Levying full cost for use of public beds would hit insurers

ANALYSIS:ANY MOVE by the Government to charge the full economic cost for the use of beds in Health Service Executive and voluntary hospitals for private practice would have a seismic effect on the health insurance sector.

The health insurance market is very much in a state of flux and the numbers covered by health insurance are falling, down to 47 per cent in September, while premium costs are soaring.

There is a strong argument on equity grounds for charging the economic cost for using facilities in public hospitals for private patients. The move would also generate sizeable sums of money for the exchequer. However this has to be considered against the background of uncertainty in the industry.

The ending of the current subsidy for private treatment in public hospitals, announced by Minister for Health James Reilly, is one of two steps involved in any overall move to charge the full economic cost for the use of beds in HSE and voluntary hospitals.

The second, and by far the more significant in financial terms, would be to allow the Department of Health to levy charges for all private patients in public hospitals whether or not they were actually treated in officially-designated private beds.

About 20 per cent of beds in public hospitals are designated for fee-paying patients and insurance companies pay the charges for these beds. However, not all private patients can be accommodated in these beds. Sometimes they are already occupied by other private patients. At other times they may be in use for infection control. It is estimated charges are not raised in respect of about half of all private patients.

Given that public hospitals already receive about €350 million for private patients, any move to introduce charges for all private patients treated in public hospitals could prove lucrative.

However, with VHI paying an estimated 80 per cent of all claims, it would play havoc with its finances and certainly lead to far higher premium costs.

VHI lost €3 million in 2010 and €41 million the previous year. Partly on foot of government moves to increase bed charges by 21 per cent last year, it increased premiums by up to 45 per cent.