Budget watchdog says health spending forecasts are 'unrealistically low'

Hospitals accounted for €264m of the average annual €590m health overrun between 2015 and 2019. Picture: iStock

Updated costings for Sláintecare healthcare reforms that factor in pay and price increases are urgently needed, Ireland's budget watchdog has said.

The Irish Fiscal Advisory Council (IFAC) said public spending on health in Ireland has been rising at a fast pace and will come under further pressure as the population ages and major reforms are implemented under the 10-year Sláintecare programme.

However, the body warned planning needed to be improved and called on the Government to implement five-year budgeting with more realistic spending forecasts.

In an analytical note, IFAC economists Eddie Casey and Killian Carroll said budget improvements would represent a “game-changer” for how health spending is managed in Ireland”.

In the mid-20th century, Ireland’s public health spending was about 2% of national income but had risen to 8% prior to the Covid-19 pandemic. The council’s long-term projections suggest public spending in Ireland would rise to 13.2% by 2050 with the country's population set to age rapidly, with the number of people over the age of 65 more than doubling in 30 years’ time.

The report notes much of the increase in health spending in recent years has been unplanned. Hospitals accounted for €264m of the average annual €590m health overrun between 2015 and 2019. Close to 65% of the overruns in recent years were related to pay.

The budget watchdog said the unplanned overruns have been almost as large as the planned-for increases themselves and said temporary receipts are being used to fund the unexpected permanent spending increases in health.

Constant overruns

As a result of the constant overruns, the report warns any budget plans will lose credibility as health managers will expect spending ceilings to be relaxed with little opposition and will therefore have little incentive to stay within initial ceilings.

The council criticised the budgeting process, saying basic information was "severely lacking" and that spending forecasts were "unrealistically low".

"While the reforms have been under way for almost four years, no budgeting is available beyond one year, no updated costings have been produced since 2017, and little clarity on progress made is publicly available," IFAC said.

"The Sláintecare reforms were estimated in 2017 to permanently add some €2.8bn to annual public spending on healthcare. But ongoing pressures, such as those linked to pay, do not appear to have been factored into the original costings."

"Planning needs to improve," the council’s chief economist, Eddie Casey, said.

"Better five-year budgeting, with more realistic spending forecasts, could be a game-changer for how health spending is managed in Ireland”.