Adelaide Hospital News
Social Health Insurance: Options for Ireland
In May 2005 The Adelaide Hospital Society published JUST CARING Equity & Access in Healthcare A Prescription for Change. In that Adelaide Hospital Society Policy Paper, a range of recommendations were made to address the continuing crisis in Irish healthcare particularly the gross inequities and unequal access experienced by citizens in our health system.
The key policy orientation underpinning these recommendations is that of SOCIAL SOLIDARITY. The fundamental concept for public policy aimed at addressing inequity and unfair access must be a public consensus about the degree of social solidarity required in financing health services; we believe this ought to mean social and political acceptance of the value that all citizens must receive equal care and treatment upon the basis of their healthcare needs rather than their financial means.
In order to make explicit the detailed financial implications of social solidarity, the Adelaide Hospital Society commissioned this study SOCIAL HEALTH INSURANCE: OPTIONS FOR IRELAND to explore the relevance and applicability of social health insurance in the Irish context given the prevalence of its application in other European Union countries. We believe that this is a ground-breaking study which for the first time provides reliable estimates of the cost of equity in Irish healthcare and sets out options for all citizens to consider. We are most grateful to Professor Charles Normand, Dr. Stephen Thomas, and Ms. Samantha Smith, Health Policy and Management, Trinity College, Dublin, for preparing this land-mark study.
The Adelaide Hospital Society is pleased to publish this study as prepared independently by the authors as a contribution to advancing the healthcare of all Irish people. We will separately make a policy contribution from the Society to the options set out in this study. We look forward to other responses from political parties and other interested organisations when they have studied SOCIAL HEALTH INSURANCE: OPTIONS FOR IRELAND. There can hardly be a more important issue than that of seeking to ensure fair and equal access and treatment based upon medical need for all our people as soon as possible.
Professor Ian Graham
Professor Tom O'Dowd
Chair, Health Policy Committee
Dr David Moore
Dr Fergus O'Ferrall
There are problems that can be largely solved by universal social health insurance (SHI), problems where SHI can provide a facilitating environment, and problems where SHI is unlikely to make much difference. To understand the potential of SHI to improve the performance of the Irish health system we need to be clear about the current problems and how these would be alleviated by changes to the main system of financing health services. The potential benefits of SHI are:
increased resources by increasing transparency and thus the acceptability to the population of increased payments;
improved performance of the system - reforms in the payment systems and related incentives can result in better access and efficiency;
greater stability in financing - since decisions are removed from the general government budget process;
Nevertheless, SHI also brings with it risks, including potentially higher transaction costs (due to the parallel structures of taxation and social insurance), inequities (resulting from contribution systems that may be less progressive than taxation) and harmful macroeconomic effects if the burden of contributions falls too heavily on the employed. Consequently, introducing SHI only makes sense if the problems in the system include insufficient funding, poor performance, low public acceptability of the funding system and inappropriate incentives to providers.
The Case for Change
The Irish healthcare system is unusual in that there is no subsidy for access to GP services for the majority of the population while a high proportion of the population has supplementary private medical insurance, which is subsidised. Further, a lack of transparency in the health financing system in Ireland has perpetuated inequities and inefficiencies.
Current financial incentives and flows of subsidisation provoke uneven access to care for the medical card holders, the privately insured, and the non-covered groups in the population. Those on very low incomes are winners, but those on fairly low incomes face full or near full cost charges for primary care. Those with private medical insurance are subsidised by tax relief on premia and less than full cost charges for private care in public hospitals. The system of 'community rating' in the private medical insurance has inter alia the perverse effect of transferring funds from any young low income members to those who are on average richer, thereby being a serious disincentive to join for young, generally healthy people with low incomes.
Potential models of SHI
SHI has the potential to improve significantly both the transparency of the current health system and its performance in terms of equity and efficiency. In this report, four alternative designs are developed to move Ireland toward these objectives. All are to be financed solely through the contributions of members, with government providing start-up investment. The four models are:
Levelling up access and quality of all services (the "Rolls Royce" option) - This gives medical cards to all the population and effectively extends the benefits of private supplementary hospital insurance to all (including private/semi-private hospital beds and access to consultants);
The Priority PHC model - This extends medical card coverage to all the population while removing some of the barriers to care for hospital services faced by the uncovered population;
The Priority Hospital model - This focuses on extending hospital insurance cover across the population and lowering GP access charges to those without medical cards; and
Making only small improvements in access (the "Mini" model) - This reduces the financial barriers to access at hospitals for the uninsured and substantially lowers the GP attendance fees for the population without medical cards.
These models can also be seen as stages in a developmental process.
The additional costs for implementing the SHI options range from €2.1 billion for the Rolls Royce option to €380 million for the Mini, in 2004 prices. Such costs can be reduced through efficiency gains associated with the current move toward case-based payments in hospitals.
Principles and Burden of Financing
Several principles undergird the proposed financing of these SHI options. First, the financing arrangements must not harm those on relatively low incomes. Second, there is no upper limit on contributions by the rich. Third, members pay all costs associated with the scheme, to help boost transparency and preserve simplicity. This means that a substantial portion of income that currently goes to the general taxation system would instead be paid into an SHI fund. Members would pay quite high premia into the SHI fund while also getting a tax rebate and possibly also not purchasing private insurance. The additional payments for the options would range from 6.0% of taxable income for the Rolls Royce option to only 2.5% for the priority PHC option and 1.1% for the Mini. With efficiency gains, these rates would reduce so that the Mini option pays for itself and the priority PHC option costs only an additional 1.3% of taxable income.
Implementation and Context
Nevertheless, any preferred design of SHI option can only be pursued with reference to a broader context. In planning SHI implementation, it is vital that due care is taken to understand and work with appropriate stakeholders, create a facilitating legal and administrative environment, remove supply-side bottlenecks in the public hospital sector and ensure that the overall tax and contribution burden is structured so as to impinge least on economic performance.
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