initial analysis of universal health insurance 24 march 2011

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Health insurance

Oliver O’Connorooc@sky.comApril 2011

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Health insurance

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“UHI”

• What is it?

• Compulsory private health insurance, with a ‘public option’

• Social insurance , like PRSI

• A mix of both…

• Both underpinned by existing taxation – how much?

• A market or a social scheme?

• Equal, always-on, 24/7, free care?

• Universal health care

• A lot of work… people, processes and projects

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People• Minister for Health – keen to get on with it• Minister for Finance – keen to reduce deficit• 2.1 million insured – keep it, low cost• 2.3 million not insured – services, fairness, cost• 2,400 consultants – decisions, power, earnings• 2,500 GPs – salary, fees, support• 100,000 other public servants• 38-52 acute public hospitals – status, roles, funding, accountability• 19 private hospitals – roles, pricing• 3 insurers, maybe more – costs, profits• EU Commission – keep the rules• EU/IMF oversight

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• Health Acts, 1970-2005 • Health Insurance Acts 1994-2009• VHI Acts 1996-2008 • Minimum Benefits Regulations 1996 –• Statutory hospitals instruments – for all hospitals• Competition Acts• Finance Act• Risk equalisation scheme• EU Competition Directorate• EU Single Market Directorate• Employment contracts consultants, GPs, other

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• Economic and cost rationale• Goals clarity• Clarity for public entitlements• Sequencing clarity• Government approval• Policy directions for primary

legislation• Write primary legislation• Secure EU agreement• Publish, consult, debate, amend,

enact• Secondary legislation: draft,

publish, consult, finalise• New purchasing public agency –

establishment, staffing, governance, administration

• VHI capitalisation and authorisation

• Negotiate contractual changes for doctors and others

• Set pricing policies• Tax / premium mix• Cost control mechanism• Board for every hospital• Set and administer payment

mechanisms• Ensure administrative interface

with the public• Go live

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Basics – providing and paying

• Simplified diagram

Individuals Providers Intermediaries

Resources

Services

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Slightly less basic

Govt HSEGeneral taxation Annual budget Salaries, grants

Insurers Fees, charges

Govt usage charges

Direct out of pocket fees

Insurance policy premia

Tax relief

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Is this the new world?

GovtGeneral taxationSalaries, grants, capitation

State VHI + Commercial Insurers

Fees, charges

Direct out of pocket fees?

Compulsory premia

Health Insurance Fund

Top-up premia

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Or will this actually happen?

General taxation

Salaries, grants, capitation

Fees, charges

Pay-related premia

Govt

“State Fund /VHI”

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Or this?

General taxation Salaries, grants, capitation

Fees, charges

Pay-related premia

Fees, chargesVoluntary premia

Govt

“Lesser VHI”

Commercial insurers

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Are we forgetting…

THIS?

• Services• Quality, development• Primary-acute integration• How does the financial

channel design impact?• No dominant best way

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Justify complexity

• Everything should be made as simple as possible, but not simpler (Einstein)

• What does the arrangement of financial ‘intermediation’ achieve?

• It’s large scale change

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Large scale change

• “Evidence from health system reform in other countries suggests that, in general, it is better to avoid major re-organisations of structures … and to focus instead on changes in the mechanisms and incentives within existing structures”Report of the Resource Allocation Group, Chapter 2.2.1

“A White Paper on Financing UHI will be published early in the Government’s first term and will review cost-effective pricing and funding mechanisms for care and care to be covered under UHI”Government for National Recovery 2011-16

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Design Choices

• Stated objectives vs probable outcomes

• Fundamental choices to be made

• Unavoidable realities

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What does it mean to …

• People / patients

• Providers – hospitals, primary care

• Insurers

• Government / taxpayers

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People

• What benefits do I get?

• By virtue of - public law or enforceable contract?

• How much do I pay? More or less than now?

• Different answers for different people – some will pay more, who?

• What choices do I have? Of provider? Of intermediary? Of how much I pay? Of what I get?

• Competence, choice, respect: trust

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Providers

• ‘Any willing provider’ – great idea, but much detail needed

• Contracts for services – but acceptance of limits, undertakings outside service

• Pricing and product design freedom

• Who pays them? One pool?

• State implicit underwriting for public providers –fair competition? Subsidies for whom?

• UK Monitor-type role needed

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Providers

• “Public” hospitals – all becoming n-f-p trusts– Ownership of assets– Accountability: who appoints/dismisses board/ceo– Financial failure – underwriting – local politics?

• Private hospitals– Free to enter, to price, to design services?– Anything beyond ‘basic package’– Consultant staff – public contract holders?– Profitability/viability– Competition and fair playing field

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Providers

• Primary care providers

– GPs and all - salaried state employees?

– PC centres – how many, how big, no HSE

• same issues for public hospitals: management, competence, accountability, financial management

• Private primary care/other services

– Who pays? What rate? Freedom to enter?

– Contracting out – no reason why not

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Insurers

• Why engage?

• Make profit: benefit design, customer selection, cost control, pricing: profit

• Is it a fair market?– VHI ‘dominance’, authorisation and capitalisation

– Function as a State-mandated ‘public option’

– What type of Risk Equalisation?

• Is it a market at all?– Competing insurers without competition law…

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Competition law

• Critical issue for commercial insurers and providers.

• German case cited (AOK 2004)

• The concept of an undertaking in Community competition law does not cover bodies entrusted with the management of statutory health insurance and old-age insurance schemes which pursue an exclusively social objective and do not engage in economic activity

• Unattractive to commercial insurers – policy choice

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Government - taxpayers

• Money limit – even in good times

• Unlimited activity = great benefit = unlimited cost = unlimited taxation/premia

• New benefits = new cost

• New cost = new tax or redistribution from current beneficiaries. Is enough available?

• Cost control necessary: how?

• Budget limited money will follow the patient

• Solvency (and reserves) of insurance entities necessary

• Annual budgets here to stay

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Government - taxpayers

• Money limit – in tough times• Public expenditure savings and limits• New insurance premia - collection via payroll• No increase in income tax rates, bands or

thresholds?• EU competitiveness pact – move away from

labour taxes• Critical issue of VHI derogation/authorisation• Capitalisation of VHI – 100-300m – EU/IMF

compatible? Prudent investor? Competition?

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Conclusions• Immensely complex: take do-able steps in careful sequence• Worth addressing primary care – but with no role for insurers?• Worth improving equality in publicly-funded services• Worth providing clarity on entitlements and service commitments• Worth using all capacity for public patients by purchasing• White Paper has task cut out• Provide clarity fast. Without it, commercial insurers will stay wary• No market without players; no willing providers without

commercial benefit• Forget comparisons with Dutch, German, French, US, etc. • Build solutions and improvements for Ireland • For patients: important still to focus on constant improvement in

services, cost, outcomes – and choice, respect, trust