Address by Dr. Fergus O’Ferrall, Adelaide Lecturer in Health Policy, Trinity College, Dublin to the Irish Pharmaceutical Healthcare Association Annual Meeting on Thursday 25 November 2010 in the Aviva

Stadium, Lansdowne Road, Dublin 4.

Social Health Insurance - the key in ensuring best use of health resources

Introduction

In Ireland we spend more per person per annum on health services than is spent in many advanced countries such as Sweden, Finland, United Kingdom, Australia, New Zealand, Spain or Japan. We spend 3,434 USD compared to the OECD average of 2984 USD (see OECD Health Data, 2009). Yet our health system is murderously inefficient and unfair. The evidence-based analysis of our dysfunctional system is contained in the recent excellent Report of the Expert Group on Resource Allocation and Financing in the Health Sector, chaired by Professor Frances Ruane. The Expert Group stated:“ ..there is no framework which allows decisions to be taken in an integrated way that links systematically with the overarching principles of the Irish healthcare system and aligns resources with goals.”In other words the so-called Reform Programme of the last decade has totally failed in the primary objective of ensuring access to quality care for all citizens at the least cost. The key problem in the Irish health system is not the level of health expenditure but the mechanisms we use to raise our health funds and how such funds are allocated.What on earth we may well ask have the Minister for Health and Children, the Department of Health and Children, and the HSE being doing since 2005 in the wake of the major reports which were completed prior to the Health Act, 2004 and the establishment of the HSE? These reports made precisely the same point about the financing of our health system as now made by the Ruane Report.

The Irish Health System- the need for a values revolution.

Political ideologies are powerful formative influences in shaping health systems. The current Minister for Health and Children, and the Governments to which she has belonged, pursued an ill-conceived ideological recipe to healthcare provision which supported our ‘two-tier’ system- one where ability to pay trumps medical need as the late Suzy Long discovered at the cost of her life. In this time of national crisis – a crisis caused in great measure by the prevailing ideology- we now need a values revolution. As citizens we must reject totally any ideology which holds that healthcare is a commodity rather than a human right and which regards the better off as more worthy of proper care than the less well off. Professor William Hsiao, the Harvard economist who has helped design healthcare systems for many countries, states that the primary decision in the development of a national healthcare system is one of values:“Your ethics, your sense of justice, determine how you distribute goods and services, including healthcare- so the first question has to deal with a country’s ethical values”The values we now adopt in the wake of the total failure of the predominant neo-liberalism which lauded the ‘market’ in the provision of public services must be explicit and made operational. With clear agreed values we can design a better health system.. The values we need to adopt are the common values widely endorsed in the European Union such as social solidarity, universal provision and equity. The practical application of such values must become core to our health provision:

- access to healthcare according to need- paying for healthcare according to income/wealth

If we do desire for all our citizens what is common in so many other countries- which seek to honour these values in actual practice and which provide universal and equal access to healthcare for all- then we must stop paying ‘lip service’ to ‘equity’ and ‘fairness’ while in fact making sure that those who are poor get delayed and worse care than those who are able to pay for their care. If we keep doing what we are doing we will keep getting what we are getting – a dysfunctional system riddled with perverse incentives and so many gross failures in care. The current system as outlined in so many reports, including the Ruane Report, is:

1. unfair to public patients2. not effective- it rations care creating long waiting lists

3. grossly inefficient – by up to 20 percent across the system4. perverse in the incentives it creates for doctors and providers5. poor value in terms of structure and outcomes

Reform of the Financing System – the sine qua non of progress

Reform is urgent and reform must address these cardinal failings. Social health insurance – now used by the top performing health systems and by about twenty-seven countries in the world- if carefully adapted to Ireland – is the key approach to take to the provision of universal healthcare. Social health insurance is based upon the underlying principle: access on the basis of need, payment on the basis of income or wealth. This is based upon the principle of social solidarity: this involves all citizens being covered for a common ‘basket’ of health services and all sharing in the costs of providing healthcare for all. In effect the well and wealthy support the sick and poor. Remember anyone of us can find ourselves in the latter categories! Such a system lifts the financial burden of ill-health from the individual or family shoulders for life.The key features of social health insurance are:

- All citizens are insured through the payment of a premium to a social health fund [or funds]; premiums are based on income – not on the cost of services individuals are likely to use and so factors such as age or pre-existing illness or disability do not influence the premium each individual pays.

