Committee Reports > List of Committees > Joint > 1979 > Committee on Commercial State-Sponsored Bodies > Report No. 09 - Voluntary Health Insurance Board

MIONTUAIRISC NA FIANAISE

(Minutes of Evidence)

Déardaoin, 13 Nollaig, 1979

Thursday, 13 December, 1979

VOLUNTARY HEALTH INSURANCE BOARD

Mr. James G. Troy, Chairman; Mr. T. C. J. O’Connell, Board Member; Mr. H. B. Dennis, Board Member; Mr. R. M. Graham, Deputy General Manager; and Mr. T. Ryan, Assistant General Manager of the Voluntary Health Insurance Board called and examined.

1. Deputy L. Lawlor.—How successful was the publicity drive to get new members to join the VHI?

Mr. Graham.—It has been exteremely successful. To quantify that, I could tell you that a record membership growth took place last year, the year ended February, 1979, and we increased our net membership by 52,000. In the first nine months of this year our net membership has risen by 105,000.

2. Chairman.—Do you see a maximum number that could be absorbed into the VHI?

Mr. Graham.—I personally do not see a maximum number. I think the potential membership at any time is related to a number of economic and social factors and these are changing all the time. It might interest the Committee to know that we carry out surveys within the private hospital area. As recently as last week, our survey showed that about 30 per cent of all people using private hospital facilities are still not insured. If you take as your base the fact that VHI covers at the moment something over 800,000 people it would appear that that represents about 70 per cent of the potential customers for private treatment just now. Obviously this is going to change as living standards rise and as private hospitals develop in particular areas.

3. Deputy W. O’Brien.—Have the changes in health contributions created any problems for the board or its subscribers?

Mr. Graham.—No. The board was in a very interesting situation before the change took place, in that about one-third of membership was already entitled to limited eligibility under the Health Act. These are people who, for one reason or another, decided they were prepared to contribute something to a fund which enabled them to have freedom of choice. Obviously they were not affected by the change; they were already paying the health contribution. The remainder of the membership probably would have been in a higher socio-economic group and were less likely to change their social habits by making the decision to go from the private to the public category. The effect on the scheme, as the board anticipated at the time, has been negligible. Our lapse-rate does not appear to have been affected at all and in fact, as I already said, we have increased our membership in nine months by somewhere in the region of 17 per cent and we confidently expect that by the end of this financial year we will have increased it by 20 per cent.

4. Deputy W. O’Brien.—Did the change in the contributions mean a duplication of payments for some of your subscribers?

Mr. Graham.—Absolutely not. This is the beauty of the new situation. Now, for the first time, everybody is paying the contribution and everybody receives the same benefits. Everybody has got the entitlement to treatment at public ward level, and everybody will receive the subvention if their treatment is semi-private. This makes our scheme very much easier to explain, and very much easier to sell. In preparing our new benefit schedule, we have taken into account the fact that people have these basic entitlements.

5. Chairman.—Have any of the original objectives of VHI not been met? Looking back, do you feel that some of your original objectives were never realised or were never sufficiently realised?

Mr. Troy.—The original objectives of the VHI, as outlined by the Voluntary Health Insurance Act, 1957, have in our view been fully met. As you are aware, we were asked to carry out schemes of voluntary health insurance for people who wished to pay a subscription. In 1957 we introduced three schemes, and in 1962 we introduced a variation of that—the unit system—to give them more elasticity in their cover. Last April we introduced new plans to coincide with the changes in health legislation. We think we have fully met the original ideals. We are covering at the moment about 800,000 people, whereas the advisory body, years ago, said our maximum would be about 500,000 people. We have moved into the domiciliary and out-patient fields and our recent benefits, which we introduced last April, provide for maternity, convalescence and other benefit extensions. We think we have fully met what we set out to do in 1957.

6. Deputy B. Desmond.—There has been intense pressure from various pressure groups, political, social, trade union, etc., and as a result the health services have been expanded considerably since the VHI was established. It has been argued that, because of this, the role of the VHI would be very substantially diminished and, perhaps. ultimately the VHI would cease to exist as a State-sponsored body. What would be your reaction to that kind of argument?

Mr. Troy.—If I might speak personally first. We were asked to do a certain job which we are trying to do. If the State wishes to change our terms of reference or wishes us to cease our activities, we would have to comply with such a wish. As long as we have a job to do, however, we intend doing it as best we can.

7. Deputy B. Desmond.—Suppose the Oireachtas were of the view that the VHI should be involved more in preventive medicine and if, for the sake of argument, one were to transfer the budget of the Health Education Bureau, £1,250,000, to the VHI and say you should be actively engaged in preventive medicine, would you be reluctant to take on that task?

Mr. Troy.—No, on the contrary. We would be only too pleased to undertake anything we are asked to do. It is part of our outlook to extend if possible, and otherwise to carry on as we are.

8. Deputy B. Desmond.—In giving information about health to people, as you normally do, do you confine that type of information to subscribers or do you act as a public disseminator? How does this operate?

Mr. Graham.—It is very important to know that the organisation has always served the entire public in that regard. We will never refuse to give advice or information to anybody who comes through our doors. We have been doing that since 1957. Whether people are members or not is quite irrelevant.

9. Chairman.—Do you give information about the most appropriate place to get treatment or something of that kind?

Mr. Graham.—Not necessarily. That takes us into a slightly difficult area. We would not see ourselves as recommending areas for treatment or types of treatment. In so far as advice about interpretation of legislation is concerned, we always trained our staff so that they can give this advice to anybody who calls.

10. Chairman.—I asked if you had achieved your objectives and you said you felt you had, by and large. Having regard to the way in which your functions have evolved, and having regard to the changes by successive governments and so on, do you feel the need to have your objectives enlarged? In other words, do you find that you are to some extent restricted now by your original terms of reference?

Mr. Troy.—Our income at the moment is about £20 million, our investment income is about £2½ million. The number of people in the scheme is about 800,000. Our staff is relatively small—about 200. At the moment, we have a lot of work to do but if we want to increase our staff we can always do so. We are fully extended at the moment. For example, our accounts to the Minister have not yet gone in because, since last April, our accounting staff have been so busy implementing the new plans.

