InsuranceThe Secretary General of the Department of Health, Michael Scanlan, has said that he believes that the take-up of private health insurance was influenced more by disposable income in the economy than by the price of subscriptions.
Mr Scanlan's comments were made in private correspondence to the Department of Finance on the Minister for Health, Mary Harney's, plans to develop 1,000 additional private beds on the grounds of public hospitals.
The Department of Finance has raised concerns about the impact of the plans for providers and subscribers in the private health insurance sector.
The country's largest health insurer, VHI, has also expressed concern that the move to transfer 1,000 fee-paying beds out of public hospitals into new private facilities on the grounds of public hospitals will drive up the cost of subscriptions.
VHI members, who have seen prices rise by well over 100 per cent in recent years, will be facing a further 12 per cent hike in the cost of subscriptions from next month.
Mr Scanlan, in his letter to David Doyle, Second Secretary General in the Department of Finance, acknowledged that the new private institutions to be established would charge patients the full economic cost of treatment in the beds decanted from the public system.
At present private beds in public hospitals are effectively subsidised by the taxpayer, meaning patients do not pay the full economic cost.
However Mr Scanlan said that it was Government policy to move towards eliminating this subsidy over time and to charge private patients in public hospitals the full economic cost of their care.
The Department of Health Secretary General also said that the proposals "could also involve an increase in overall private bed capacity on the site, and given the nature of the health market, this could be expected to increase demand, volume and overall costs within the private health insurance segment of the market".
However he said that the existing tax policy already supported an increase in private bed capacity.
"Ultimately, the impact of the proposal on the private health insurance market will depend upon the scale and pace of actual proposals received and the price elasticity of demand for private health insurance.
"It will, in my view, also depend very much upon developments in the economy and incomes over the period involved.
"The indications are that the purchase of health insurance is more elastic in relation to disposable income than in relation to price. The impact also needs to be seen in the context of total private health insurance premium income of €1 billion," Mr Scanlan wrote.
He said that he agreed with the Department of Finance that there were a number of policy issues to be addressed about the proposed transfer of the 1,000 beds to the new private hospitals.
However, he argued that it would not be necessary or appropriate to ensure that all these policy decisions were "operationalised" prior to issuing policy guidance of the development of the new beds.
"On the contrary there are strong arguments for adopting a parallel approach ie issuing the guidance and proceeding to give effect of the policy decisions because the emergence of actual proposals could act as a useful lever to secure, for example, the required changes in consultants contracts," he said.
Mr Scanlan said that existing public hospital consultants would, naturally, want to have access to the decanted beds and that public hospitals would, accordingly, need to source additional consultants to manage the resultant additional public bed capacity.
"The key issue from our perspective, however, is the need to achieve consultant-provided team-based working arrangements. Accordingly, we intend making it clear in the policy guidance that the Health Service Executive should only accept proposals which facilitate the introduction of such arrangements in the public hospitals ie we intend to use the initiative to leverage the required improvements in working arrangements", Mr Scanlan said.
