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

NINTH REPORT

VOLUNTARY HEALTH INSURANCE BOARD

I GENERAL BACKGROUND

(a) History

1. The Health Act of 1953 expanded the free and subsidised Health Services provided by the State, and at the same time extended eligibility to a much wider class of the public. A large fraction of the population, however, remained ineligible for these services. In the same year a commercial insurance company attempted to introduce a voluntary health insurance scheme, but subsequently decided to discontinue it after less than two years. Also in 1953, the Irish Medical Association requested the Minister for Health to promote a scheme of voluntary health insurance. An Advisory Body, which was appointed by the Minister for Health in 1955, reported in 1956¹ its recommendations that a scheme of voluntary health insurance be established by a non-profit organisation and that the State be prepared to guarantee its solvency.

2. The Government accepted the main recommendations of the Advisory Body, and the Voluntary Health Insurance Act was enacted on 5 February, 1957, providing for the establishment of the Voluntary Health Insurance Board to make and carry out schemes of voluntary health insurance. The first members of the Board were appointed on 11 February, 1957, and the Board offered insurance cover to the public for the first time on 2 October, 1957. Public response to the scheme was greater than expected, and in fact it took some weeks to process the initial surge of applications. By 28 February, 1959, over 53,000 persons were covered by the Board’s various schemes (Appendix 1—Table B).

3. VHI, as it is known, has been successful by most standards. Membership has grown continuously throughout its life and stood at approximately 800,000 in December, 1979 (see paragraph 37). The Chairman of the VHI told the Committee that the original objectives of the VHI, as outlined in the 1957 Act, have in the Board’s view been fully met.² With the exception of three years, revenues have exceeded expenditures (see paragraph 34), and there have been few serious financial problems. Benefits offered have continued to grow (see paragraphs 16, 17 and 18), and have met with favourable public response. The VHI scores well on accepted tests of insurance efficiency (see paragraph 36). Industrial relations are good, there having been only one minor dispute in the Board’s history.

(b) Organisation

4. Members of the Voluntary Health Insurance Board are appointed by the Minister for Health, and authority over schemes of health insurance offered by the VHI is shared between the Minister and the Board. In its main submission to this Committee,³ the Board described the VHI as a “non-profit mutual health insurance organisation”.

5. The Board consists of a Chairman and as many other members to a maximum of four (which is the current number) as the Minister determines. The Chairman and other members are appointed by the Minister for a term of office not exceeding five years. Subsections (2) and (3) of Section 4 of the Voluntary Health Insurance Act, 1957, state,

“(2) The Board may make and carry out such other schemes of voluntary health insurance as it may think fit, subject to the consent of the Minister in regard to the scope and extent of the benefits.

(3) A scheme under this section may be amended by a subsequent scheme made by the Board, subject to the consent of the Minister in regard to any amendment relating to the scope or extent of benefits.”

6. The Board is empowered to set the premiums paid by subscribers. It is also empowered to appoint the senior management of the VHI. The chief officer of the VHI is the General Manager. Other members of senior management are the Deputy General Manager and the Financial Controller.

(c) Relations with the State

7. The State has not provided and does not now provide the VHI with any direct financial assistance. The recommendations of the Advisory Body notwithstanding (see paragraph 1), the State does not stand ready to cover losses. When the VHI was begun, the Department of Health provided it with a loan of £13,200 to cover starting-up expenses, but this was repaid, with interest at commercial rates, in the early years of the VHI.

8. However, the State provides the VHI with considerable indirect assistance. The Board is not required to pay tax on its investment income. More important is the fact that subscribers are permitted to deduct premiums, in full, against taxable income. The effect of this provision is the same, in terms of cost to the Exchequer and in aid to VHI and its members, as an explicit cash grant equal to the amount of tax reduction experienced by the members. No estimate exists, however, of the amount. The Deputy General Manager of the VHI told the Committee that he believed there was “a substantial sum involved”.⁴ To any individual subscriber, the cash value of the income tax provision is equal to the amount of the subscription premium multiplied by the subscriber’s marginal income tax rate, be it 25, 35, 45, 55 or 60 per cent. Because the VHI draws its membership disproportionately from among those with higher incomes (i.e., those with only Category III eligibility under the Health Services), it is fair to assume that many subscribers have relatively high marginal income tax rates. Hence it is conservative to estimate that income tax relief provides an indirect subvention to the VHI of at least one-third of its subscription income.