11. Chairman.—Do you have to get approval for the extension of your staff?

Mr. Troy.—No, but the accounting staff are very busy arising out of changes in the health legislation last April.

12. Deputy W. O’Brien.—Your administration costs are very low, are they not?

Mr. Dennis.—We have always kept up to date with the computer end of things and we have become increasingly mechanised in the accounting functions over the years. Although the scheme has expanded enormously in the last ten years our staff has only gone up by about 10 per cent. This, I think, is due to the advent of the computer and to the fact that we have always sought to rationalise things. First, we had a contract to use the computer in Aer Lingus. We have now purchased one ourselves. At the moment we are running a parallel claim system and in January hope to go over entirely to processing the claims through the computer. This obviously is one of the main reasons why we are able to keep down the number of staff.

13. Deputy W. O’Brien.—Speaking of claims, how do you ascertain whether the medical charges are within reason? Have you a way of investigating that? Do you have a scale?

Mr. Dennis.—We have a schedule. Mr. Ryan, our Assistant General Manager and Claims Manager, might like to answer that.

Mr. Ryan.—We have a very good basis for comparing increases in medical costs with previous years and comparing any particular practitioner with the entire body of his colleagues. In that way we can always monitor increases in medical charges. It is fair to say that they have been very reasonable.

14. Deputy B. Desmond.—The State’s role in providing health services is continually growing. What is your target in terms of membership? How can we work out some kind of estimate of the fraction of the population with only category 3 entitlement under the Health Services who are not covered by health insurance? What segment of the population do you finally hope to cover? Do you hope to cover everybody?

Mr. Dennis.—You can never cover 100 per cent for a number of reasons. There are some people in the top income bracket who mistakenly feel that it is more advantageous financially for them not to be in the VHI because they get tax allowance on medical expenses. At the moment about 30 per cent of people who go into hospitals are not insured through the VHI.

15. Deputy B. Desmond.—Is that not a fairly substantial figure?

Mr. Dennis.—It is. There are a number of reasons. Carelessness is one of them. Despite our intensive advertising, there are people who are not aware of VHI, people who have never been sick and people who take chances and think they will never be sick. People prefer to carry insurance to ensure they will have freedom of choice when they go into hospital. I do not think we will ever get to the stage where there will be total State coverage. People will always want to pay, so that they will have freedom of choice. Since April, if a person goes into a private room he does not lose the advantage of free hospitalisation because he will get the subvention. This is probably one of the reasons why we have found this enormous growth in the scheme over the past few months—people pay more and get more.

16. Chairman.—When they pay the bill for the final figure they get an offset of what they would——

Mr. Dennis.—Yes, they are not at any loss. There is subvention against that. I do not think that point was made quite clear in an earlier question.

17. Deputy B. Desmond.—Will you ultimately encompass the 30 per cent you mentioned?

Mr. Graham.—We hope so. We must be concerned by the fact that we did a survey of that type three years ago and at that time there were 30 per cent uninsured. Since then we have almost doubled our membership and still 30 per cent of the patients are uninsured. We are satisfied that the decision whether to become a private patient or a public patient is rarely made when somebody is in full health, when they can make objective decisions as to which category they are in. When illness strikes the home, the whole matter becomes an emotional one, and it is at that stage that the decision is made. Unfortunately, it is then too late to take out insurance. This is the problem.

18. Deputy B. Desmond.—What is the future role of your organisation. Would you get into areas of a preventive kind? From the expansion viewpoint would you engage in activities like urging the public to have periodic examinations dealing with, say, alcoholism, proper nutrition, general preventive care? Even if it meant your administration costs going up, because it would be a very expensive undertaking, would you still take it on?

Mr. O’Connell.—The position is that under the present Act we cannot go into preventive medicine. That would be totally outside what we have been set up to do. We would have to have some amendment of the Act if it became necessary to do that kind of thing. It would be a totally new field. We would have to have subventions of some kind. We would be only setting up another body instead of the Department of Health, which is doing this work very well and whose function it is. Our organisation was set up, as the Act provides, to meet the catastrophic costs of modern medicine and modern hospitalisation. We have expanded, as you have seen, even within the limits of the Act itself.

19. Chairman.—Apart from that, do you think there is any area outside your present range of activities in which you could usefully involve yourself? Do you feel in any way restricted about an area which you would like to move into but which is outside your present terms of reference?

Mr. O’Connell.—I do not think so, but I would like to hear the other members. I would not have any view that we are restricted in any way. We have never been restricted. As a matter of fact, we have had nothing but co-operation from the Department and from the various Ministers since 1957. The greatest care has been taken in that respect. We have never been restricted in anything we asked, though there may have been minor things here and there. We want to expand our scheme a little, to vary it to study, for instance, dental and other branches of medicine. It is difficult to see how it can be done.

20. Deputy W. O’Brien.—As regards group subscribers, what are the advantages and disadvantages?

Mr. Dennis.—No disadvantage whatsoever. If you are a member of a group you get a 10 per cent discount.

21. Chairman.—All subscribers are equal if they can find a group in which they can participate?

Mr. Dennis.—Yes. I think ten is the minimum number to form a group.

Mr. Graham.—It is lower now. About six.

22. Deputy W. O’Brien.—Do you find a certain amount of uncertainty among your members in regard to what may be necessary to ensure adequate coverage?

Mr. Graham.—Not any more. This is the beauty of our new plans. People are now guaranteed that they will be fully covered for their hospital bill provided they remain within the accommodation level that they have selected. We have only three different plans, A, B, and C.

23. Deputy W. O’Brien.—Was there sufficient publicity of that change?

Mr. Dennis.—We had a very wide campaign of publicity since April of this year when the new limited eligibility provisions were introduced.

24. Deputy W. O’Brien.—Could we have a quick exposé of the three plans?

Mr. Graham.—I will start with the lowest of the three which is Plan A. Plan A guarantees to cover a patient against any hospital bill incurred in a private or semi-private bed in a public or voluntary hospital, local authority hospitals included. That guarantees to cover the entire hospital bill, that is the maintenance and all ancillary charges. Plan B will cover the member in any semi-private accommodation whether it is in the private sector or the public sector. Plan C will guarantee to cover the member in any private room, regardless of the type of hospital involved. This is a total guarantee of indemnity.

