Irish health spending would rise to over 12 per cent of GNP if the Government's health strategy were implemented. The share of national income going to health would exceed that of all other developed countries, except the United States.
Health spending in Ireland will already reach over nine per cent of GNP this year, close to the UK's target for health spending in 2007. EU average health spending remains approximately eight per cent of national income.
If the health strategy were to be implemented by 2011 at the pace envisaged by the Department of Health, this would require current health spending to increase by nearly 20 per cent next year from €8.2 billion to €9.8 billion and capital spending to double from €497 million to €942 million. The Department envisages heavier increases in the early years of the strategy so that current spending increases would gradually reduce to annual increases of 7 per cent in the final three years of the plan. Capital spending would further increase in the mid-years of the strategy.
This forecast of the effects of the strategy on health spending as a proportion of GNP was produced by Prof John FitzGerald of the Economic and Social Research Institute at the request of The Irish Times.
Prof FitzGerald applied the growth assumptions of the ESRI's medium-term review to a detailed breakdown of the health strategy released by the Department of Health under the Freedom of Information Act. The forecast assumes that the economy will remain on a favourable growth path of 4.5 per cent average volume growth in GNP over the next 10 years and that inflation will gradually fall towards the EU rate. GNP has been used as the more realistic measure of Irish national income. An estimate for private health spending has been included and public health spending has been reduced by 10 per cent to exclude spending on social services.
The Taoiseach, Mr Ahern, has said that the strategy would be funded by money generated from growth in a low-tax economy. However, this analysis makes it clear that even with a relatively optimistic growth forecast, a government that wanted to implement the health strategy would have to raise taxes to increase the proportion of national income going to health. The Blair government in Britain last week raised taxes to fund health and broadly accepted a report which envisaged health spending potentially rising to over 12 per cent of GDP by 2022.
The revelation that Irish health spending already so far exceeds the EU average at 9.1 per cent of GNP and yet fails to deliver acceptable services, should increase pressures for reform. The experience of other states would suggest that higher spending unaccompanied by reform produces poor results.
The UK will this year spend 7.7 per cent of GDP on health and at the end of March only two patients in England had waited longer than 15 months for surgery. Ireland has been spending more per capita on health than the UK since 1999, but still has much longer waiting lists. Despite the world's highest health spending, nearly 16 per cent of the US population is uninsured and life expectancy in the US for both men and women is lower than the European average.
The Government-commissioned study of value-for-money in the Irish health service by consultants Deloitte and Touche published last November argued for more spending. It concluded: "If a superior system is demanded by the public (and there is much evidence to believe this to be the case), then, as taxpayers, the financial implications of addressing the current health service deficits need to be accepted."
The Government's November health strategy document put a price tag of almost €13 billion on the planned developments, of which €7.6 billion was for capital spending for the period 2002 to 2011. Current spending would need to rise by an extra €5 billion annually by 2011 to fund the new developments. This would be on top of funding increases to maintain existing services which cost €7 billion in 2001.
The figures, released under the Freedom of Information Act, show that the Department of Health hoped that an extra €1 billion in current spending and €550m in capital investment would be allocated to strategy developments this year. The actual allocations were €370 million and €40 million respectively, so the shortfall must be made up over the next nine years if the strategy targets are to be met by 2011.