants continue to drag their heels in this regard, we will be obliged to move quickly to ensure that penalties are applied in respect of them. Irrespective of what one is paid, there must be some consequences if one fails to carry out one's job. People should do their jobs if they are being paid to do them. If someone fails to do his or her job, then sanctions should be imposed. I am undertaking to pursue this matter because the position is intolerable and there is no excuse for it being allowed to drag on interminably. We need to collect the money in question as soon as possible.

The Government is not proposing to introduce the Dutch model here. We are proposing a hybrid model for universal health insurance that will draw from the best models throughout Europe. The details in that regard will be worked out by the implementation group. As stated earlier, the implementation group on universal health insurance is to be established very shortly. It will be charged with designing a system which will apply to existing needs and which will address the particular difficulties that have obtained in the health system for many years. It is important to clarify that said system will be a hybrid and that it will meet Irish needs. I hope the implementation group will produce the White Paper, sooner rather than later, because there is a need to carry out the relevant groundwork in respect of this matter.

Senator Bradford voiced many people's feelings on this subject. I welcome his comments and would concur with many of them. In the context of trying to introduce fundamental reforms to the health system, the Government is attempting to move towards a lower cost model of health care. There are far too many vested interests in the health service. Reference was made to protected professionals and action must be taken in respect of such individuals. We should not have tolerated the existing system for so long. There are those who are extremely well compensated — from both the public and the private purse — for the work they do and in the course of that work they often operate in an extremely uncompetitive way by allowing closed-shop situations, restrictions on entry to professions and training, etc., to continue to hold sway. That type of carry on is nonsense and it must be brought to an end. We need to move towards a modern democracy in which there is accountability. In that context, we must end the type of anti-competitive practices that have obtained within the professions in particular.

I welcome the requirement placed on us by the troika to open up access to the GMS. It should not have taken an intervention from the troika in order to encourage us to do this. The process of opening up access to the GMS is under way. For many political and historical reasons, closed shops have been in operation. I am glad, however, that progress is at least being made in this regard. The Committee Stage debate on the legislation to open up access to the GMS began this morning. I hope the Dáil will conclude its deliberations on that Bill in a short timeframe and that it will then come before this House before being passed into law as quickly as possible. I know of several very well qualified GPs in whose training we invested a great deal. It is inexcusable that these individuals have not been able to establish practices under the GMS. A number of them are waiting patiently for the legislation to be passed. I hope it will be enacted as quickly as possible in order that the highly qualified people to whom I refer might set up practices and bring their skills into the health service. Their entry to the health service will increase competition and give patients a much greater choice in the context of the type of service they can access.

Overall, there are difficulties with regard to the high cost base within the health service. These difficulties apply in the context of the lack of competition in the primary care sector. They also apply with regard to the lack of competition among and the general lack of numbers of consultants. The latter have managed to carve out a very special role for themselves within the health service. That is an issue which must be addressed.

There are also difficulties regarding the high cost of medicines. Many Senators referred to this matter and I hope we will make real progress on it in the new year. We will be introducing legislation which will allow for reference pricing and generic substitution. I look forward to the support of both Houses in the context of passing that legislation as quickly as possible in order that significant savings might be achieved for the Exchequer and for individual patients. Everyone is aware of the huge differential that exists in the price of medicines here and that which applies in Spain, Portugal or other countries people visit on holiday.

In the context of the model of care, it is the Government's intention to move as much activity as possible out of the acute hospital setting and into community and primary care. This will allow us to achieve a much lower cost model of health care provision. What we are doing in this regard makes better sense from a health point of view because there will be better outcomes. It also makes sense from a cost perspective.