9. There is a point of view which holds that explicit cash subsidies are preferable to implicit ones, because they permit informed periodic review. In response to a question during the taking of evidence, the Deputy General Manager stated a preference for tax relief over an explicit subsidy, on what he described as psychological grounds. He felt that the tax relief provides the subscriber with an annual reminder that the State encourages and supports voluntary health insurance, whereas individual members would be less aware of a direct State subvention.

10. The VHI is designed to perform a “residual” function, filling gaps left by less than universal eligibility and less than comprehensive coverage of the State Health Services. In general, the VHI is complementary to such services. For example, when changes in eligibility for the Health Services were introduced in April, 1979, the VHI simultaneously introduced complementary changes in its own schemes (see paragraph 18). However, the VHI Board are not consulted in advance concerning changes in State health policies.⁵ Mr. T.C.J. O’Connell, a member of the VHI Board, told the Committee that the Board prefers not to offer gratuitious advice.⁶

11. The Minister for Health has arranged with the VHI for the latter to handle, as an interim procedure, Category II eligibility for employees with incomes between £5,500 and £7,000.

12. Under the Act of 1957, the Board has the duty of charging rates of subscription which will enable it to break even, taking one year with another. As a matter of policy the Board notifies the National Prices Commission of any increases in unit charges.

(d) Relations with others

13. In its main submission to the Committee,⁷ the VHI Board stated that the following are the main bodies with which it normally has consultation:—Department of Health; area Health Boards; all hospitals; Private Hospitals’ Association; Irish Medical Association; Medical Union; Irish Dental Association; and trade associations. This list does not include any group representative of subscribers, patients or the general public. However, in the course of the giving of evidence the Deputy General Manager stated that 75 percent of members are recruited through group schemes, and that the Board is in constant touch with group secretaries. The Board organises regional meetings of group secretaries at regular intervals, and hears their complaints and suggestions. In addition, VHI development officers regularly address meetings of organised groups, such as the Irish Countrywomen’s Association, Macra na Feirme, etc.⁸

II BENEFITS AND PREMIUMS

(e) Complementarity

14. Benefit schemes offered by the Board, and premiums charged, as of April, 1979, are shown in Appendix 2. It will be noted that the premiums charged for the three hospital plans are given in the Appendix as incremental to the premiums charged for the doctors’ fees coverage. The full charge for Plan A coverage, including doctors’ fees, for a single adult in a group plan, for example, is £33.52 (£10.92 + £22.60.)

15. The VHI is designed to perform a “residual” role in the Irish system of health care finance, filling in gaps left by less than universal eligibility for and less than comprehensive coverage by the public health services. When the VHI was established, an estimated 457,000 persons were not covered under either full or limited eligibility by the State Health Services. VHI made cover available to these persons. In addition, among those persons who were covered by full or limited eligibility, the State Health Services did not provide for certain benefits, such as private or semi-private rooms in hospital. VHI cover applied to a number of these benefits, leading many with limited eligibility to become subscribers. In general, the VHI is complementary to the State Health Services.

(f) Development of schemes

16. Since the introduction of VHI cover, schemes of benefits have been modified a number of times. There have been, however, three basic approaches followed. The initial scheme was limited to in-patient charges and fees, exclusive of normal maternity care, and to medical and surgical appliances. The Board offered three plans: a basic plan, costing £4 per year for adults and providing benefits for up to 10 weeks in hospital at up to £6.30 per week, somewhat less for children, and additional benefits for consultants’ fees and drugs and medicines (on an in-patient basis only); and two other plans, with higher premiums and higher benefit maxima. The three schemes were designed to cover treatment, respectively, in a public ward, a semi private room and a private room.

