Public hospitals recoup only half the cost of caring for private patients from insurance companies, with the taxpayer making up the shortfall, a study released today reveals.
The report, by the Economic and Social Research Institute, shows that private patients in public hospitals are being substantially subsidised by the State. It concludes that a phased increase in health insurance premiums to fill this gap would not drive people away from private insurers.
The study, Private Practice in Irish Public Hospitals, was written by Prof Brian Nolan, the ESRI's research professor and Prof Miriam Wiley, head of its health policy research centre. It shows that private patients account for one-fifth of all hospital stays in acute public hospitals, yet about a quarter of the hospitals' total expenditure on in-patient care is spent on them.
The State spent about £130 million in 1996 to provide in-patient care in public hospitals to private patients. This is about double the income raised by the hospitals through charges paid by private patients or their insurers. Private patients are further subsidised by the State through tax relief on health insurance premiums, the study notes.
Speaking at a press briefing on the report yesterday, Prof Wiley said the extent of the State's subsidy of private patients in public hospitals was likely to be at least the same today as it was in 1996, given increases in State expenditure on hospital care in recent years.
The Government's policy was to move towards charging private patients the full cost of providing care for them in public hospitals, she said.
"We now know the extent of the subsidy currently being applied to supporting private patients in public hospitals and what's clear is that a substantial increase in the daily charges by the hospital will be required if we are to actually get to the point of charging the full economic cost of private patients in public hospitals," she added.
"Given that most of that income is coming from insured patients, then that has obviously implications for charges levied against insurance companies, and presumably subsequently for premium levels charged by insurance companies as well."
If the level of charges for private care in public hospitals was doubled to redress the current funding imbalance, then annual claims faced by insurers would increase by one quarter, the report estimates.
However, if this cost was immediately passed on to private patients through a 25 per cent increase in health insurance premiums, there would be a decline in the numbers of people taking out health insurance, it adds.
The authors say a phased increase in premiums of 5 per cent per year over five years would not produce a dramatic fall-off in the numbers of people buying insurance. "We drew the conclusion that the scale of increase in the price of insurance required to move up towards charging the cost of the care provided, if it was phased in over a number of years, would not be likely to burst the bubble and lead to a sharp decline in the numbers of people on health insurance," Prof Nolan said.
"This is contingent on continued healthy economic growth per annum of 4 to 5 per cent and no radical shift in people's perceptions of the public system, because what's fuelling demand for private insurance is what people think their options are if they don't have it."
Prof Wiley said the report did not assess the impact of the subsidy for private patient care on the quality of care for public patients. "We feel that there would be an important need for research on issues addressing quality of care, given that our survey of attitudes of people who buy health insurance suggested that a lot of people buy it because they could feel that there is a quality difference," she added.