Reilly raises pay rates issue in talks on spiralling health costs

MINISTER FOR Health James Reilly has raised the prospect of cutting overtime and premium pay rates in response to a call from Minister for Public Expenditure Brendan Howlin for “immediate action” to address a huge costs overrun at the Health Service Executive (HSE).

Any such move would have serious implications for the Croke Park agreement between the Government and public sector unions, which protects core pay until 2014.

It comes as Mr Howlin and Minister for Communications Pat Rabbitte refused to rule out further social welfare cuts and tax increases.

Overspending in the HSE, running at €200 million as of the end of April, is causing serious concern in Government circles and has sparked a debate on how best to tackle it.

Mr Howlin has urged Dr Reilly to “personally engage” with his department and the HSE to ensure steps are taken to bring spending into line.

Mr Howlin says the deficit could reach €500 million by the end of the year. He told Dr Reilly to take “immediate action”, including measures on top of those already set out in the budget for this year, to deal with the deficit.

Dr Reilly is arguing that a choice has to be made between cutting health services further and looking at issues such as the €800 million currently spent in the health service on overtime, allowances and premium pay. He also pointed to “anomalies” in the current climate, such as the requirement to pay staff double time for working Sundays.

The Croke Park deal with public service unions permits the Government to reduce its exposure to overtime or premium payments. However, unions have maintained that cutting actual rates would be in breach of the agreement and would be seen as a pay cut.

In correspondence with Dr Reilly seen by The Irish Times, Mr Howlin said he was “seriously concerned” at the financial picture emerging in the HSE.

Mr Howlin urged Dr Reilly to “personally engage” with his department and the HSE in an effort to bring health spending back into line.

“Any significant overrun in the health sector this year would not be sustainable and would undermine our national recovery efforts.

“It would also render the task of producing the 2013 estimates for the health sector and continuing implementation of the programme for government commitments on health reform extremely difficult, if not impossible.

“I would ask you, therefore, to ensure that immediate action, including additional measures over and above those envisaged at budget/estimate time [last year] if necessary, are taken to bring HSE expenditure back on track.”

The Department of Health is currently working on a paper for Cabinet on how to address the HSE’s financial difficulties. The HSE’s €13.317 billion budget for this year required it to make cost reductions of €750 million. However, it is understood senior management have raised doubts as to whether planned savings on drugs of more than €100 million, as well as the generation of more than €140 million in additional revenue from health insurance companies, will be fully realised.

HSE chief executive Cathal Magee is understood to be seeking “guidance” from the board of the organisation – made up of senior health service administrators – on how to deal with the financial difficulties. One of the options is understood to include further cuts in hospital capacity, such as more closures of wards or theatres.

The issue of reducing labour costs through moves such as cutting overtime or premium rates is a policy matter for the Department of Health and Cabinet and is understood not to form part of the HSE paper.

Separately, the Government is expected to publish proposals for reconfiguring services in smaller hospitals later this week.

Hospitals in Mallow, Cork, and Loughlinstown, Dublin, could be most affected by the moves, which are likely to involve the transfer of more complex services to Cork city and to St Vincent’s University Hospital in Dublin.