17. In 1962, the Board replaced the foregoing with the Unit System, which was designed to permit subscribers to select a level and set of benefits which met their own needs. Subscribers could elect from one to twelve units of each of two types of unit: Unit M which provided for hospital maintenance charges; and Unit T which covered the so-called treatment benefits, including consultant’s fees, x-ray and other ancillary charges, drugs and medicines, and appliances. Subscribers were permitted to elect any combination of units. The Unit System was offered because it was found that about one-third of VHI members had limited eligibility under the State Health Services, and hence had different requirements to those of the remaining two-thirds. In 1967 the VHI initiated a supplementary out-patient scheme, available at additional cost, only to subscribers of the hospitalisation scheme, which subject to deductions and an annual maximum covered general practitioner and specialist services, and a number of other expenses incurred outside of hospital. This scheme was expanded and re-named the “Home Scheme” in 1975. In that year the Board also introduced a short list of surgical’ procedures and treatments which were to be covered even where the subscriber did not stay overnight in hospital. Prior to that innovation there had been some criticism of a VHI provision that subscribers were reimbursed only for charges where there had been a hospital stay of 24 hours or more, a provision which, it had been said, encouraged unnecessary hospitalisation by inducing overnight stays where day or drop-in treatment would have sufficed (see also paragraph 20).

18. In April, 1979, a new scheme of premiums and benefits, as shown in Appendix 2, was introduced. Coverage is divided into two sections. One section covers doctors’ fees when subscribers are hospitalised. Subscribers must purchase at least fourteen units of cover in this section, and can buy more. In its 1979 brochure the VHI stated. “In our experience, 14 fee units should be adequate for professional fees in most instances.” However, subscribers are not guaranteed that doctors’ fees will be fully covered. The benefits per unit, as shown in Appendix 2, must be multiplied by the number of units in order to arrive at benefits. The Doctors’ Fees section of benefits can be purchased jointly with a hospital plan, or separately under the name, “Public Ward Scheme”—the name derives from the assumption that the subscriber will be availing of his or her entitlement under the State Health Services to free hospitalisation in a public ward. The VHI introduced the Public Ward Scheme at the specific request of the Minister for Health. According to the Board, fewer than 1 percent of subscribers have elected it. That is, over 99 percent opt for one or other of the three hospital plans. The other section of VHI coverage consists of hospital charges, with a choice of three plans, together with a number of benefits which subscribers can receive for services performed outside of hospital admission. Under the three plans subscribers are covered respectively, for charges for semi-private or private rooms in public hospitals, (Plan A), private rooms in public hospitals or semi-private rooms in private hospitals and nursing homes (Plan B); and private rooms in any hospital or nursing home (Plan C). According to the Board, these plans have been elected by approximately 24, 50 and 25 percent of subscribers, respectively. In addition to hospital maintenance, this section provides a number of out-patient benefits, including general practitioner and specialist fees, prescription drugs except as covered by the State Health Services, and “day surgery” i.e. surgery performed without admission to hospital for 24 hours.

(g) Commentary on new scheme

19. In a number of ways the new scheme of benefits and premiums marks a departure for the VHI. The new approach involves both advantages and disadvantages, but it has proved extremely popular with the public (see paragraph 37). The following commentary focusses on both pluses and minuses of the new scheme.

20. As noted, the new scheme introduces a number of new benefits, which are available only as a “package” with one of the hospital plans. One is maternity care benefit. In its terms of reference, the Advisory Body⁹ was called upon to consider whether voluntary health insurance ought to cover maternity care, and (with the dissent of two members) it recommended that such cover be provided. In the event, it was not provided by the Board at that time, except in the case of medical complications. Maternity is covered for the first time in the new scheme. It is part of a package of benefits which presumably some (e.g., single persons, the elderly) would not elect to buy if it were available only as a separate option. Similarly, as noted, the Home Scheme (paragraph 17) previously had been available as a separate option, whereas in the new scheme it is part of a combined package of benefits. In the new scheme, the short list of surgical procedures covered on an out-patient basis (paragraph 17) was expanded to a far longer list where so-called “day surgery” would be covered. The 24-hour rule, however, still applies for a number of non-surgical procedures.

21. Some of the flexibility inherent in the old Unit Scheme has been sacrificed in exchange for indemnity in the new scheme. In the Unit Scheme subscribers were free to purchase any number of units they chose, which permitted them to tailor their health insurance cover to their level of eligibility under the State Health Services. The Deputy General Manager of the VHI told the Committee that the old units system was beginning to break up, because it depended on members reviewing and up-dating their cover annually. As many people neglected to do so, they often found to their disappointment that VHI reimbursements did not cover their full medical costs, i.e., that they were co-insuring without having intended to do so.¹⁰ The new scheme overcomes this problem completely. In its main submission to the Committee the Board stated, “For the first time, the Board is now providing an indemnity scheme which guarantees total cover against hospital bills, provided the patient remains within the accommodation level at which he has opted to insure.” The indemnity covers maintenance and all ancillary charges. The indemnity does not apply to doctors’ fees (see paragraph 18).