- The State pays and /or supplements the premium of those citizens who are on lower incomes and thereby every citizen is an insured patient with equal access to the health system.

- The premiums are paid to the Social Health Insurance Fund (s) separate from the Exchequer or State funds raised by general taxation and are not subject to the annual ‘stop-go’ of expenditure allocations made by Government- this is vital to develop and maintain health services separate from mismanagement and macro-economic shocks now so familiar to us.

- Care covered by Social Health Insurance may be delivered by public, private not –for –profit or private for-profit healthcare providers on a level-playing pitch.

- There is a ‘common basket’ or set of health services covered by the premium paid – typically these include free access to GP and primary care services including drugs and prescriptions, free acute hospital care and may include other elements such as long-term care.

- The money follows the patient- in other words the amount of revenue generated by hospitals and primary care centres is largely determined by the numbers of patients they treat and as this is the case quality and efficiency becomes key.

The Seven Advantages of Social Health Insurance (SHI) as a Funding Mechanism1. SHI enables the provision of a one-tier system of healthcare with access based upon need not

income.2. SHI provides the means to provide in Ireland primary care services free at the point of use for the

entire population ending our unique barriers to primary care where most of care ought to be delivered – this alone will ensure better outcomes and care at lower cost.

3. SHI puts the patient ‘front and centre’ for all healthcare providers as ‘money follows the patient’ – at present the patient is ‘last and back’ – ‘queuing to queue’ to get on waiting lists in so many cases.

4. SHI is a transparent funding system – citizens see exactly what they are getting for their premiums.5. SHI combines social solidarity with more accountable and efficient public service provision – ending

our opaque and largely unaccountable system.6. SHI develops more stability in healthcare financing and thereby facilitates multi-annual planning of

capacity and services.7. SHI facilitates the necessary element of ‘subsidiarity’ in healthcare provision as providers obtain

power over, as well as the responsibility for, their healthcare services – this will dismantle the excessive ‘command and control’ of our bureaucratic and highly centralised health system under the HSE.

The ‘Road-Map’ best use of healthcare resources

We are now at a crucial turning point in regard to our health system. As William Beveridge wrote in his famous Social Insurance and Allied Services report in 1942: “A revolutionary moment in the world’s history is

a time for revolutions, not for patching.” We have a moral imperative to reform the financing of healthcare. Financial reform is the main lever to use in order to develop a just and effective universal health system . Social health insurance is the optimum and most transparent mechanism to use to ensure best use of that quantum our national wealth which citizens themselves decide to devote to their health and well-being. The Adelaide Hospital Society has set out a clear ‘road-map’ to achieve this based on the comprehensive and independent research reports undertaken by Dr.Stephen Thomas, Professor Charles Normand and their colleagues in Trinity College, Dublin.[These Reports are listed at end of this address]. This involves

- A new Social Health Insurance Authority with legislative remit to oversee the design and planning of the steps necessary to develop universal healthcare using SHI- to move from analysis to implementation.

- A single Social Health Insurance Fund as a not-for-profit fund into which all premiums would be paid. This would (a) give public confidence that the patient not profit is at the centre of policy (b) minimise administration costs (c) avoid costly and often ineffective risk equalisation systems and ( c) would minimise disruption in moving towards universal care; single-payer systems are more efficient and allow for better cost control.

- A greatly reformed and much smaller expert Department of Health & Children to set overall health policy under the Minister and to discharge the wider responsibilities of the State and to focus upon population health.

- A framework for payment systems designed to achieve specified health outcomes is the key: it will be the responsibility of the Social Health Insurance Fund to devise a mix of payment systems to providers to achieve goals in primary care, chronic disease management, acute care and so forth. There sound evidence of efficiency gains from 10 per cent and upwards to be made in this regard.

- A ‘Carte Vitale’ for every person- utilising information technology is a key to ensuring effective high quality care and cost effective administration in a comprehensive social health insurance system. The success of the ‘carte vitale’ in the French health system illustrates the advantage of this- the ‘card of life’ contains a person’s entire medical record on the size of a credit card and used by every French citizen. It is essential to better and easier access to care while keeping paper-based records to a minimum. A single- payer system – a unified system- makes it much easier to develop and use a ‘carte vitale’ in Ireland.