25. Deputy W. O’Brien.—Was there a certain amount of uncertainty about the old system?

Mr. Graham.—The old units system, unfortunately, was beginning to break up as a good idea because it was designed to cover a situation where there was a very wide range of hospital charges and where there was the further complication that some people were eligible for health services and others were not. The unit system was very flexible. It allowed people to have a tailor-made benefit package to suit themselves. Unfortunately it depended a little too much on the member updating his cover every year and in practice we found that many people omitted to do this. The result was, that when a claim arose, we very often had a disappointed claimant on our hands.

Deputy W. O’Brien.—I came across that.

Mr. Graham.—The demand for the full indemnity came from the members. We have been repeatedly asked, particularly over the last five or six years, to produce a scheme that would give full cover and we responded to that. The April changes here gave us the opportunity that we were waiting for.

26. Deputy L. Lawlor.—The Medical Union and two of the health boards expressed concern about the actual method of payments in that payments do not go direct to the hospitals and doctors and sometimes subscribers do not clear accounts even though paid by the VHI. Is that a widespread problem?

Mr. Ryan.—This question has been raised quite a number of times in the past. On each occasion we invited the people who raised the query to send a sample of their bad debts or their unpaid accounts so that we could check them out against our own records. We have always found that only a very tiny proportion had failed to pay their bills when they had recovered from us. There was a number of problems. Some people claimed to have been members of VHI, perhaps sometimes deliberately and sometimes inadvertently, because there is a certain amount of confusion between voluntary contributors to social welfare and voluntary health insurance. Some, of course, failed to recover because a claim may have been rejected for one reason or another, usually because they had joined the scheme only a few weeks earlier and had not yet become eligible. We found the degree to which this happened was very tiny. In other instances people recovered from us but it was a problem with the old unit system that they did not have adequate cover, so they elected to pay either the hospital or doctor fully depending on their relationship with each. The other reason for bills being unpaid was that no money was passed over. It is not actually a problem but it is something which has got publicity out of all proportion. We have, in a limited number of cases, arranged to have the member assign his benefit directly to the hospital—this is almost exclusively in the area of psychiatric hospitals—when because of the nature of the ailment the patient is not in a position to look after his affairs. It is not a problem. That is all I can say on the subject.

27. Deputy L. Lawlor.—Are you considering a change?

Mr. Ryan.—We could consider a change. Initially, we did not have the organisational ability to do it. We had limitations in our computer system and so on. We have that capability now and we certainly could consider it, but we would not like to do it in the immediate future for organisational reasons.

28. Deputy L. Lawlor.—In relation to other functions such as dental care, do you envisage in the future providing a new scheme in the dental area?

Mr. Ryan.—We have looked at dental benefits several times. We have not actually devised any broad scheme of dental cover mainly because, in looking at our cover from time to time, we obviously have to decide on a priority. We felt there were more pressing priorities than dental cover up to now. Of itself, general dental cover does not lend itself very well to an insurance scheme. First, to be successful, obviously the rate of uptake of the benefits has to be very high. If we were covering, for instance, routine dental treatment you would expect that virtually everybody would claim. We would have to charge a member a premium almost equal to his dental fees plus some charge for administration. It would be a better arrangement for him to pay himself. Again with routine dental care, because it is done progressively over a period of time there is, if you like, a built-in instalment system of payment. In that sense, it is not really a good idea. In countries where it is done, mainly in the US, it is more or less a prepayment scheme. It is not really insurance as such at all. I would point out that we provide a considerable amount of dental care at the moment, mainly for the more major types of care. This is particularly in the area of oral surgery and also the repair of damage resulting from accidents, which is obviously an insurable risk. We have been studying the thing. We could consider bringing in schemes of dental cover perhaps limiting it to the more esoteric types of dental care. Again, there are problems there because one can embark on an increasingly expensive series of efforts to save one tooth and it can almost be a bottomless pit. We could, for instance, draw up a scheme for the very young age group, hope they would have a satisfactory dental status and hope to maintain that by use of a dental scheme. There is the problem of a very large backlog of poor dental health in Ireland. This will obviously have very serious implications for any scheme that we might start now for the general population. We will probably do something in that line in the future.

Deputy L. Lawlor.—In view of your success in other areas and the state of dental health that would be a good thing.

Mr. O’Connell.—The real depth of the problem in this country is not dental decay but the prevention of decay. We have not sufficient dentists to do that. That is really preventive medicine in a big way, involving public education and so on. We have provided, as Mr. Ryan has said, for the major catastrophies, but for the routine preservation of teeth it is a problem involving the schools and so forth. It would be very difficult even for us to try to solve. Money will not solve it. It is personnel.

Mr. Dennis.—There are two factors. One is that you would have to get children in at a very young age. The second point is that any adults who wanted to join would have to go and have a dental examination with everything corrected and come to us, as it were, with a clean bill of health. Otherwise, it would not be practical to do it.

29. Deputy L. Lawlor.—The cost of medical care has been rising rather rapidly in recent years. To what level can VHI scrutinise the increases and hold them at an acceptable percentage increase? Obviously, it is of concern to us all. Do you consider you have a special function in that aspect?

Mr. Graham.—Whether a health insurance body wants to or not, it must be involved and interested in the whole area of cost containment. I do not believe for one moment that a health fund of itself can contain medical costs but at least we must be very careful that we do not either do anything or fail to do something which could have an effect in improving that situation. We, in consultation with our counterpart organisations throughout the world, particularly in Europe, have been studying this whole question of the cost explosion in medicine for some years. It is true to say that many of the new benefits which we introduced this year have found their origin in these studies. For example, our movement to pay for treatment in day wards, to pay for out-patient procedures, medical or surgical, our movement to bring everybody into the out-patient benefits as well as in-patient, which lessens the incentive for people to enter hospital unnecessarily, have been prompted by the idea of cost containment.

