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Gurdgiev on Healthcare. Jokers burning money

Public sector not reforming or cutting – as taxes rise

Health service inflation second highest in EU


‘spending on health has shrunk by just 128 million euro over the last two years’.


‘Between December 2005 and mid-2012, cumulative Irish consumer price inflation (CPI)  was 9.5%. Health CPI was 21.4%’


With an early Budget looming, the circus of  ‘austerity is overbaked’ politics has rolled into town. The Labour and the FG backbenchers are out in force trying desperately to salvage what little popular support they still might command on the streets. Not to be ever outdone, Fianna Fail, freshly again converted to the Church of Socialistas has been unleashing torrents of social consciousness. Things are getting so hot on the backlash speaking circuit that Siptu was able to net even Jack O’Connor a gig. Their star performer was last seen thundering at the MacGill Summer School a potent brew of outlandishly misinformed comparisons of European and American policies for dealing with the Great Recession and calls on for an end to ‘human-rights-violating’ austerity.


The problem is that, once you come down from the highs of this Keynesian Lollapalooza, you’re still in Ireland where the Government continues to run an insolvent state with spending less than revenue and where society needs bigger and more effective expenditures. The fiscal mess we are in has nothing to do with the lack of economic growth and everything to do with the policy institutions that the current Government inherited from the decades of political clientelism presided over by its predecessors.


Let us look at some numbers.


In the first six months (H1) of 2013, the Irish State’s current expenditure was 27.12 billion euro, just  352 million euro shy of the level in H1 of 2012, and 3.2 billion euro more than we spent in H1 of 2011. Meanwhile, tax revenues rose from 15.3 billion euro in H1 2011 to  17.6 billion euro in H1 this year. Crunching  ‘austerity’ based on ‘savage cuts’, five years in, still looks more like a tax squeeze and slippery spending re-allocation from one programme to another.


Meanwhile, Department of Health spending is now running at 6.539 billion for H1 2013, down on EUR 6.754 billion for H1 2011 – a whopping reduction of EUR215 million. Remember too that 2011-2012 increases in the cost of beds charged to the private insurers (ie to ordinary insurance patients) have more than offset the above reductions in spending. Net current (ex-capital) spending on health has shrunk by just 128 million euro over the last two years.  Register that, dear Village reader.


The Department of Health is a great example to consider when dealing with the failure of our reforms. It is the quintessential ‘frontline’ service, of the type we all are willing to pay for. Yet, it is also a symbolic dividing line between the poor (allegedly having no access to the services) and the rich (allegedly all those who hold health insurance and as ‘private’ patients clog public wards). Healthcare was also the epicentre of endless rounds of reforms over decades, including the decades of rapid economic growth. And it is one of the two largest departments, with a budget only slightly smaller than the 6.545 billion euro spent in H1 2013 by the Department of Social Protection.


For all this spending, 35% of Irish households have to purchase private insurance to obtain any meaningful level of health services. For those who think insurance a luxury, the Irish Government is considering making health insurance obligatory.


Meanwhile, basic healthcare is shambolic. While emergencies get reasonably decent attention, Ireland ranks at or below the European average in treatment of most chronic diseases, before we control for differences in population demographics. Our primary care and access to specialist consultants is pathetic – apart from hospital emergency rooms  and intensive care units. Despite the fastest rise in healthcare expenditure per capita 1997-2007 in the entire EU27, according to the EU itself, Irish increases have made only “a modest contribution to [improved mortality], substantially less than one third of the total, and possibly only a few percentage points”.


In reality, of course, Irish healthcare is run for the benefit of Irish healthcare staff. The 2005-2007 pay bill for the HSE stood at an average 50.7% of the entire HSE non-capital budget. In 2009 it was 50.1%. In 2010, Irish salaries (excluding other income) for medical specialists were the highest in the EU, with the second highest paid (in the Netherlands) coming at a discount of roughly 25% on  their Irish counterparts. These salaries were not inclusive of Irish specialists’ earnings from private patients.


According to the EU’s 2012 assessment, 33% of Irish people find access to hospitals unaffordable (the 8th highest in the EU) and the same percentage find access to a GP to be out of their financial reach (the 4th highest in the EU), while 53% claim that they cannot afford medical or surgical specialists (the 8th highest in the EU).


This is hardly surprising. Between December 2005 and mid-2012, cumulative Irish consumer price inflation (CPI)  was 9.5%. Health CPI over the same period was 21.4% – more than double the rate of overall inflation. Of  EU15 states, Ireland and Holland were the only states where health costs rose faster than general inflation in the last 7 years. 2005-2011 inflation ran at 47.3% in hospital services (state-controlled charges), followed by 28.6% for dental services , 23.5 % for out-patient services and 21.3% for doctors’ fees. This inflation added to the already high cost base of 2005.


Extraordinarily, from 2005 through mid-2012 Ireland had the lowest rate of inflation in the EU15, while our health services inflation was the second highest after the Netherlands.


Austerity, it seems, has been a boom-time for healthcare costs. Or put differently, while the rest of the world defines efficiency-improving reforms as changes in delivery of services that reduce the cost of services while maintaining or improving, in Ireland we envision efficiency as  fewer services at a higher cost.


Despite this, in Ireland, assessment of healthcare systems   starts and ends with public-spending levels. A great example this is the 2010 report to the Oireachtas, ‘Benchmarking Ireland’s Health System’. A foreigner, or alien, reading this report would conclude (a) Irish healthcare is run on a shoestring, (b)it  achieves great outcomes, and (c) it is delivered to the middle-class and the rich, bypassing the poor.


In reality, of course, the inequality of access to Irish healthcare means that the middle classes and rich are required to buy expensive insurance to gain access to health services. Our achievements in combatting key diseases are primarily driven by our younger (and thus healthier) demographics. This distorts everything.


And when it comes to access, only 17.2% of all non-maternity-related hospital admissions in 2011  were for private patients, with the rest being public patients. On average, people on private insurance made 2.4-2.6 visits to their GP 2007-2010, while those on medical cards made 5.3-5.2. In 2012, the rich-favouring distribution of access to Irish healthcare so often decried by the media and politicians meant that 39% of the population or just under 1.8 million people had access to medical cards, more than the total of private-health-insurance holders.


Al least health spending yields some metrics concerning the inefficiency of services. In contrast, in other major areas of state expenditure, there are none – and none are planned.


For example, the Irish welfare system is absurdly complicated, and unbalanced – providing potentially excessive services for able-bodied adults with long-term dependency and insufficient services for adults in temporary need of supports and to people with severe disabilities.

Training and placement for the unemployed are glaringly out of touch with reality. Over the last five years, the Irish economy has suffered a growing shortage of skills in several areas, most notably internationally-traded ICT services and  financial services (back- and front- services). Yet the Irish system of unemployment benefits, planned by Forfas and managed by Fas/Solace is heedless. By the time the state training behemoths have turned around the demands will have changed again.


Irish state spending – with or without austerity – is a rich sprinkling of waste over a thin layer of substance. And it remains such in the face of five years of boisterous pro-reform rhetoric.

Irish austerity has failed: so much we can all agree. But the real failure is not in cutting spending too much, but in failing to deliver any real gains in efficiency or quality of public services.  Though it failed also to contain costs.


The likes of Jack O’Connor and Fianna Fail Nua might have discovered a magic trick for conjuring economic growth out of public spending, but the reality is that the actual working population is sick and angry at taxation to fund the perpetuation of our public-sector mess, best exemplified by our healthcare.