22. The structure of the new scheme, together with its active and successful promotion, may generate an increase in demand for semi-private and private rooms in public hospitals, and rooms in private hospitals, so that at any given time the demand may exceed the supply. In response to a question, asked during the taking of evidence, whether the hospitals could cope with providing VHI members with the facilities they opt for, Mr. T.C.J. O’Connell replied that waiting lists were getting much longer, and that they had grown in the last few months and were much higher than they had been a couple of years ago.¹¹ The Assistant General Manager told the Committee that the Board estimates that there are sufficient beds for the amount of insurance sold at the moment, together with a certain amount of slack. VHI membership could increase to about 1,200,000 he suggested, without altering anybody’s present pattern of treatment. About 25 percent of available acute beds in hospital are available for private care; and VHI membership is approximately 25 percent of the population, according to the Assistant General Manager. He did concede that “there can be local bottlenecks and bottlenecks at certain times of the year.”¹²

(h) Other possible services and benefits

23. In a submission to the Committee, the Medical Union¹³ suggested that the VHI Board should see if it can play any part in the field of preventive medicine. In response to a question on this subject, the VHI told the Committee that they were unable to undertake such an innovation under the 1957 Act, but that with appropriate amendments to the Act and an adequate subvention for the purpose, it would be possible for them to undertake it.¹⁴ Mr. H. B. Dennis, a member of the Board, stated that should reserves grow further, relative to claims (see paragraph 35), preventive medicine was one possible area in which some of the reserves might be used.¹⁵

24. The VHI does not at present offer dental coverage (except for some types of oral surgery and the repair of dental damage resulting from accidents), nor does it have any plans to do so, though the matter has been examined by the Board on a number of occasions. It would not be economical for most people to buy insurance for routine dental care, since the premiums would cost approximately what they are now paying in dental bills, plus an amount for administration. In addition, the VHI would be reluctant to insure subscribers unless they had a satisfactory dental status at the time insurance was taken out, and few adults in Ireland are in that position.

(i) Method of payment

25. Claims are paid directly to subscribers. Some claims may be paid before the subscriber has paid his or her account with the hospital or doctor. This permits the subscriber to use the VHI benefit payment as a source of funds for the payment of the bill. The VHI is well known for, and prides itself on, quick payment of claims. The Committee received submissions from The Medical Union, the Southern Health Board and the North Western Health Board suggesting that the VHI either make payments directly to hospitals, or pay claimants on the basis of receipted accounts, in order to assure that the bills actually get paid.

26. In response to a number of questions asked during the taking of evidence the Assistant General Manager stated that the Board had always found that only a very tiny proportion of its subscribers had failed to pay their medical bills when they had recovered from the VHI; and that instances which at first appeared to fit that description ordinarily on closer inspection turned out to be something else. Some persons who claimed to be members of VHI were not. In some cases there may have been deliberate misrepresentation, but in many cases it was a matter of confusion, e.g., between voluntary contributions to social welfare and Voluntary Health Insurance. Some persons who were members had their claims rejected, e.g., because they had joined the scheme too recently to be eligible for reimbursement. Under the unit system, some members might not be adequately covered, and their reimbursement might only be enough to pay the doctor or the hospital, but not both.¹⁶ The Deputy General Manager stated that under that scheme, direct payments by VHI to hospitals would frequently have been a useless exercise, because in a great many instances the member’s cover would have been inadequate for the entire bill, and the hospital would then face the prospect of billing the customer for the balance. The Committee was pleased to hear him state that, with the new indemnity plan, the idea of direct payments to hospitals is much more attractive, because it is now the case that the hospital bill will be paid in full. Assuming that the Board gets the authority of its members to make direct payments, the VHI should be able to introduce this method of payment before the end of 1980.¹⁷

27. In a submission to the Committee, the Association for the Welfare of Children in Hospital (Ireland) stated, “mothers who accompany their young children to hospital are not covered by VHI benefits. Mothers are often charged for accommodation sometimes at private patient rate.” Commenting on this submission, the Assistant General Manager told the Committee, “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”. ¹⁸ The Committee welcomes this statement.