30. Deputy B. Desmond.—To revert to the relationship with the Government, because it would be a particular aspect of concern to the review of this Committee, your board have had to face successive changes in health eligibility and health services. A number of these have come in fits and starts depending on the pressures, the outcome of negotiations and so on. It must have been a trying experience for your board. To what extent is there any of what might be called planned liaison with the Department of Health, anticipating future social policy changes and being able to take them into account? Is there any real advance warning given of a timely nature enabling you to adjust to the trauma which on occasions must seem unsurmountable? One gets the impression that the procedure in successive Governments, irrespective of political composition, has been that the Minister of the day takes a decision, after Cabinet consultation. You are then informed; you have got to put up with it and try to salvage the administrative problems, if I could put it that way. How do you cope with it?

Chairman.—Is there any consultation?

Mr. Dennis.—For obvious reasons we are not told in advance. We could not be.

31. Chairman.—Is that true in all cases?

Mr. O’Connell.—Our relations with the Department are excellent from the point of view that they can see our difficulties and we can see their’s but beyond that, as Mr. Dennis has said, we are not naturally, for ministerial reasons, told in advance what is coming. We can read what is going on.

Mr. Dennis.—We adjust ourselves. If there are new directives or new Health Act changes we adjust our scheme to them.

There was a point which did not come out earlier about this scheme. We are constantly reviewing it. We see where there may be a need which we have not covered before, or we find that by charging a small extra premium we can perhaps provide maternity benefits of some sort, or we pay for out-patient treatment. We are constantly trying to broaden the scheme so that it is as comprehensive as possible. With the changing social factors and increased requirements in the health area, we have to look forward and anticipate where there may be a need for increased benefits. As regards the five-year plan, that is more difficult.

Mr. Graham.—We do a considerable amount of forward planning. We cannot do a specific five-year plan, although we hope to embark very soon on such a planning effort. What we, as an organisation, try to do is to remain as flexible as possible. We try to consider the various possible political developments which would have an impact on our activities and work out options we might use. For example, many of the benefits we introduced this year were planned as far back as 1972-1973 and had to await the right time to introduce them. The political developments this year provided a tremendous opportunity for VHI and the important thing was to be ready to take advantage of them. Our relationship with the Department was sufficiently good that we got warning as early as the officials in the Department could make it available to us and we were able to act accordingly.

32. Chairman.—On the question of flexibility, one of the criticisms that has been made in the past is that, in order to get a comparatively minor form of treatment, a person had to stay in hospital overnight, where that was not really necessary. Has your new plan dealt with that situation?

Mr. Graham.—Our new plan is dealing with that situation. For the last three or four years we have been operating an experimental list of procedures for which we were prepared to pay benefit without the need to remain in hospital. As a result of our experience, we have now extended that particular arrangement to cover all medical and surgical procedures which are listed in our schedule and there are many hundreds of them. That is a tremendous step forward and we are very close to solving the problem you mentioned.

33. Deputy L. Lawlor.—Do you see your role as reacting to new policy and new planning, or in reverse, that is suggesting initiatives from time to time in areas where up-dating or modernising of schemes should be implemented? Do the submissions come from the Department of Health all the time? Do you, as a board, see your role as recommending certain changes in different aspects of policy?

Mr. Troy.—We make changes and, if necessary, apply to the Minister for approval.

Mr. Graham.—All the initiatives for benefit changes come from the VHI board. It is very rare for us to be asked to do a specific job for the Government, one exception being the public ward scheme which we introduced in April of this year in response to a specific request from the Minister to cater for a particular group of people who were being deprived of a traditional entitlement under the Health Acts. Apart from that, all initiatives regarding benefit schedules have come from the board itself.

34. Chairman.—Do you feel there is a need for a consumer organisation or something of that kind? Some State boards— for example, in the agricultural area they have the IFA and so on—have an organisation saying what the board should be doing and what they are not doing. You do not have such a body to tell you of your shortcomings, if any, or to compliment you on the good things you are doing. How do you react to that point?

Mr. Graham.—We are well aware that we have our shortcomings and we try to eliminate them. We have, however, a greater exposure to the consumer than almost any other organisation in this country for these reasons. We recruit 75 per cent of our members through group schemes and we are in constant touch with group secretaries. These people do this work voluntarily and our development and accounts people are in constant touch with them. In addition, we organise regional meetings of these group secretaries at regular intervals, we address them and hear their complaints and suggestions. Apart from that, we are in daily contact with individual members who come to our offices, who write to us, who make criticisms and suggestions and we evaluate every one of these and act on them where it is considered appropriate. In addition, our development officers regularly address meetings of organised groups, such as the Irish Countrywomen’s Association, Macra na Feirme, and organisations of this type.

Mr. O’Connell.—You must not forget that the Irish medical organisations are expected to keep a close eye on us too.

35. Chairman.—I am in a group but the group secretary never asked me if I was satisfied with the benefits or consulted me in any way. I wonder whether they really consult their groups?

Mr. Graham.—Many group secretaries are very assiduous and very interested in this whole philosophy and are quite vocal about communicating the needs of their members to us very frequently.

Mr. Ryan.—Much depends on the nature of the group. Some groups are large and diffuse. These people may be members of a common organisation, but most groups are very tight-knit and composed of people working in the same firm or plant. The group secretary is very often a highlyskilled person in the personnel area and he will bring any shortcomings to our notice in no uncertain way.

Chairman.—So it varies from group to group.

36. Deputy B. Desmond.—Coming back to the general relationship the VHI have with statutory bodies, such as the health boards, how satisfactory is your relationship with them?

Mr. Ryan.—Our relationships are very cordial and satisfactory. Everybody in the health care field tends to know the officials in all the various organisations and there is a very easy flow of information. In practice, we do not have a lot of dealings with the health boards. We deal with them as proprietors of hospitals and their officials, if they have a need, come to us about day to day matters, such as the bad debt problem mentioned earlier. We carry out various surveys to see how it affects their billing procedures and so on. The board have the facility to make ex-gratia payments up to certain limits. The health boards have a similar facility and we have liaison to make sure there is no duplication of benefits. We also have liaison with them about their drug subsidies scheme, as we have a similar element in our benefits. Again, there is liaison there to make sure there is no duplication.

