‘Productivity and efficiency’ must be core to debate on health service funding

Productivity, efficiency reforms and value for money will increasingly have to become central to discussions within Government over funding to be allocated to the health service to ensure sustainability, the Department of Public Expenditure has argued.

In a new paper comparing Irish expenditure with that in other countries, the department says that health spending in the Republic per head in 2021 was 28 per cent greater than the average in the Organisation for Economic Co-operation and Development (OECD).

It says that the Republic has, at present, a relatively young population but that “health spending already more closely resembles a country with a much older population”.

Overall, it says 21 per cent of Government expenditure goes to the healthcare system. It says this is the second-highest proportion of State spending on health in the OECD and the EU and this is a clear indication that healthcare is a State priority.

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The Department of Public Expenditure paper maintains that a high proportion of total State expenditure being allocated to health “is not necessarily positive”.

It says there are opportunities and costs involved as “the over-prioritisation of health could result in constrained funding for equally valuable services provided by the State such as social welfare or educational supports”.

“It also leaves the health system vulnerable to fiscal risks such as a severe contraction in tax revenue.”

The paper says that despite the high and increasing levels of funding provided to it, the Irish health sector has been consistently spending more than its budgetary allocation.

“This poses challenges, as the increases in public expenditure to provide these public services should over the medium term be aligned to expenditure levels that can be sustained by the economy and its medium-term growth path.”

The paper says total health expenditure in the State increased by €10.3 billion or 77 per cent between 2015 and 2022 to reach €30.5 billion.

“This has resulted in healthcare expenditure per capita reaching $5,861 in 2021; this is 28 per cent greater than the OECD average.”

“Public expenditure as a share of overall health expenditure has also grown substantially, increasing from 71.8 per cent in 2015 to 77.4 per cent in 2022. ”

The paper notes that this refers exclusively to Government expenditure as in the Republic there is no compulsory health insurance.

“In Ireland, health expenditure as a proportion of overall Government expenditure rose from 17.9 per cent in 2015 to 21.2 per cent in 2021. Over the same period, the OECD and EU average healthcare expenditure as a proportion of overall government expenditure increased from 14.7 per cent to 16.2 per cent.”

The paper argues that “it is clear that the levels of increased spending, and overspending, in the health sector in recent years must be considered in light of the ageing population as the higher than average per capita healthcare expenditure but lower than average per capita healthcare volumes”.

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