III MEDICAL COSTS

(j) Cost patterns

28. As elsewhere rising medical costs in Ireland have been the product of rising utilisation rates and increased prices, fees and charges. The rise in claim payments by the VHI have been influenced by these two, and as well by rising membership and more comprehensive coverage. In the 19 years 1958/59—1977/78 real claim payments per member, i.e., total claim payments, adjusted for inflation, and divided by the number of members, more than trebled. The average in-patient claim (Appendix 1—Table A) rose in constant 1970 prices from £53.60 in 1958/59 to £68.10 in 1968/69, an increase of 27 percent in ten years, and then to £80.30 in 1977/78, for an increase of 50 percent in the whole 19 years. (It is to be emphasised that these increases were relative to the average of prices, as measured by the Consumer Price Index. The nominal increase, i.e., in current prices, was from £33.50 to £200.60 over the same period, a rise of approximately 500 percent.) Equally spectacular was the rise in number of claims per member (Appendix 1—Table B), which reflects among other things higher utilisation rates and broader coverage. Annual claims per member rose from .047 in 1958/59 to .081 in the ten years ended 1968/69, and then again to .119 in 1977/78, an increase of more than 150 percent in nineteen years.

29. The average number of days in hospital per in-patient claim (Appendix 1—Table B) rose for the first dozen years of the existence of the VHI, reaching a peak in 1970/71. Since then it has fallen (as average hospital stays have fallen in general, in Ireland and elsewhere) to 11.4 days, which is lower than the 1959/60 figure, and 19 percent lower than at the peak. This figure seems likely to continue to fall in the foreseeable future. Average hospital stays per patient are comparable between the VHI and the Hospital In-Patient Enquiry (HIPE),¹⁹ which includes both VHI and non-VHI patients, but mainly the latter. In the most recent year for which both VHI and HIPE statistics are available, 1976, the average VHI stay was 12.2 days, while the average stay reported in HIPE was 11.0 days. However, when the category “mental disorders” is excluded, the HIPE average remains at 11.0, while the VHI average drops to 10.6. (The difference presumably reflects the absence in HIPE of psychiatric hospitals.) Thus there is no basis in these statistics to infer that VHI methods encourage wasteful utilisation of hospital facilities.

(k) Monitoring

30. The VHI, like most health insurance organisations abroad, pays the claims submitted to it so long as the claimant is insured, the item covered by the policy, and the amount is not excessive (see paragraph 32). There is no basis for any questioning by the VHI of claims on the grounds that the treatment or procedure was medically unnecessary, the time spent in hospital excessive, or the treatment not as cost-effective as alternatives available. That is, medical decisions are left in full to medical professionals. This approach has been criticised by Culyer and Maynard as follows:

“Like many other private, and indeed public insurance agencies in other countries, VHI has not exhibited any vigorous desire to contain costs by demanding more cost-effective therapies of the physicians. The physician has considerable power to determine the demand for his product, and, as for any other person or institution, such discretion can be mis-used. [There are] . . . potential gains to be derived from greater emphasis on therapy effectiveness and minimum cost procedures.”²⁰

31. In a supplementary memorandum²¹ to the Committee, the VHI state:—

“… 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 . . . . . The degree of fraud in health care in Ireland is negligible and . . . . . 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.”

The Committee accepts the Board’s view on this matter, but recommends that the position be reviewed periodically.

32. The VHI disseminates a schedule of fees which constitute the maximum that they would ordinarily pay on each listed procedure or treatment, such that were a consultant’s bill for a higher amount, the patient would have to pay the difference. This schedule, which is regularly updated to take account of medical inflation, is very influential in Ireland in the fees set by individual doctors, though of course they are under no compulsion to limit their fees to the amounts in the VHI schedule. The Deputy General Manager told the Committee that, where a consultant rendered a bill that exceeded the amount the VHI was willing to pay for the treatment given, the subscriber would have no redress from the VHI but would have to refer the matter to the consultant. However, he pointed out that it might transpire that the benefit paid by the VHI had resulted from some wrong description of the medical procedure carried out, and that the VHI would review the benefit if that were the case.²²

