Minister for Health James Reilly should cut staff costs in the health service rather than proceeding with his plan to charge private patients the full cost of using public hospitals, according to leading economist Colm McCarthy.

The Minister should address cost issues in the health service directly rather than seeking to finance his budgetary shortfall by imposing costs on private patients, he said.

Speaking at the launch of a report on the private insurance market, he predicted a continuing haemorrhaging of young customers from the private health insurance market as well as an increase in premiums of up to 25 per cent if the Government goes ahead with the plan.

Mr McCarthy said the proposal, set to come in in July, was being imposed on a sector that was already under stress as a result of declining enrolment driven by demographic changes and rising unemployment.

“The analysis in my report should serve to caution that any proposal to add further to health insurance premiums could further destabilise an already fragile and contracting market.”

Community rating
The effect of these trends would be to destabilise the current system of community rating – under which all subscribers pay the same premium regardless of age.

Mr McCarthy predicted that the market could shrink by 40 per cent in the coming years if premiums continued to rise.

The Government needed to take a longer-term approach rather than “patching up a cash hole” and engaging in “finger in the dyke stuff”.

Some 85 per cent of customers say they would give up their health insurance if premiums rise by 30 per cent, according to a survey carried out for Aviva Health, which commissioned Mr McCarthy’s analysis.

At present half of private patients who stay overnight do not pay maintenance charges of up to €1,000 a night. A nightly charge of €75 applies in public hospitals.