Committee Reports > List of Committees > Joint > 1980 > Committee on Commercial State-Sponsored Bodies > Report No. 09 - Voluntary Health Insurance Board

APPENDIX 5

WRITTEN ANSWERS PROVIDED BY THE VOLUNTARY HEALTH INSURANCE BOARD TO QUESTIONS PUT TO IT BY THE JOINT COMMITTEE SUBSEQUENT TO THE TAKING OF ORAL EVIDENCE ON 13 DECEMBER 1979

1. Question: What is the VHI reaction to the suggestion that members of VHI may purchase cover for private treatment, or indeed semi-private treatment, and yet find that such facilities are not available to them in the event of illness?

Answer: A number of points may be made in answer to this, vis.

(a) In its advertising and literature, VHI does not promote any one Plan in preference to the others. The cover afforded by each Plan is described in simple terms and the member makes his own choice.

(b) As stated in answer: to Question No. 53, during the taking of oral evidence, the Board estimates that there is a sufficient stock of semi-private and private beds to accommodate a VHI membership of approximately 1.2 million persons.

(c) The level of comment or criticism which the Board has received from its members regarding this suggested difficulty has been negligible.

(d) Not every member buys the top Plan (Plan C), because he necessarily intends to use a private room on each occasion, but rather because he wishes to be assured that he has sufficient cover to guarantee complete indemnity irrespective of the type of accommodation he might have to occupy in the event of sudden illness. The insurance aspect of VHI is uppermost in his choice rather than the purely benefit aspect.

(e) It is not possible to judge precisely a member’s intentions with regard to cover from a simple observation of his choice of Plan. Some members would, for example, choose Plan B although intending to use private accommodation on the grounds that they want partial rather than full cover.

(f) It must also be borne in mind that sometimes the nature of the ailment will dictate the bed type which a patient may occupy, especially during the acute phase of an illness, but the member may have every intention of spending his convalescence in private accommodation. An example of this would be the case of open heart surgery.

(g) In the surveys carried out in private facilities it has been found consistently over a number of years that approximately 30% of those seeking admission have not got VHI cover at all. It is therefore possible to sell private accommodation cover to such people without affecting the availability of beds.

(h) It must also be borne in mind that the introduction of the indemnity plan has not introduced any new element into the situation, as under the old maintenance units system many members bought units sufficient to cover private accommodation, but in the event of sudden illness had to occupy a semi-private bed and vice versa. Because it is known that not all members who purchase cover for private rooms, succeeded in being admitted to such rooms, both the old maintenance units and the present Plans are costed at a rate lower than would otherwise have been necessary. Systems have been set up to monitor the usage of the various Plans and when VHI has acquired sufficient data, there may be differential adjustments to the cost of each Plan.

2. Question: It has been represented to the Joint Committee that VHI subscriptions are expensive. What is the VHI view in the matter?

Answer: This may be approached under two headings. Firstly, one must ask if the VHI administration element is unduly high, and here the answer must be that by international standards in the health insurance industry the fraction of turnover used by VHI for administration is extremely small. It is indeed small by comparison to administration costs in any business. There is therefore no scope for reducing subscription costs in the area of administration. The second aspect which might contribute to expense is the possibility of unnecessary treatment or fraud. We have kept abreast of the literature regarding utilisation review and we have seen statements, particularly from North America, to the effect that each dollar spent on utilisation review saves seven dollars, but the point must be made that much of this saving seems to come in the area of detection of fraud. We have already stated to the Committee that the degree of fraud in health care in Ireland is negligible and the attitude of the providers of medical services has always been extremely responsible. We very much doubt therefore that expenditure on utilisation review would yield any significant saving to our members and would, more likely, increase the administration cost. With the increasing sophistication of our computer equipment, it will be possible for us to study medical profiles and to make information available to the providers of services, which may enable them to increase their efficiency. The major influence on the increase in subscriptions over the years is the fact that medical costs have been rising at a greater rate than the general rate of inflation. This has been contributed to in part by the fact that it has been Government policy over a number of years to approach the position where the actual charges made to patients, for semi-private and private facilities in Public Hospitals, equate more closely with the true costs. In earlier years a greater degree of hidden subsidy of these costs masked the true situation. In summary, all are agreed that medical services are an expensive item and consequently the insurance contributions to cover them must also be relatively expensive. If, however, one compares a VHI subscription with an individual’s expenditure on sundry items such as cigarettes or newspapers, the cost of VHI appears extremely reasonable. One’s concept of what is “expensive” is very much a personal thing and varies from individual to individual.

3. Question: Would the VHI amplify the answer given in oral evidence to Question 58 concerning the control of medical costs?

Answer: To amplify the situation with regard to Question No. 58, in the taking of oral evidence, we would like to say that when VHI came into existence in 1957 the schedule of benefits was designed to cope with the existing professional fee pattern. Initially, therefore, it is true to say that the prevailing fees determined the VHI schedule. At that stage the schedule was of course in a very rudimentary form, classifying operations as being simply either minor, intermediate or major, but over the years development took place and a certain amount of re-classification was done and new procedures were added as they were developed. When adding these new procedures. VHI was guided to a great extent by relativity studies from abroad.

Once the schedule had come into existence, however, it became something of a regulatory mechanism as, in striking their particular rates of fee, individual doctors obviously took cognizance of what the patient could recover from VHI. VHI members in their turn tended to increase their cover only at the rate recommended by VHI as being necessary to allow for inflation. To the best of our knowledge the schedule has met with broad acceptance, both by the patients and by the medical profession, over quite a number of years.

19 February 1980