A new research report, “An Examination of the Potential Costs of Universal Health Insurance (UHI) in Ireland”, was published today (18 November 2015) by the ESRI. The study was funded by the Department of Health and examines the cost implications of the UHI model proposed in the 2014 Government White Paper.[1]

The main findings of this study are:

• The White Paper model of UHI would increase overall Irish healthcare expenditure by up to 11 per cent;
• Some of this increase is to address unmet need. However, a major driver of the increase is the additional cost that arises from financing healthcare through multiple, competing insurers;
• Taxation would continue to finance up to 70 per cent of Irish healthcare expenditure through tax subsidies for insurance premia for people on low incomes and through funding for the remaining uninsured services;
• These findings are in keeping with the international literature reviewed in this study, which suggests that health systems based on multiple, competing insurers are cost-inflationary.

Assumptions about UHI coverage:
The Government White Paper proposed that everyone would be insured for the same package of health services. The White Paper did not state which services should be covered by UHI but did specifically exclude some, like long-term care for older people. This study examines the cost implications of providing UHI through insurers for alternative baskets of health services, focussing on three:

• The first basket would cover hospital care, mental health care and general practitioner (GP) care.
• The second basket would also cover other primary care services.
• The third basket would cover all these services and further cover prescribed medications.

Detailed findings:
The study presents a range of estimates reflecting uncertainty in relation to some key underlying assumptions. The detailed findings of this study of the cost implications of the White Paper model of UHI (in 2013 prices) are:

• The overall level of Irish healthcare expenditure, would increase by:
  • 3.5 to 7.2 per cent (€666 million to €1,388 million) if UHI covers hospital, mental health and GP care;
  • 4.1 to 8.3 per cent (€780 million to €1,591 million) if UHI also covers primary care services;
  • 5.4 to 10.7 per cent (€1,040 million to €2,055 million) if UHI also covers prescribed medication
• The average (mean) per capita cost of the three UHI-covered baskets of services is estimated to range between:
  • €1,600 – €1,758 for hospital, mental health and GP care;
  • €1,837 – €2,013 if UHI also covers primary care services;
  • €2,288 – €2,509 if UHI also covers prescribed medication

This cost is equivalent to the average (mean) UHI premium, if a simple flat-rate premium were to apply across all members of the population, i.e. if no distinction were made in relation to premia for adults, students and children, or in relation to ability to pay, which is not the assumed approach.[2] The White Paper proposes that people on lower incomes would have their premium subsidised. [3]

• Tax-financing remains between 60 and 71 per cent of overall financing for Irish healthcare compared to 77 per cent currently, when financing for services outside the UHI basket and the effect of the Government’s proposed tax subsidy for UHI premia for people on lower incomes are taken into account.
• Individuals would continue to pay for healthcare by taxation and by out-of-pocket payments, in addition to UHI, contributing the following estimated amounts:
  • Mean per capita taxation (to pay for healthcare services outside the UHI basket and for the tax subsidy on UHI premia): 
    • €2,889 – €2,957 if UHI covers hospital, mental health and GP care;
    • €2,828 – €2,904 if UHI additionally covers primary care services;
    • €2,662 – €2,757 if UHI additionally covers prescribed medication.
  • Mean per capita out-of-pocket payments (for services not covered by tax or UHI):
    • €430 if UHI covers hospital, mental health and GP care;
    • €413 if UHI additionally covers primary care services;
    • €379 if UHI additionally covers prescribed medication.

The report estimates that the overall per capita cost of healthcare in 2013 under the current financing system was €4,184; with mean per capita taxation to finance healthcare of €3,223; mean per capita out-of-pocket payments of €504; and mean per capita private health insurance of €389 (averaged across the whole population including the uninsured and excluding tax subsidies).

• Due to the continued high level of tax-financing of healthcare in this model of UHI, the report concludes that the distributional effects of UHI will depend on Government decisions, not only about the level of the premium and its subsidy but also about how the tax burden to finance healthcare is distributed;
• In sensitivity analysis, the report finds that on most assumptions the insurers’ margin [4] is the greatest contributor to additional healthcare costs in the White Paper model of UHI financing, with a higher assumed insurers’ margin leading to higher percentage increases in healthcare expenditure;
• The estimated cost of the UHI model of financing (insurers’ margin and transaction costs) generally exceeds the estimated cost to address unmet need in a universal system (unmet need and universal GP care costs), however financed. The authors recognise that data inadequacy causes uncertainty in estimates of unmet need and recommend further, more detailed research in this area.

Policy issues:

Dr Maev-Ann Wren, Senior Research Officer at the ESRI and lead author of the report, said: “The proposed design of the White Paper financing model should be reviewed in light of the findings about the potential cost implications.”

“The Department of Health has been advised that the White Paper UHI model would be subject to competition law, which is not the case for universal healthcare financing systems in many other European countries. This limits the Government’s ability to control factors such as pricing and insurers’ margins. The proposed design of any alternative financing model should be reviewed in light of this limitation and the findings of this analysis.”

“This report has investigated the cost of the White Paper model of UHI. Further important questions that should be addressed before a system of UHI is introduced in Ireland were beyond the scope of this report. Other key enquiries about the introduction of a system of health financing based on UHI should include whether the model outlined in the White Paper would improve health outcomes, achieve equity, be cost-effective or whether the proposed model is feasible in an Irish context.”

[1] Department of Health (2014). The Path to Universal Healthcare: White Paper on Universal Health Insurance. Dublin, Department of Health. 

[2] KPMG (2015), UHI Premia Costing Report, a report prepared for the Health Insurance Authority (HIA), has estimated a potential approach to mean adult, student and child premia.

[3] The further step of examining how such mean costs might be distributed across individuals or population groups was beyond the scope of this particular report but the issue of subsidy design and its distributional effects is examined in associated work by Callan and colleagues (Callan T., B. Colgan and J.R. Walsh “Income-Related Subsidies for Universal Health Insurance Premia: Exploring Alternatives Using the SWITCH Model”, ESRI Working Paper No. 516, ESRI: Dublin, available to download from the ESRI website here from 18/11/2015).

[4] The insurers’ margin is the term used in this report to describe the margin between insurers’ earned premium income and their expenditure on claims incurred and is comprised of: expenses and the cost of reinsurance; and underwriting profit or loss plus the impact of investments, which sum to profit before tax.

For Further Information Please Contact:

Dr Maev-Ann Wren (Senior Research Officer, ESRI): maev-ann.wren@esri.ie 

 Notes for Editors

1. This report, An Examination of the Potential Costs of Universal Health Insurance (UHI) in Ireland, was prepared by Maev-Ann Wren, Sheelah Connolly and Nathan Cunningham at the Economic and Social Research Institute (ESRI) for the Department of Health and is published as an ESRI Research Series Report. The report is the first output of a three-year programme of research agreed between the Economic and Social Research Institute (ESRI) and the Department of Health in July 2014. The broad objectives of the programme are to apply economic analysis to explore issues in relation to health services, health expenditure and population health, in order to inform the development of health policy and the Government’s healthcare reform agenda.