Healthy markets, sick system

BY ROBBIE SMYTH

A government u-turn on the principle of equality, new privatisation proposals for the Irish health services sector and higher health insurance charges for customers. Move over Michael McDowell, Health Minister Mary Harney is centrestage this week when it comes to propagating the Progressive Democrat philosophy of encouraging inequality, penalising the poor and less well off while pampering big business, writes ROBBIE SMYTH.

ON three key issues; risk equalisation between health insurers, the future status of the VHI and on healthcare costs, Harney has been pushing a privatisation agenda that is grounded not in the principle of best care for patients but in making the healthcare market as profitable as possible for new private sector entrants.

Nobody plans to be sick, nobody wants to be ill, hospitalised or operated on, but it happens and in Ireland, like in many other states, businesses are profiting from illness, by the sale of medicines and the charges for treatment procedures, whether it is a visit to a doctor, a hip replacement operation or even a bit of liposuction to get rid of that overhanging stomach.

However, over the last month Mary Harney has caved in on an important principle of how the Irish healthcare market operates, allowing a significant u-turn in government policy after intense lobbying by BUPA and other private healthcare companies. The Harney u-turn is, she says, "for the good of the market".

We need, according to Harney, to have a "vibrant health insurance market". For her, this means private companies building and running more and more hospitals in Ireland. It also will mean significantly higher costs for customers, as the private companies entering the healthcare market have made it clear that profits come before everything, including patient care.

So what did Harney do? The 26-County health insurance market is based on two important principles — community rating and risk equalisation.

Community rating means that the level of risk that a consumer poses to an insurer does not affect the premium paid. Everyone is charged the same premium for a particular plan, irrespective of age, gender and the current or likely future state of their health.

Risk equalisation tries to neutralise differences in insurers' costs. The VHI customer base is considerably older than BUPA's. This means that the VHI is disadvantaged in the market compared to BUP and under the risk equalisation scheme BUPA should defray the costs of this variation in customer make-up. If over time BUPA's patient profile changes it could end up being in receipt of money from other health insurers.

BUPA have strongly resisted paying any risk equalisation charges even though they knew this was one of the underlying principles of the Irish healthcare market when they entered it.

At the beginning of June, Harney wrote to all the Irish insurers telling them she had received a recommendation from the Health Insurance Authority, which regulates the Irish health insurance market, supporting the triggering of payments from the private health insurers to the VHI. In total, the costs incurred by the VHI for the last six months of 2004 were €16 million.

The private health insurers had 21 days to respond. This week, after heavy lobbying from the private sector, Harney changed her mind and decided to ignore the regulator's recommendations.

The VHI will have to pay the costs of their older customer profile from existing reserves, which now stand at €300 million. It seems that she wants to run down the VHI reserves before triggering the risk equalisation scheme.

Harney also announced her intention to change the VHI's status from statutory government body to public sector commercial company. She will bring forward legislation in September.

Earlier in the month, she had rejected proposals for turning the VHI into a mutual company owned by its members. Designating the VHI as a commercial company leaves it just ready for privatisation; making it a mutual would mean that the actual 1.5 million VHI subscribers would decide the future of the company. Harney is, it seems, opposed to this type of progressive democracy!

What the minister is not opposed to is the probability that the VHI will increase charges to customers to defray some of the costs of not getting equalisation payments, which means more customers will migrate to BUPA, which will probably mean even greater inequalities in customer profile between the two companies.

But isn't that what a healthy vibrant market really is, one with low costs for suppliers and high charges for buyers, leaving a lot of profitability in between?

The Irish Health Insurance Market

facts and figures

Subscribers

VHI 1,550,000

BUPA 400,000

Gardaí, Prison

Officers, ESB 80,000

Total insurance

income, end 2003 €978.2m

50% - percentage of the Irish population covered by health insurance

12% - percentage of British population covered by health insurance, where BUPA are based

March 1996 -

o Risk Equalisation signed into Irish law

October 1996 -

o BUPA enters the Irish health insurance market, BUPA had seen the scheme in draft form in 1994 and 1995

1998 -

o Risk equalisation scheme revoked to help competition in the health insurance market.

2001 -

o Health Insurance Amendment Bill enacted with provisions for risk equalisation

2003 -

o BUPA complain to EU that risk equalisation is an illegal state aid, the EU Commission decided not to object to the scheme

2005 -

o Harney u-turns on risk equalisation and starts process of privatising the VHI