33. For a variety of reasons, most of them obvious, no health care system in the world finds it possible or desirable to rely on patients to pay medical bills from their own resources. Instead, finance is based on some combination of prepaid care (as in so-called “Health Maintenance Organisation”), voluntary health insurance, social insurance, and the exchequer, i.e., taxpayer finance. An apparently inevitable consequence appears to be that users of medical services are not cost-conscious. That is, when deciding whether, how, when and where to have medical treatment, they do not tend to take into account the relative costs of different courses of action. This is often given as one explanation for the rapid rise in recent years in medical costs. The VHI Board feel that it is important that patients, public as well as private, be aware of the costs of their treatment. (In fact, private patients, whether VHI subscribers or not, are aware of the charge for their treatment, not the cost, the difference being the State subsidies to private care. The State provides substantial current and capital grants to public hospitals, so that the consultant is in effect provided with certain subsidised facilities for his or her private practice. Since April, 1979, the State has also provided a subvention to maintenance costs of all patients in the private hospitals.)

IV PERFORMANCE

(l) Profitability

34. The performance of the VHI can be gauged in three ways: profitability; efficiency (or productivity); and growth. In all three the VHI does well, and in some does extremely well, by conventional standards. With the exception of a period in the middle 1970s, the profitability record is unassailable. The 1957 Act provides that, taking one year with another, the revenue of the Board from subscriptions together with its other revenues (if any) shall be sufficient to meet the charges properly chargeable to revenue. Thus neither an annual profit nor in fact an annual balance is required. In 21 full years of operation, the VHI has shown a deficit in only three—1967/68, 1973/74 and 1974/75, as shown in Appendix 3. The last two deficit years were in succession, however, and they brought the VHI’s reserves (assets less liabilities) down to the perilously low level of £74,630. (The Board believes that its reserves should equal approximately three months’ claims payments.²³ In 1975, £75,000 represented less than one week’s claims payments.) While the income/expenditure accounts returned to a surplus position in 1975/76, and have not shown other than surpluses since then, the VHI reported losses on their insurance operations in both 1975/76 and 1976/77; deficits which were, however, more than offset by investment income and profits on the sale of investments, as shown in Appendix 3. Thus the VHI actually experienced four successive years of losses on underwriting. In commenting on the 1967/68 deficit, the VHI stated in its annual report, “The deficit was caused fundamentally by the fact that the incidence of in-patient hospital treatment, which had remained virtually unaltered for three previous years, increased by approximately 5 percent in 1967/68.” The 1974/75 annual report attributed the deficits for 1973/74 and 1974/75 to “the effects of inflation and an increasing claims rate.” Losses on underwriting in the two succeeding years are not explained in annual reports. The Chairman of the VHI told the Committee that the deficits in themselves did not create any difficulties, but their continuation would have, and for that reason the Board had raised its premium rates in 1975. He added that “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.”²⁴

35. In its annual report for the year ended 28 February, 1978, the Board reported reserves of £2,584,503, which was equal to approximately two months’ claims. The Chairman of the VHI told the Committee that the reserves had now grown to £5,000,000.²⁵ This is well over three months’ claims at 1979 claim levels. Mr. Dennis, a Board Member, stated that the guideline of reserves equalling three months’ claims is merely a rule of thumb or a target, and that health insurers have varying views on the appropriate level, some arguing for six months’, some for one year’s claims.²⁶ The Deputy General Manager stated that the importance of reserves is that they provide time in which to study emerging trends without having to take precipitate action.²⁷

(m) Administration ratio

36. Efficiency or productivity of insurance enterprises is conventionally indicated by the ratio of administration expense either to subscription income or to total income. The VHI performs extremely well by either standard, as is indicated in Appendix 1—Table A. Administrative expense has consistently been below 20 percent of both total and subscription income except at the very beginning of the VHI, and has been below 10 percent since 1968/69. Part of the continuous decline of these two measures reflects the rise in medical costs relative to VHI administrative costs, but a very large part certainly reflects improvements in efficiency, in which the VHI Board and staff take justifiable pride. Mr. Dennis told the Committee that one reason is that the VHI has always kept up to date with computer technology and utilisation, at first using an Aer Lingus computer by contract arrangement, and subsequently acquiring its own.²⁸ The VHI has recently gone over entirely to processing by computer hospital claims under the new plans.

