Jill Kerby

Sunday MoneyComment – March 18, 2012

Universal Health Insurance? Only if there’s a true – government-free - market

I was stopped by a man in my local supermarket yesterday who told me that he couldn’t afford private health insurance anymore for his family. It’s just got too expensive, he said, and he insisted he knew why.

“Let me tell you a story. I met a friend recently who told me how he’d had to go to Germany for specialist treatment for prostate cancer. The cost of the surgery and treatment was all picked up by VHI – though not the flight – and for the four nights and five days it cost €10,000.

“Two years ago,” he continued, “my young son had to have a relatively minor heart condition treated in Crumlin – it was done by keyhole surgery but he was also in hospital for four nights and five days and Aviva covered the bill, which cost nearly €30,000.

“That’s why I can’t afford private health insurance anymore for my family and why 60,000 people have dropped their cover.  My friend said his surgeon said that his bill in Ireland would have been two or three times more than was charged at the German hospital. Irish doctors and Irish hospitals are killing the golden goose.”  

He’s right at least about the health service now being caught in a nasty inflationary/deflationary spiral: the more people drop private health care, the more the insurers raise their premiums and the higher the cost to the state which increases its charges to the insurers… ad nauseum.

This man’s son and his friend, like the vast majority of the other two million people with private insurance here are mainly only treated by private consultants in public hospitals and their insurance plan covers the billing of both the operation/consultant and their semi-private or private room bed (or just an ordinary bed in the children’s ward) in the public hospitals. The cost has been going up sharply in recent years since it was decided that the true price of the use of the public hospital services hadn’t been passed on.

Meanwhile, only a minority pay for expensive plans that cover them entirely in the private hospitals.

It isn’t private health care that is to blame for the huge disparity between the cost of health treatments in Ireland and Germany. So what is doing so?

How about the fact that nearly 80% of the Irish health budget is spent on salaries and pensions, and these are set by the government and the public sector unions. The other 20% of the running costs – drugs, equipment, fittings, utilities, food,– are also the responsibility of government paid administrators, and with no personal ‘skin the game’ they’ve few qualms about spending taxpayer’s money either.

Is it any wonder then that the price, both public and private, to over two million health insurance members has been soaring for years?

James O’Reilly, the Health Minister seems to think that once universal health insurance is rolled out (starting with “free” GP care by 2016) we’ll have one, wonderful health care system that is fair, and accessible and world class.

There is only one way this will happen, regardless of how many golden eggs can be squeezed out of the poor, shrinking Irish goose:  the Department of Health and the Government must be reduced to a supervisory and regulatory role only and the health care market – patients, practitioners, hospitals, insurers – must be allowed to work out a genuine service that is affordable and deliverable, based on our available resources.

Let me put it another way:  if the Department of Agriculture had also been allowed to run the provision and delivery of food in this country, we’d have all starved long before anyone would have needed medical assistance.

This lack of empathy gets you nowhere

The Central Bank Governor Patrick Honohan must think it is helpful whenever he lobs another little hand grenade into the public debate about the dire state of our banking system.

He’s wrong. It just annoys ‘the little people’.   

You know, people not like him, not on a big fat Irish government salary of c€300,000, pension and perks, who didn’t get sucked into buying a huge mortgage on an overpriced property (for their own use or as an investment) during the biggest property boom in the western world that happened partly because the central bankers of the day were incompetent and asleep on the job.

Last week, Mr Honohan said it was high time the banks start putting the boot into owners of investment properties who cannot meet their repayments and are in arrears.

Why?

Because these defaulting loans are a threat to the survival of the banks – as are the c100,000 or so homeloans in arrears – but the investment ones are not subject to the same consumer protection codes and forbearance measures. He knows that if the entire problem is left to fester, it could bring down the Irish banks once and for all. By tackling the smaller c30,000 buy-to-let problem first, he must think it will give the banks a little breathing space before they’re forced to cope with the more lenient treatment that is expected to be afforded to distressed home owners when the new insolvency and bankruptcy law comes into force next year.

What the head of the Central Bank isn’t taking into account is that a lot of those 30,000 investment loans are backed by the equity in the borrower’s principal private residence. If one goes, they both go.

Or maybe the Governor does know this, but figures it’s going to be ugly whatever the outcome and the banks have to start somewhere.

It’s their survival, let us never forget, and not yours, that isn’t making this well-remunerated government servant lose any sleep.