If Mary Harney's plan for 1,000 additional private beds is to succeed, the role of the VHI will prove crucial, writes James Sheehan.
A great deal has been written recently about private health insurance and risk equalization, and as subscribers we are poised for a significant increase in Voluntary Health Insurance (VHI) premiums.
It is opportune to examine the role of the major health insurer - the VHI, a semi-State body, and to analyse its behaviour over the past few decades.
The chief executive of the VHI appeared on television recently, almost in tears, when risk equalization was deferred. Has he a cause for grievance?
As an uninterrupted subscriber for the past 48 years to the VHI - and, thank God, never having made a personal claim in that period - one assumes that like any insurance scheme, the insurer has invested my premiums over the years so that when I inevitably claim, there are significant reserves. Now aged 66, the risk of a claim from me is increased eightfold compared to when I was under 65.
Sadly, the reserves have been neglected for years and it is only in the past 10 years that any effort has been made to provide any.
By and large each year, subscription income met claims. Subscription rates were set by the minister for health and were kept to a minimum to ensure popularity with the electorate.
Exactly the same happened with the PMPA and its car insurance. With time, the inevitable happened, only with much greater certainty in the health insurance business.
The VHI keeps reiterating that the age profile of its subscribers is higher than that of its competitors, since people like myself have inevitably aged after subscribing to it for 48 years, and its claims rate is thus now greater. It now wants its competitors to stoke up their reserves.
Community rating sounds fair and equitable in principle, but when analysed, it is like suggesting that those who take out a pension fund in their 60s, a few years from retirement, pay the same subscription rate as those who have contributed for a pension since they began work - and are given the same pension! Community rating will only work if all subscribers join at the same age.
The Government in its White Paper in 1999 set out the parameters for health insurers with the introduction of competition in the market.
Amongst many recommendations it suggested a late-entry premium loading for those taking out private insurance over the age of 35. This has never been introduced. Is it any wonder that the VHI now feels under pressure? It would not have required an actuarial genius to work out the maths.
A much more serious issue is the role played by the VHI in preventing the development of private hospital facilities and, in those situations where it has reached agreement with a new hospital facility, refusing to recognise advances in medical technology that are now central to providing quality patient care.
The single biggest contributor to the poor state of our independent health service can be attributed to the dominant role of the VHI. It has effectively blocked all hospital development from 1986 until the opening of the Galway Clinic in 2004. The abuse of its role is poorly understood by most, and it is important to identify its position at this time, particularly with so much public disquiet about our health services.
With such an increase in subscribers, one would expect the number of private hospital beds to increase significantly to deal with the increased demand.
However, the reverse has occurred. A number of private facilities have closed - the Bon Secours hospital in Tuam, St Joseph's hospital in Raheny, and St Gabriel's hospital in Cabinteely.
Why have new facilities not been provided? It may come as a surprise to learn that while the VHI has no brief to control private hospital development, it does so indirectly by not sanctioning any new facility, or by offering agreements with a proposed independent institution that simply make the survival and viability of that institution extremely difficult.
When the Blackrock Clinic was developed in the early 80s, after three years of negotiations, the VHI admitted the need for modern technology so that its subscribers could avail of cardiac surgery, implant and transplant surgery, as well as other modalities not available outside of the public hospitals.
When sanction was finally granted for the development of the clinic, funding was then achieved from financial institutions. The only question that interested bankers was, Has the VHI sanctioned payment for its subscribers? One can imagine how unenthusiastic a group bankers could be if the response were negative.
The VHI board decided that no further facilities were required for subscribers despite virtually a doubling in subscriber numbers and the introduction and availability of increasingly complex medical and surgical technologies.
This strategy was backed by a report from PriceWaterhouseCooper which was not made available, apart from an incomprehensible summary which stated that no further beds were required for those with private insurance and that their needs were fully met.
The PWC summary loses all credibility for the authors when it suggests that no private beds, for example, were required in Limerick - where no private beds exist other than in the public hospital which has an occupancy rate of private patients of 50 per cent - an abuse of the public beds.
By adopting the strategy of undersupply of beds, most subscribers have to revert to the public system for treatment and occupy public beds, whether for free, or, if designated private, in a heavily subsidised bed, which the Tánaiste recently said is billed to the insurers at 60 per cent of the true rate.
This has had the much more serious effect of "blocking" beds in public hospitals by forcing patients with health insurance to seek treatment in the public hospital service, thus compounding the difficulties faced by patients and healthcare workers in Accident and Emergency departments all around the State.
The VHI, when approached six years ago about the provision of additional private facilities in the west of Ireland - which was the worst medically serviced area in the State - quoted the PWC report that there was no need for additional facilities.
After four years of negotiation and repeated refusals, a decision was made to challenge their obstruction, and with the help of an outstanding bank which funded the project, the Galway Clinic was constructed with no insurance sanction.
Six weeks before the clinic opened, the VHI approved the facility for its members. Its attitude was that it now only approves hospitals which it can inspect on completion. Some comfort to the banker and investors when they have spent €100 million!
This subtle form of indirect control has blocked the provision of greatly needed facilities for sick patients. The VHI now assumes the role of regulator as well as insurer. If ever there was a need to separate these roles, this is it.
It is important that private/independent hospital development is controlled and that indiscriminate use of tax incentives by developers is avoided. Licensing for private hospitals should be under very tight criteria to ensure the quality of medical and paramedical staff, and that the highest standards of care are upheld.
The role of the insurer is to provide cover for expenses incurred with illness. Frequently with today's cover the insurer passes the insurance risk to the hospital and pays a fixed amount for certain procedures or illnesses. In numerous cases the amount paid is significantly less than the cost of providing the care.
In some instances the amount paid is only 10 per cent of the true cost, and hospitals are forced to undertake loss-making procedures if they wish to remain a VHI-recognised hospital.
Bearing in mind that 70 per cent of hospital income comes from the VHI, the hospital has little choice in the matter. Below-cost selling is prohibited by law in supermarkets. Should hospitals be any different?
Certain technologies are withheld from subscribers and the VHI has decided that, for instance, MRI scanners are now restricted, and no new scanners have been sanctioned for use by subscribers since 2003.
We currently have 24 MRI scanners in the State - the same number as the Mayo Clinic has in its one hospital in Rochester, Minnesota.
Seventy per cent of PET scans performed in the Blackrock Clinic are on public patients, since a large number of VHI patients with cancer are denied such scans as they do not meet the VHI criteria for the procedure. Again, a subtle form of rationing.
Who sets the VHI criteria, and is the formula in the best interests of patient care and wellbeing?
The role of the VHI will prove crucial in whether Mary Harney's suggestion of 1,000 additional private beds succeeds. The VHI will quote its oft-repeated mantra that no new beds are required, and PWC will back its cause.
The inevitable results of additional private beds are increased premiums, and the VHI can be lauded in keeping control of premiums over the years. This strategy has, however, resulted in its present financial difficulties and poor reserves - and in preventing the development of our entire independently funded private hospitals.
Long live competition and bring on a health regulator for the independent hospital sector.
James M Sheehan is an orthopaedic surgeon and founding member and director of the Blackrock Clinic, Galway Clinic and Hermitage Clinic