37. Deputy B. Desmond.—On the financial side, the Minister for Finance could cast an envious eye on a board, which pays no income tax as such in a statutory sense, and then cast another eye on subscribers who get income tax deducted on their contributions. There is a school of thought—to which I do not belong—which holds the view that you should not have these statutory exemptions but that they should be given in cash form and that the public expenditure involvement should be more noticeably obvious. Have you any thoughts on it? Have you quantified the benefit of that tax exemption to people like me? I am in a group scheme. We get the benefit of tax exemptions. It is quite considerable to a large volume of subscribers.

Mr. O’Connell.—They would have to be induced to do that. They already have to pay in another way.

38. Deputy B. Desmond.—A growing number of people want to be in the VHI anyway. I wonder what the value in cash terms of that tax exemption is?

Mr. Troy.—We have considered this. Mr. Graham will tell you about it.

Mr. Graham.—It is very difficult for the board to quantify this because without having details, of the income of their members the board would not be in a position to do this. Subscriptions are fully deductable. You save at the rate of tax that you are paying. We have no way of knowing how many people are paying at the 60 per cent rate and how many are paying at the 35 per cent rate. I would think there is a substantial sum involved. The board have always felt that there is a very important psychological aspect to the facility to be able to save something on tax. It is important that the State be seen to encourage people to be provident and to stand on their own feet. I believe, if this money was given directly by the State to the board, that very soon an individual member would begin to be unaware of it. When he is reminded, each year, in his tax return that he is getting something back from the State this is an important psychological advantage to him and a very important psychological selling point to the board.

39. Deputy B. Desmond.—There is the old counter argument that people do not pay for health care until they have to. Should there be a certain element of social compulsion, an obligation? The percentage of people’s residual savings invested in health care is relatively small.

Mr. O’Connell.—This week we got the message from the Revenue authorities on that point. They felt that the £50 has to be paid now, whether or not people are in the VHI.

Mr. Dennis.—I do not think that Deputy Desmond’s question necessarily meant that we are not taxed ourselves as a body on income of any sort. Is that part of the Deputy’s question?

Deputy B. Desmond.—On the general accounts side, there is an exemption from income tax.

Mr. Dennis.—If we go on the line the Deputy is pursuing that would only have a cosmetic effect. If we save any money or have additional funds because we do not pay any tax, we merely recycle that. We pass it back to our subscribers in the shape of increased benefits. We are not a body which is distributing any dividends or making profits.

40. Chairman.—You are a non-profit making organisation?

Mr. Dennis.—Our original mandate under the Act was, taking one year with another, to break even. At the moment we have a substantial investment income with very high interest rates. Our investment portfolio is something in the region of £20 million. That is bringing us in a substantial sum each year. That is, of course, being channelled back to the subscribers.

41. Deputy B. Desmond.—Do you find that there is any disincentive on the tax side to subscribers or do you point out the tax remission benefit? They will not get it until the end of the year. Then they claim it and then they get it but 12 months have gone by at this stage.

Mr. Dennis.—The better we can manage our investment portfolio the more we can extend the date on which we might have to put up subscriptions. For instance, as was mentioned earlier, with increased hospitalisation charges and increased medical charges, in theory each year we should have to put up our subscriptions. In fact we have gone a few years and we did not have to put them up because we had growth through increased advertising, increased marketing and development. We also have had a big inflow of funds in the last few years. We are getting this investment income which I speak of and our subscribers are benefiting to a large extent.

42. Deputy B. Desmond.—I make these points in the sense that the dogs are howling at the door about cut backs in public expenditure and social expenditure. In that sense it could be argued with some merit that there is some form of subsidisation from the State in that it gives the subscriber tax remission and the VHI a tax exemption. I have no doubt that wary eyes are probably being cast on this. How do you react to that opinion?

Mr. Dennis.—The argument against it is if we have to pay £1 million tax on our £2 million investment profit, then obviously we will have to put up our subscriptions by 5 per cent to balance our books. It would only have a cosmetic effect on our accounts.

Mr. Ryan.—I would like to add a point in relation to what Deputy Desmond said. VHI members as a body help in keeping public expenditure down because if they did not buy VHI cover and obtain this tax exemption on their premiums, and used the public ward system instead, it would be costing approximately £350 a week to keep and treat them there. If they take some of the pressure off the public system and go into a nursing home, to a semi-private or private bed, they then receive a State payment of approximately £50. It is quite a help in reducing public expenditure. On the question of the investment income the point could be made that the more successfully we can manage that, and have done in recent years, the more it tends to pay our administration expenses. We are, therefore, returning £1 for £1 to the subscriber.

43. Deputy B. Desmond.—When the Minister set the ceiling on health eligibility recently which affected certain substantial groups of manual workers, not necessarily low-paid workers, was there much reaction to you from the public?

Mr. Graham.—Very simply, we made the public ward scheme available to cater for that market.

44. Deputy B. Desmond.—Is that about 1 per cent of your subscribers?

Mr. Graham.—Yes. It is very tiny. Potentially it was a lot bigger. The fact is that when these people came in they wanted something better than the public ward scheme and invariably they bought plan A. We went as far as we could to sell the public ward scheme by very intensive canvassing in what we considered were the right places. We went to where these people worked. We had development officers starting work at 6 o’clock in the morning and talking to shift workers before they went on to shift and to others when they came off shift.

45. Deputy B. Desmond.—The public’s image of the VHI is one of semi-private?

Mr. Dennis.—It has changed a lot.

46. Deputy B. Desmond.—You do not take out VHI insurance for public ward purposes. Did you benefit by the acceptance by people?

Mr. Graham.—We did. When people looked at the schemes, compared them and took the tax remission into account, plan A was very attractive to them. It also gave them the extra freedom of choice. It presented them with an option. When one of their family was sick they then could decide whether they were going to be public or private. I believe that is why they opted for plan A rather than the public ward scheme.

Mr. Ryan.—Our membership has always spanned the entire spectrum of occupation. Many people in the VHI have very modest incomes. It has never been an elitist thing.