(n) Membership growth

37. The growth of the VHI has been really quite remarkable, as is shown in Appendix 1—Table B. Membership, measured in terms of persons insured, doubled in the first two years, 1958/59 to 1960/61, doubled again in the next four, doubled again in the next six, and almost doubled again in the next eight. In addition to the figures shown in the Appendix, which are based on annual reports, the Deputy General Manager told the Committee that membership grew by 52,000 in the year ended February, 1979, which was at that time a record gain for a year, and that in the first nine months of the year 1979/80 (which began on 1 March, 1979), membership grew by another 105,000, to more than 800,000²⁹—approximately 23 percent of the population. The number of claims has risen faster than the number of members (Appendix 1—Table B). This growth reflects not only growth in membership, then, but enlargement of benefits and rising demands for health care as well.

38. The VHI stated that a survey indicated that about 30 percent of all people using private hospital facilities in December 1979 were not insured by VHI.³⁰ This indicates that the VHI has not yet approached the saturation point in terms of membership growth. While a large majority of VHI subscribers have only Category III eligibility under the State Health Services, a significant minority have Category II eligibility.³¹ If the VHI continues to increase the number of its subscribers from among those with Category II eligibility, its potential membership could be very large indeed.

V PERSONNEL AND PLANNING

(o) Personnel

39. In addition to 51 managerial and supervisory positions, there were 150 staff positions listed in the main VHI submission³² to the Committee. With the exception of specialists, positions are filled by recruiting school leavers and promoting from within. There have been few industrial disputes in the history of the VHI. There are no employees on the VHI Board.

(p) Planning

40. While the VHI, like almost any organisation, does plan ahead, there is at present no formal planning procedure and no formal written plan. Preliminary enquiries have been made, however, with a view to more formal long-term planning, with the aid of specialists consultants. In its main submission to the Committee, the Board stated that its main pre-occupation over the next few years will be in the areas of technology and marketing.

VI CONCLUSION

41. The Committee congratulates the Board, the management and the employees of the VHI for their successful, indeed exemplary, performance as a State-sponsored body. The Committee recommends that the VHI bring its considerable talents and energies to bear, in future years, on the important task of containing medical costs.

42. Written submissions received from the VHI (two), four of the Health Boards, The Medical Union and the Association for the Welfare of Children in Hospital (Ireland) are reproduced in Appendices 4 to 11. All the submissions proved extremely helpful to the Committee.

43. The Committee wishes to express its thanks to Professor A. Dale Tussing of the Economic and Social Research Institute for the valuable advice and assistance which he gave at all stages of this enquiry.

Chairman of the Joint Committee

26 March 1980

¹Report of Advisory Body on Voluntary Health Insurance Scheme (Prl. 3571).

²See Evidence (Question 5)

³See Appendix 4

⁴See Evidence (Question 38)

⁵See Evidence (Question 30 and 31)

⁶See Evidence (Question 52)

⁷See Appendix 4

⁸See Evidence (Question 34)

⁹Advisory Body on Voluntary Health Insurance Scheme—see paragraph 1 of this Report.

¹⁰See Evidence (Question 25)

¹¹See Evidence (Question 51)

¹²See Evidence (Question 53)

¹³See Appendix 10

¹⁴See Evidence (Question 18)

¹⁵See Evidence (Question 82)

¹⁶See Evidence (Question 26)

¹⁷See Evidence (Question 68)

¹⁸See Evidence (Question 71)

¹⁹Department of Health, Statistical Information relevant to the Health Services; Various Years

²⁰NESC, “Some Major Issues in Health Policy”, Report No. 29, Page 48.

²¹See Appendix 5

²²See Evidence (Question 60)

²³See Evidence (Question 82)

²⁴See Evidence (Question 77)

²⁵See Evidence (Question 77)

²⁶See Evidence (Question 82)

²⁷See Evidence (Question 80)

²⁸See Evidence (Question 12)

²⁹See Evidence (Questions 1 and 2)

³⁰See Evidence (Question 2)

³¹Definitions of Categories I, II and III are contained in “The Health Services of Ireland” (B. Hensey): IPA, 1979

³²See Appendix 4