Dáil Éireann Debate, Tuesday - 27 May 2014
6. Deputy Billy Kelleher asked the Minister for Finance the consultations he and his Department have undertaken with the Department of Health with regard to the cap for tax relief on private health insurance introduced in the last budget; and if he will make a statement on the matter. [22577/14]
Amharc ar fhreagraLast year in his Budget Statement the Minister announced a cap on the tax relief for private health insurance. At that time he said that only gold-plated private health insurance policyholders would suffer as a result of the €1,000 tax relief cap. Of course, that has not transpired. The vast majority of families who are struggling to pay for private health insurance find themselves facing a huge increase in the cost of that insurance. What consultation did the Minister's Department have with the Department of Health in view of the fact that this policy flies in the face of the Government's intention to move to universal health insurance, whereby everybody will be compelled to have private health insurance?
Decisions regarding tax matters are primarily a matter for my Department and the Office of the Revenue Commissioners. However, the budget was agreed by the Government before being announcement on budget day. From 16 October 2013, tax relief for medical insurance premiums has been restricted to the first €1,000 per adult and the first €500 per child insured. Any portion of premium paid in excess of these ceilings no longer qualifies for tax relief. Previously, income tax relief for medical insurance premiums was provided at source on the entire premium amount at the standard rate of income tax, regardless of cost. This meant the State was paying 20% of the cost of all private medical insurance premiums. The cost of income tax relief in respect of medical insurance, which has increased significantly in recent years, was estimated at €404 million in 2011, €448 million in 2012 and €500 million in 2013. Despite the increasing cost of the relief, the number of those insured is estimated to have decreased by approximately 170,000 over the same period. At the same time, the level of medical cover has decreased on some policies. Against this background, the increase in costs was unsustainable. If the relief had remained unchanged while the trends continued, the cost would have increased to approximately €1 billion per annum by 2020.
Notwithstanding the recent reform, the tax system is still supporting those who can afford private medical insurance to the tune of approximately €400 million per annum. In effect, some taxpayers who could never afford private health insurance or who have had to give up their policies due to personal circumstances are continuing to provide financial support via the tax system to those individuals who can afford such insurance. In its 2009 report, the Commission on Taxation recommended the retention of medical insurance relief but suggested it should be limited. The introduction of an upper ceiling on the amount of medical insurance premiums that will qualify for tax relief achieves this recommendation. The new ceilings ensure continuing support via the tax system for those who purchase medical insurance policies, while reducing Exchequer exposure to more expensive policies.
The difficulty we have is that the Minister got it spectacularly wrong when he announced that his intention was to introduce a cap on private health insurance that would only affect gold-plated policies. With all due respect to the Departments of Health and Finance, the definition of "gold-plated" leaves a great deal to be desired. The vast majority of ordinary families who struggle daily to purchase private health insurance are finding that the cap on the tax relief is affecting their ability to continue to fund their premiums.
I want to know what discussions the Departments had. Was there an examination of the broader health policy in view of the fact that families will be forced from 2019 onwards to take out compulsory health insurance? The idea should have been to attract more people in to sustain the private health insurance market during the move to universal health insurance. The opposite has been the case with the decision to cap tax relief on ordinary families.
The Deputy should look at the text of my budget speech in which I used the phrase "gold-plated". It was not as the Deputy is describing it. The tax relief that was provided was a relief at the standard rate of tax of 20%. The cap is at €1,000 per adult. Somebody who pays up to €1,000 per adult continues to get the 20% relief. If it goes over €1,000, the tax break is lost on the balance above that. They will still get the relief on the €1,000. Where somebody has an adult policy of €1,200, 20% of €200, would be €40. The big tax take is from those who have very expensive schemes. That is what I am talking about.
I am acting in line with the report of the Commission on Taxation. Given that 44% of the community has private health insurance, the Deputy's proposition is to the effect that they should be subsidised without any limit by the other 56%.
That is what the relief scheme is about. From where does the Deputy thinks the money comes? It comes from other taxpayers. If he is talking about equity, he must look at this aspect. It was unaffordable and will not continue. I will not continue with having 56% of the people who cannot afford private health insurance subsidising those who can. As that is what it is about, we limited the figure, which was reasonable and fair.
The Minister has forgotten that the people who pay private health insurance are subsidising the public health system. It is very much a merry-go-round because many families are making extraordinary efforts to maintain private health insurance and removing the responsibility from the State to provide health care for them. In effect, they are subsidising the public health system by taking out private health insurance. Coupled with this, the Government has decided to charge full cost for private patients in public beds. There is cross-subsidisation. We do not want the State to subsidise gold-plated health insurance policies, but the definition of gold-plated means that ordinary health policies without bells and whistles are being directly affected. The cost increases are exerting major pressure on families, more of whom are dropping out of the private health insurance market. This is undermining the market. I am referring not to the policies with bells and whistles but to ordinary health insurance policies.
There is no impact on adults with health insurance policies costing under €1,000 gross. There is an impact above that figure. It does not have much of an impact on people with modest health insurance policies but impacts a little on people at the top. I do not disagree with the Deputy that people with health insurance and those on middle incomes are finding it hard to live. He should direct his attention towards the massive increases in costs by the health insurance companies. The cost has increased by 86% in four years. If the Deputy thinks I will automatically link with them and automatically subsidise them as they increase the cost further, that is not the case. We are capping the figure and it has been capped. We will not start to cap it at a lower rate in the next budget. I defend the policy decision taken. It was a very good one because we could not continue to ask the 56% of people who did not have private health insurance to subsidise through their taxes those who did.
Deputy Denis Naughten is not present for Question No. 7.