47. Deputy B. Desmond.—I had the impression from looking at the advertisements on television and in the papers, that there was a slight under-selling on the public ward side and as a result people opted for plan A. I do not necessarily fault the VHI for so doing, if there was that unconscious decision on your part. Comment?

Mr. Graham.—You have to bear in mind that, apart from the general advertising, we produced special literature on the public ward scheme and distributed that literature very widely throughout all our group schemes. Most of the people affected by this particular change would have been included in those group schemes. We felt we penetrated that market very well with this literature and with the personal contacts we made with these people. The more people we saw the more people simply seemed to decide that they did not want that basic scheme; they wanted something better.

48. Chairman.—Would you go so far as to say that you regard the public ward scheme as being a failure?

Mr. Graham.—No, I would not, because we are there to meet the needs of our members and we satisfied that requirement by making that scheme available. The fact that only a small number have it is irrelevant. That is what those people want and, as an organisation, we have made it available to them. They have bought it. Whether in practice it will be the right scheme for them only time will tell. I could see difficulties arising if people who enroll in the public ward scheme for some reason or another find themselves in a private hospital situation. They may face some disappointment when they realise that that scheme covers only professional fees. We may very well have a transferring element at that point.

Mr. O’Connell.—Nobody need feel that they are not covered in any way. If they are in a situation where they might have to meet professional fees it is the net for them: if they do not want to take bigger fees the net is there. If some of them decide they want better benefits and care, the net is there, just as the Health Acts net is there. Everything is covered.

49. Deputy L. Lawlor.—How do the hospitals, or the members seeking the type of treatment they opt for under the different schemes, cope with that sort of switching requirement?

Mr. O’Connell.—In the beginning there was a certain amount of confusion regarding assessing eligibility and things like that. That has now become more regularised. Each hospital has taken on its own job and has appointed people to do it. This is being done to the satisfaction both of the hospital authorities and the medical profession. Everything is going smoothly.

50. Deputy L. Lawlor.—Can the hospitals provide this service in the proper category of scheme?

Mr. O’Connell.—Yes. The hospital service is the same for everybody: it does not matter what scheme they are in. Once they are in the bed is looked after by the State in a public hospital, and the staff look after the patients. There is no difference there at all.

51. Deputy L. Lawlor.—One could assume that the facilities in the hospitals are capable of coping with large numbers. If your membership, which is so high, continues to grow, structurally can the hospitals cope with giving your members the facilities they opt for?

Mr. O’Connell.—The waiting lists are getting much longer—they have grown in the last few months—but are not anything like the British or Northern Ireland waiting lists. They are much higher than they were a couple of years ago.

52. Deputy L. Lawlor.—You play a very crucial role in forward planning vis-à-vis the Department of Health’s hospital building programme. Is it true that you can influence or give guidance on the type of facilities that will be needed, based on the type of schemes you provide?

Mr. O’Connell.—We could, but the Department usually have their own views on that. We certainly could give advice if we were asked what our problems were. That would come through our computer settings. We could say: “This is what is sought. Perhaps you could do something about it.” We cannot necessarily give gratuitous advice to the Department on what to do and what not to do.

53. Chairman.—It cannot be said that it looks as if your schemes are so successful that within a short time there will not be hospitals for your members?

Mr. Ryan.—We are aware of the fact that there are plans in existence, some at reasonably advanced stages, to increase the numbers of private beds in some institutions. Broadly speaking, we estimate that there are sufficient beds for the amount of insurance sold at the moment and, indeed, a certain amount of slack. As we said earlier, 30 per cent of the patients being admitted to private facilities are not insured. Our membership could increase up to about 1.2 million without altering anybody’s present pattern of treatment. There can be local bottlenecks and bottlenecks at certain times in the year, but broadly speaking we have about 25 per cent of the population and we estimate that approximately 25 per cent of the available acute beds are available for private care. It is a bit difficult to estimate the number of private beds in the health board hospitals because technically they are all public, but a certain amount of private practice is allowed and it is not easy to quantify it. Our best information is that there are sufficient beds available for private care in the health board hospitals to meet the demand.

54. Chairman.—The question I raised earlier about the flexibility of treating people, rather than keeping them overnight, should help to a very considerable extent. Has it been having an effect?

Mr. Graham.—There is no doubt it is having an effect on figures like the average length of stay in hospital. We would ask you to bear in mind that these new plans are not yet fully implemented and they will not fully apply to all our members until next April. It will be some little time after that before we begin to get reliable statistics on which we can make valid assumptions.

Mr. O’Connell.—Day beds and day stays do not diminish costs. What happens is this: demand grows, you keep more patients, give more facilities, but the costs are the same. The cost of treating a patient, even if he only stays in hospital for 24 hours, is still there. If you have to do five or six patients, it may be even dearer than taking one person in. The demand for day bed facilities has increased. This does not mean that the expense is any less. In a way, it costs the State a lot more.

55. Chairman.—The claims on you are just as high, or may be higher, but the demand for hospital beds will be lower?

Mr. O’Connell.—For beds yes, but the actual amount of people treated will be higher and when the State is paying for this, it costs more. Even though the beds are not taken up they give more facilities. It costs more to give better facilities to the ailing population, but it does not cost the individual more.

Mr. Dennis.—The average stay in hospital is being reduced somewhat.

Mr. Ryan.—It is constantly falling. This effectively increases the capacity.

56. Deputy B. Desmond.—I am concerned about the long term influence of the VHI on our hospital and medical costs. This is something we regard as needing profound examination. Do you have any views on this? There seems to be a popular assumption that when people apply for VHI they see the world in terms of medical costs. When you get the bill you send it to the VHI who do not pay it but they send you the cheque. There is no direct payment to the hospitals. One does not have to send a receipted account. It has been argued— I am not saying I share the argument— that, because of the existence of the scheme and incentive for hospitals to apparently send you anything they like in terms of costs, the whole system is not a cost conscious one. What do you think of that argument?

Mr. Graham.—I may get the answers slightly in the wrong order here. We would consider, for example, that it is very important that the patient should be aware of the cost of his treatment. We feel that it is a very important principle.