It is worth stressing that new payment systems are required to incentivise the development of ‘integrated care’ so that providers are encouraged to treat patients in the appropriate setting and this is especially the case in relation to chronic disease management where so much of health expenditure accrues. Changes in the organisation of health delivery systems will be driven by the need to collectively respond to new payment systems. For example ‘bundling payments’ to cover holistic care over a specified period would drive higher quality care at least cost. A single payer system will facilitate the utilisation of new payment systems to drive quality, efficiency and effectiveness by:

- Strengthening and reinforcing primary and community care- Promoting more accessible, co-ordinated, patient-centred care with a focus on better chronic disease

management, disease prevention and health promotion- Rewarding quality, outcomes and efficiency.

There will be a central role for a powerful and independent Health Information and Quality Authority to ensure clinical excellence in all licensed healthcare providers.

Can we afford SHI?

SHI is but a mechanism to deliver: if we are clear upon the objectives then it is possible to design a progressive system using SHI which will be within the compass of the amount of our national wealth that we wish to spend on our healthcare. The research carried out on behalf of the Adelaide Hospital Society has demonstrated the financial feasibility of SHI in Ireland if introduced in a carefully planned and phased manner. The phasing has to do with meeting capacity constraints over coming years – constraints which we need to meet anyway as for example in primary care. Naturally everybody wants to know what a SHI system of universal care would cost. The obvious answer is, of course, it depends upon what the people would like to insure themselves against in the ‘common basket’ of health services.

The Research Reports, commissioned by the Adelaide Hospital Society, in relation to costs make the following remarkable conclusions:

- For the initial ‘common basket’ – free GP care and medicines and free acute hospital care and treatment – at 2007 figures the percentage of GDP spent on Irish healthcare remains the same at 7.6 per cent with 10 per cent efficiency gains (a reasonable assumption) and only rises to 7.83 per cent with zero efficiency gains.

- In other words this ‘common basket’ would not require any significant extra spending of national wealth- what it would require is radical change in the way we raise and allocate such funds.

- “Typically SHI systems cost more because they deliver more services. It is estimated that the financing of the comprehensive ‘levelling up’ model would require the equivalent of an extra 3% of payroll deductions, taking into account likely efficiency gains.” If we achieve “efficiency gains that lower costs by 19% across the health care system (that) would allow the introduction of comprehensive SHI with no additional running costs”

- If one takes a single person on 25,000 euros per annum such a person would pay an additional amount of 20 euros per month for a single tier system with good access to comprehensive primary and acute care and would no longer pay fees at the point of contact for GPs, hospital services or for drugs. (Thomas et.al, 2010).

The research reports consider in great detail the options for how we might mobilise the funds for a SHI system through (a) premiums (b) ‘sin’ taxes (c) taxation subsidies and so forth. They also point out that over time people come to trust how their funds are spent in SHI systems much better that in general taxation systems which in turn allows other elements to be included in the ‘common basket’ after careful costing has been done.

Conclusion.

Significant change requires vision and bold leadership. Ireland deserves a health system built upon European values and principles which delivers what is common in EU countries – universal healthcare of the highest quality using resources in the best possible way. There is a consensus emerging now that SHI ought to be introduced. We should not lose sight of the great national goal involved as we debate the details of how such a system might be structured and financed. The details are, of course very important, but they are technically available to us if we agree on the goal: the provision of equal access to the best quality care for all our people. Let us set out on the journey with this great goal which will take us some years: to lift the financial cross from the shoulders of the sick, the old and the disabled by collectively sharing the burden of ill-health and disease in Irish society.

Dr. Fergus O’Ferrall is Adelaide Lecturer in Health Policy, Trinity College, Dublin. He may be contacted at ‘oferralf@tcd.ie’ or ‘foferrall@gmail.com’ and mobile 086-2382103.

The Reports on Social Health Insurance referred to above are:

The Adelaide Hospital Society, Universal Health Insurance: The Way Forward for Irish Healthcare Policy Paper, April, 2010.Stephen Thomas, Charles Normand, Samantha Smith, Social Health Insurance: Options for Ireland (Adelaide Hospital Society, 2006).Stephen Thomas, Charles Normand, Samantha Smith, Social Health Insurance:Further Options for Ireland (Adelaide Hospital Society, 2008).Samantha Smith, Equity in Health Care: A View from the Irish Health Care System ( An Adelaide Health Policy Brief, Adelaide Hospital Society, April, 2009)Stephen Thomas, Padhraig Ryan, Charles Normand, Effective Foundations for the Financing and Organisation of Social Health Insurance in Ireland (Adelaide Hospital Society, 2010).