Increases a threat to universal health plan

HEALTH insurer Aviva’s decision to hit 90,000 of its customers with another fee hike — 9.5% — raises all sorts of questions, most of which have been asked many times before but never adequately answered.

The most obvious is why does medical inflation run so very far ahead of basic inflation. Even if evolving technology relentlessly pushes costs upwards, it is hard to understand increases of 45% — VHI earlier this year — and the 24.5% hike Aviva has imposed in two tranches this year.

To put those figures in context, Ireland’s consumer price index rose by 2.7% this year and euro zone inflation stands at 2.5%.

Minister for Health James Reilly responded by saying it is “extraordinary” that the public accepts in a “blasé fashion” medical inflation far above that of the cost of living. If he, with all the power his ministry confers, and his position as the sole shareholder in VHI, finds it “extraordinary”, then imagine how the rest of us feel.

Some months ago, Dr Reilly ordered a review of rates paid to doctors and hospitals covered by insurance. “I don’t believe we have been getting value for money,” he said on Thursday. This belief is strengthened by recollection of last year’s VHI payment of over 1 million to one hospital consultant.

The Milliman report on the VHI’s costs and procedures, partially published last February, concluded that VHI had made impressive progress in the past two years. The firm had secured a 15% reduction in consultants’ fees, a 6% cut in private hospital fees and a reduction in its administration costs. Unfortunately, these figures are dwarfed by VHI’s 45% and Aviva’s 24.5%.

This increase gives rise to another question. Did Aviva hold off on the second part of their increase to maximise their opportunity to attract an estimated 50,000 disaffected VHI customers? It is very hard to think that they did not. Once again, the consumer is the meat in the sandwich.

Dr Reilly has opened negotiations about pay and work arrangements with hospital consultants and his task should not be underestimated. They are a powerful group that has secured rates well above the European average and, almost uniquely, combine private and public work. Their contribution to the well-being of the nation should not be underestimated or disrespected, but things have got out of kilter and balance needs to be restored. If Dr Reilly does not do it then eventually the IMF will. The reforms promised by Croke Park have a role to play as well but it remains to be seen whether they will be delivered.

A mixture of private and public health insurance plays a central role in the Government’s plans for a long-awaited universal health service but unless costs — and double-digit fee increases — can be better managed, then a universal health scheme seems as far away as ever because huge numbers of people will not have faith in private companies to deliver long-term, viable cover.