57. Deputy B. Desmond.—May I interrupt you? Once the patient has paid his premium, once he has indemnity, once he knows that he is covered, he does not give a damn what the cost is. You are going to get the bill ultimately and he is covered. He is delighted and thanks God on his knees that night that he is covered. Ultimately, what the anaesthetist, the consultant and the others charge is not his worry. Is that not so?

Mr. O’Connell.—That is the argument.

Mr. Graham.—We still feel it is terribly important for any patient to be made aware of the cost of his treatment. I would apply that to public patients as well. Every patient who uses expensive medical resources should be told the value of the treatment he is receiving.

58. Deputy B. Desmond.—Should not the VHI be in a position of having some real control over such costs?

Mr. O’Connell.—They have. If I send in a bill as a surgeon to VHI for an ingrown toe nail, the patient is very quickly told by VHI: this is all you will get.

59. Chairman.—That is it in practice. Say, a surgeon has sent me a bill for 200 guineas for something, which VHI say that £50 is really correct, and I paid the surgeon 200 guineas. When I go to the VHI to recover and they say that that is too much, what happens?

Mr. Graham.—We will never say that. We will provide you with the benefit you are entitled to. If that happened to be less than the fee you have been charged, obviously you would wonder whether in fact you might have been overcharged or whether you had enough insurance. One way or the other it would create a market force which is significant. We still have sufficient competition here among the professional people in medicine for market forces to be important.

60. Chairman.—Have I any redress as a member if I get a bill that it so happens is more than it should be, but I paid it, and then I sent the bill to you? Have I any redress?

Mr. Graham.—On the fund, the answer would be no. The redress, if that is the correct word, would obviously be against the person who made the charge in the first place. It could be queried with the person. It might very well transpire that the benefit had resulted from some wrong description of the procedure carried out. That is possible. Our board will review that benefit if that is the case.

61. Deputy B. Desmond.—One talks about the market force. It could be argued that certain segments of the medical profession are not subject to market force, that they are effectively in a monopoly situation. It could be equally argued that certain areas of hospital maintenance in private hospitals are in a very powerful position to adjust their costs, whether real or not. What do you think of those arguments?

Mr. O’Connell.—It is the public hospitals that lead the private hospitals in their charges. We have many private hospitals that are not charging anything like the public hospitals.

62. Deputy B. Desmond.—That does not surprise me. I have grave concern about costs even in the public hospitals. You have authority—you should have greater authority—to be a very powerful watchdog over costs. That is a power which evolved on you but perhaps through lack of Oireachtas——

Mr. Dennis.—It is there by implication. We are monitoring and keeping a very close eye on the various bills that we receive. If we find that there is a pattern emerging where doctor X is always 25 or 50 per cent more than somebody else for taking out a person’s appendix, it becomes very obvious to us after a while. I do not think in the maintenance end it would apply quite as much because they are standard charges.

You may get somebody who is a malingerer——

63. Deputy B. Desmond.—Not even deliberate malingering but there could be an attitude that if one goes to hospital, VHI might add on the extra few days?

Mr. Dennis.—Those are pretty general questions that we get quite frequently. The classic theory sometime ago was that you sent in any bill you liked to the VHI and they paid it. This was never true. The classic reply always was that we could only give back what we took in. We can only redistribute what we have collected in the first instance in subscriptions.

64. Chairman.—You have reserves now?

Mr. Dennis.—This is only in the last couple of years.

Mr. Ryan.—We do not guarantee to cover professional fees. We simply make certain benefits available and we estimate how much cover people would need on average to cover those fees. The actual contract which the individual makes with his doctor is entirely a private contract. We have no function whatever in that. It would be very helpful if people discussed the fee with the professional man in advance. In practice they do not do this.

65. Chairman.—Discuss it with whom?

Mr. Ryan.—With the doctor.

66. Chairman.—What about discussing it with the VHI? Supposing either the hospital or the doctor has sent me a bill for such and such and I ring the VHI, will you say: “Wait a minute, that is a bit much”?

Mr. Ryan.—We would never say this. The fee which is charged to an individual is entirely a matter for settlement between himself and his doctor. In practice the patient never even asks what the fee is. He simply accepts the fee which is submitted and then accuses the VHI of being inadequate. This only happens in a small number of cases. By and large, the fees tend to approximate very closely to our benefits. We could show you data on this. The correlation between the two is remarkable. On the question of excessive maintenance, this rarely occurs mainly because of the success in marketing the scheme. The increasing numbers seeking care in these beds is forcing the average stay down. This is demonstrable and it is published in our reports from year to year. I do not think that is a problem any more. One of the features of the success of the scheme is that it has made the private end more efficient. It compares very favourably with the average stay in public beds. The other point I wanted to make in answer to Deputy Desmond was that when you are talking about financing health care, you can only talk really in terms of two systems either voluntary payments or involuntary payments through tax. One could argue that the voluntary system is more responsive to medical inflation because ultimately it comes back to the patient’s pocket in the form of an increased premium so he has greater control in what he is prepared to pay.

67. Deputy B. Desmond.—The proposal to change to the direct payment system on receipted accounts and so on is favoured by and large. It seems to be quite logical that you change the system?

Mr. Ryan.—We could do this. It is now becoming feasible on our new computerised system. It will, in the long run, depend on what the members want us to do. It seems to be very important to some members to be able to pay their bills. Some of them will resist direct payment for that reason.

68. Deputy B. Desmond.—Do you send a cheque to the subscriber? Would you consider sending out an itemised cheque relative to the particular payment?

Mr. Graham.—I would ask you to bear in mind that up to now, where we were dealing with the old unit system, we had a situation where we were not paying every claim in full; in fact many of them were underpaid to a considerable degree. In that situation, to make direct payments to hospitals would have been a useless exercise because the hospital would have had to claim the unpaid balance from the patient and it might not have been successful. With the new indemnity plans this idea is much more attractive because we could now be paying the hospital bill in full. Assuming that we get the authority of our members to do it, we, as an organisation, should be able to do that before the end of next year.