Various points were made in respect of VHI. I am not sure to whom Senator Barrett was referring when he used the phrases "We were trying to achieve this", "We claimed this", etc. I do not know whether he was referring to the industry or to a group of academics. I take it that he is not opposed to the principle of the common good in the context of health insurance and that he subscribes to community rating, open enrolment, lifetime cover and minimum benefits. There is strong support for these throughout the country. A great deal of people's concern in respect of health insurance relates to the lack of regulation. They are also concerned about the lack of transparency regarding the way in which the various insurance companies operate and the fact that side deals can be done. If, for example, one is prepared to pay cash, one will be quoted a particular price but if one is paying through one's insurance, the price is much higher. There is a need for much greater transparency in respect of the base for the kind of prices insurance companies are paying and on how they reach various agreements with public and private hospitals and, in particular, consultants. We must move towards a much greater level of regulation in this area because I do not believe that consumers are being well served.

Senator Clune referred to public beds being used by private patients and the fact that the matter was examined in some detail by the Comptroller and Auditor General before being discussed by the Committee of Public Accounts. There is a considerable loss of income to the Exchequer as a result of the failure to charge the economic rate for public beds used by private patients. That matter must be addressed. There is general agreement that where money is owed to hospitals it should be paid. I am concerned that what we are discussing in this regard could provide hospitals with a perverse incentive. When this idea was first mooted, I raised that concern. I am aware that work is being done within the Department in the context of putting in place safeguards to prevent that which we are discussing from happening. Given that hospitals are under such pressure in the context of their budgets, I am concerned that there might be an incentive for them to take in more private patients at the expense of their public counterparts. We must move quickly to ensure that there are safeguards in place and I will be pursuing that within the Department of Health.

Senator Moloney raised a question about older people who are not in the tax net and whether they get the benefit of the tax relief, and the answer is, "They do". That is deducted at source.

Senator Cullinane raised the question of the slow progress of UHI. I have responded to that question. It is a very big undertaking and we are doing it in the shortest possible timeframe.

I would also make the point to Senator Barrett that the Mr. Justice McKechnie High Court judgment in the Bupa case stated:

Therefore the creation of a risk equalisation scheme, pursuant to s. 12, is in my view a pressing and substantial need in a free and democratic society.

It is important to point out that unlike the Supreme Court, which did not need to go on and deal with the substantive issues, the High Court judge and the EU court fully endorsed risk equalisation. This High Court judgment is persuasive until any further Supreme Court judgment rules otherwise. It is important to bear that in mind. There was no question of being opposed to the principle of risk equalisation.

Senator Colm Burke raised a question about the Cork Medical Centre. VHI has not approved the Mater Private Hospital in Cork and has also refused a proposal from the Bons Secours group for an increase in the size of its existing facility. It is important to point out that the Minister has no role in directing health insurers to enter into agreements with service providers. The Minister has engaged with VHI on this issue. Even though he has no specific role, he is concerned about it.

They did give cover for 50 beds in Galway for the Bons Secours Hospital.

The Minister is trying to progress this issue with them through persuasion. VHI has rejected at least eight applications for additional facilities across the country on the grounds that there was already an adequate supply of services in their respective areas.

I picked up on most of the issues raised. I thank everybody who contributed. This important legislation deals with a specific issue and should be considered in the context of the overall reform agenda to which the Government is fully committed. I am aware the Senators opposite are also committed to introducing these reforms and I very much welcome that support.

Considerable work is under way and I hope that all of the Members of this House will start to see the benefits of the work that is under way from next year on, when we start the roll-out of universal GP care, and, I hope, closely allied to that, the roll-out of the chronic disease management programmes. For example, I am keen to see the commencement of the diabetes programme next year. It will really bring it home to people that the way we deliver services does not make sense and how we can do it in a way much more responsive to people's needs which achieves far better health results and which is cost effective. I hope all of those benefits will start to materialise in the middle part of next year. I look forward to the support of Members in that regard.

The Government is fully satisfied of the requirement to provide for a risk equalisation mechanism along the proposed lines. The main objective is to ensure the continuation of an interim scheme next year. The scheme already made a significant contribution to community rating since 2009, and has succeeded in transferring funds from low-risk to high-risk groups, which is, essentially, what this is about.

Question put and agreed to.