The Healthcare Funding and Delivery Challenge

25th November 2010

1. Healthcare Expenditure Overview

2. Public Healthcare Expenditure 1990 – 2010

3. Economic Overview and Consequences for Healthcare Funding

4. Ageing of Population

5. Impact of Ageing on Healthcare Services

6. Sustainability of Current Funding Model

7. Sustainability of Current Delivery Model

8. Conclusion

Contents

• Total annual spend (including social/voluntary care) of €18.3 billion.

• Approximately 78% funded through taxation system.

• Significant growth in expenditure over last twenty years.

Healthcare Expenditure Overview

1990

Billion

1999

Billion

2010

Billion

Funded by Exchequer €2.0 €4.8 €14.1

Health Insurance €0.2 €0.4 €1.6

Funded by Individuals €0.4 €0.9 €2.5

€2.6 €6.3 €18.3

Exchequer Funded Healthcare

1990

€ Billion

1999

€ Billion

2010

€ Billion

Hospital Care 1.0 2.4 4.8

Primary Care Re-imbursement schemes 0.3 0.8 2.8

Care of Elderly N/A (1) N/A (1) 1.3

Disability Services 0.2 0.5 1.5

Mental Health Services 0.2 0.4 0.7

Other Services/Central Costs 0.3 0.7 3.0

2.0 4.8 14.1

Analysis of key healthcare areas funded by HSE

(1) included in other services

• €15 billion fiscal adjustment by 2014.

• Likely to involve €7- €8 billion reduction in day to day expenditure, €2 - €3 billion reduction of capital expenditure and €4 - €6 billion increase in taxation.

• Healthcare expenditure currently accounts for circa 30% of gross day to day expenditure.

• A total reduction in day to day expenditure of €7 - €8 billion implies annual healthcare spend of €11.9 billion in 2014 – reduction of €2.2 - €2.4 billion.

Economic Overview and Consequences for Healthcare Funding

• Population did not significantly age over last twenty years.

Ageing of Population

• Population will age significantly over next twenty years.

1990 2000 2010 Increase over 20 years

Society members over age of 65

370,000 420,000 510,000 140,000

2010 2020 2030 Increase over 20 years

Society members over age of 65

510,000 792,000 1,000,000 490,000

Ageing of Population

• 280,000 additional members of society over the age of sixty five in next ten years.

• Greatest increase in % terms is in older members of society aged over 85.

Age Band 2010 2021 % Increase

65 – 74 305,000 438,000 43%

75 – 84 157,000 248,000 58%

85+ 48,000 106,000 120%

510,000 792,000 55%

• Provision of cancer care expected to grow at 7% per annum over next 25 years – NCRS.

• The number of adults with chronic conditions will increase by 40% by 2020 – DOHC.

- 50% increase in chronic heart disease

- 48% increase in strokes

- 62% increase in diabetes

• Individuals with chronic healthcare conditions are expected to live twice as long with chronic conditions - Centre for Ageing Research and Development.

Chronic Conditions

• 10% of patients admitted account for 50% of in-patient bed utilisation within public hospitals.

• Typically they are older (60+) and have chronic health conditions.

• 50% of Vhi Healthcare’s healthcare expenditure is accounted for by meeting the healthcare needs of its customers over the age of sixty.

• An increase of 280,000 members of society over the age of sixty five over next ten years implies a very significant increase in demand for hospital services under current healthcare delivery model.

• Increase in number of individuals with chronic conditions implies an increase in demand for hospital services under current healthcare delivery model.

Current and Future Impact of Demographics/Chronic Conditions of Healthcare Expenditure

Primary Care Re-Imbursement Schemes

1990€m

2000€m

2009 (e)€m

Total Expenditure 263 806 2,696

Expenditure by scheme

GMS 200 515 1,767

Drug payment 21 141 335

Long-term illness 11 42 148

Hi-tech drugs - 52 312

Dental 21 38 78

Others 10 18 56

263 806 2,696

Prescriptions issued

GMS 14.6m 21.7m 50.3m

• Increase of 280,000 over the age of sixty five over next ten years implies significant cost increase in future GMS funding under current approach.

• Likely development of new high tech drugs implies future cost increases in hi-tech drug schemes.

• Growth in chronic conditions implies further growth in long-term illness schemes.

Impact of Demographics / Chronic Conditions

• Current annual funding of €1.3 billion.

• Annual budget under fair deal nursing scheme set at €980m.

• Remainder of budget – Home care packages / home help packages / ancillary services.

• Significant future increase in demand for services:

- Ageing of population particularly in older age groups

- Reduction of number of family carers as population ages

Care of Elderly

• Demand for and utilisation of services continues to increase but implied public healthcare expenditure is €11.9 billion in 2014.

• Issue is more complex than simply substituting a tax based annual budget funding model with a UHI / fee per service model / money follows the patient funding model.

• If utilisation of current hospital services / current primary care services / care for elderly service etc. continues to grow at historic levels it will be unfundable regardless of funding model.

• Resources are allocated on the basis of historic budget allocations / current utilisation trends rather than on the basis of a valued based health care delivery.

Sustainability of Current Funding Model

• Services delivery is currently fragmented.

• Limited integration of services.

• Limited focus on managing chronic conditions within community setting.

• Current delivery model is not funded on the basis of a value based healthcare delivery e.g. care of elderly.

• Home care / Home help programmes – annual spend €300m.

Sustainability of Current Delivery Model

Other costs of elderly care:

In-patient hospital care public €2,400m (est.)

Long-term care – fair deal €980m (est.)

Primary care re-imbursement schemes €1,200m (est.)

Private insurance in-patient care €700m (est.)

Total additional expenditure on care of elderly €5,280m

• Funding and care model needs to be fully integrated.

• Separate payor and providers.

• Set up separate entity – Irish Medicare as payor which would procure all services for citizens over the age of sixty-five in Ireland.

• Irish Medicare would procure and pay for the relevant services from the relevant providers.

• Primary care re-imbursement would be significantly restructured to focus on funding care for the elderly with chronic conditions.

• Funding model combination of central funding from Exchequer and % of income for defined services.

Potential Approach

• Current funding model is unsustainable due to fiscal adjustment.

• Current delivery model is unsustainable due to fragmentation.

• Public resources will decline yet demand for services will continue to increase.

• Requirement to fully integrate funding and care delivery for most significant users of services.

• Higher element of co-pay will be required in funding model.

• Payor / provider will have to be separated.

Conclusions