69. Deputy B. Desmond.—I want to discuss, on a general basis, the additional premium relative to children. Three years ago one of my children was in a public ward in the Children’s Hospital, Crumlin. The problem of catering for the different requirements of the various members of a family seems to arise from global coverage. It has been suggested that, in that context, families tend to over-subscribe.

Mr. Graham.—The subscriptions we are charging for children reflect our claims experience arising from children’s complaints and the usage of different types of hospital accommodation.

70. Deputy B. Desmond.—I presume your experience in this area would be taken into account?

Mr. Graham.—We have very good information on the illness rates relating to different age groups.

71. Chairman.—One consumer organisation wrote to us, the Association for the Welfare of Children in Hospital, and they make the point that

mothers who accompany their young children to hospital are not covered by VHI benefits. Mothers are often charged for accommodation, sometimes at the private patient rate.

Have the VHI considered doing something for that kind of situation?

Mr. Ryan.—At the moment we contribute to the cost of the mother’s stay with a young child, but only where we see a genuine medical need and where the charge for the mother is reasonable. We encountered cases where the mother might share a private room with a small infant, where her presence might relieve the hospital of some of the nursing duties or where there may have been a medical need —for instance, following eye surgery. On some occasions we found that both mother and child were charged the full rate for a private room whereas by definition it had become, at best, a semi-private room. We thought that was excessive. If hospitals provide these facilities and where there is a genuine need, we would certainly go along with it because we consider it to be highly desirable.

72. Deputy B. Desmond.—What has been your experience on the maternity side in terms of the new plans?

Mr. Graham.—Unfortunately, it is much too soon to say. Our claims pattern has already been disturbed by the postal dispute earlier this year. We started to phase people into the new plans from April, but it will be next April before they are all in, and it will be some time after that before we have any reliable statistics on the maternity side.

73. Deputy B. Desmond.—Are you going to manage to maintain your ratio of administrative expenses right into the eighties?

Mr. Graham.—It is dependent on growth, of course. If the subscription income continues to rise, then we certainly would hope to keep our administration under 8 per cent. We are very conscious, as an organisation, of eliminating unnecessary administrative procedures and keeping paper to an absolute minimum. We are there to give a service and to give it in the most sympathetic way possible to our members, and we try to do it with the minimum of bureaucratic approach to the job. I believe that has helped us to keep staff down.

74. Deputy B. Desmond.—One of the things which struck us in our examination of various bodies is the variation in the investment portfolios of the different bodies and the extent to which, in some instances, there seems to be very rigorous control. What is your experience? Have you developed your own internal strategy in that regard?

Mr. Dennis.—Up to a few years ago, when we had a small surplus of money to invest, we managed it ourselves. Six or seven years ago we appointed an investment bank to manage it for us. By and large, they are managing £13 million out of the £20 million. In the last year, because we had a big inflow of money, and with interest rates the way they are, we decided to manage some of it ourselves. This has enabled us to compare their performance against ours. Obviously, if we can out-perform them we can have them across the table to account for themselves. This field has become very professional because when you are handling moneys of that size you need specialists to do it for you. At the moment, because deposit rates are so high, we can place the money ourselves and make a comparison of how we are performing against our professional advisers.

75. Deputy B. Desmond.—On the industrial relations side, what would be the reaction to having some worker-elected representatives on your board?

Mr. Graham.—That is something our board has not considered, because I do not think it was referred to in the 1977 Act. We have not considered that point.

76. Deputy B. Desmond.—Have your industrial relations been satisfactory?

Mr. Graham.—Yes. We have close consultation between staff and management on a very regular basis and we try to identify areas which may create problems and try to deal with them. We exercise a bit of preventive medicine in that area, hopefully successfully.

77. Chairman.—For two years, in the middle seventies, you had a deficit. Have you got that out of your system? Are any of the factors which were present at that time still there, or do you feel you are satisfactorily balanced now?

Mr. Troy.—We had deficits of £266,000 and £131,000 in 1974 and 1975. As a result our reserves were reduced to £74,000, which we thought at the time were clearly inadequate. We increased the premiums by 15 per cent and eventually the balance was restored. The deficits in themselves did not create any difficulties for us at the time, but we felt that if these deficits continued we might be in difficulty. We increased the subscriptions in 1975. Since then, with the increase in new members and the substantial increase in our investment income, we have suddenly found that all these difficulties have disappeared. Our reserves of £74,000 in 1975 have now grown to £5 million, due to new members and to the high rates payable on our investment income.

78. Chairman.—When you talk about reserves is that over and above what you might regard as an actuarial computation?

Mr. Troy.—When I say reserves I mean the difference between our assets and our liabilities.

79. Chairman.—Having made provision for all the likely claims, you have that in reserve?

Mr. Troy.—Absolutely.

80. Chairman.—Would that not seem to be contrary to your terms of reference which say, roughly speaking, taking one year with another, you should just break even? Are you entitled to have reserves? Are you strictly speaking required to have reserves?

Mr. Graham.—We are required by the Act. The importance of reserves in health insurance generally is that they provide time in which to study emerging trends without having to take precipitate action. We adhere to a figure which equates approximately to three months claims as our reserve policy. We have now achieved that figure, which was our target.

81. Chairman.—May I take it then that you would not feel the need to increase your reserves beyond that figure or approximately that figure?

Mr. Dennis.—Not necessarily.

82. Chairman.—Would it be a ratio to your turnover?

Mr. Dennis.—There are various shades of opinion about this in health funds throughout the world. Some of them think they should have one year’s claims as a figure for reserves, some people six months. We never had any strict policy about it. We decided after the deficit in 1972-73 that we should try to build up reserves of some sort. Just as a rule of thumb, we decided to have three months claims payment as something to aim at. We did not necessarily make a decision that that is what we would confine ourselves to. For the time being we are looking at it. Deputy Desmond referred to some of the longer term planning. There is quite a number of areas in which we could become involved. For instance, some of our counterparts in the UK and on the Continent and even America and right throughout the world have become involved, either directly or indirectly, in hospitals and nursing homes. Apart from increasing benefits there is quite a number of areas, including preventive medicine, in which we could use some of those funds.

Chairman.—Thank you gentlemen. That was very informative.

The witnesses withdrew.