Higher spending on public hospitals will be required as costs rise and the population grows and ages

New research from the ESRI provides projections of expenditure for public acute hospital and adult acute psychiatric in-patient services in Ireland for the years 2018–2035. These projections are based on new ESRI projections for population and economic growth, both of which consider the impact of COVID-19. A range of alternative projections are presented reflecting alternative assumptions about population growth, trends in health and life expectancy, policy change, and costs. The report contains the most comprehensive mapping of Irish public hospital expenditure to have been published.

Main findings

The main findings of “Projections of expenditure for public hospitals in Ireland, 2018–2035, based on the Hippocrates Model” are outlined below:

  • The population is projected to increase by up to 920,000 by 2035, with the share of the population aged 65 and over projected to increase from one in seven to one in five.
  • Projected increases in both the demand for and the cost of delivering care will contribute to increased expenditure requirements for public acute hospital care.
  • In nominal terms, we project gross expenditure requirements for public acute hospital care of between €10.8bn and €14.4bn by 2035, compared to expenditure of €5.9bn in 2018; an expenditure increase of between 3.6 per cent and 5.4 per cent on average per annum.
  • Pay costs are the largest single driver of expenditure growth, projected to account for between €2.0bn and €4.1bn of additional expenditure requirements by 2035.
  • When the effect of projected pay and non-pay cost increases is removed, we project a real (or volume) increase in expenditure requirements of between 1.2 per cent and 1.7 per cent on average per annum.
  • We estimate that the cost to the public acute system of tackling waiting-list backlogs, exacerbated by COVID-19, and maintaining manageable waiting times, would be €1.1bn over 5 years (excluding any associated capital costs). This could be partially offset through shifting certain appropriate care, currently delivered in public hospitals, to the community over time.

Policy Implications

The additional public acute expenditure requirements projected in this report are driven both by increased demand for care and particularly, the projected increased cost of delivering that care. These findings have implications for capital investment, staffing, and resource planning. Our findings show that improving productivity can play a role in offsetting some of these increased costs, and that certain care currently delivered in hospitals could, in line with current Sláintecare reform proposals, be more appropriately delivered in the community. This would require increased investment in community care, which will be examined in detail in future work. When considering the sustainability of future expenditure requirements, it is important to view these increases in the context of growing national income which will contribute to the tax base necessary to finance future care needs.

Selected Detailed Findings

In addition to examining projections of required overall public acute hospital expenditure, this report also presents findings for the four main forms of public acute hospital activity (emergency department attendances, outpatient department attendances, day-patient discharges, and in-patient discharges). Findings are also presented separately for adult acute psychiatric in-patient services.

Emergency department attendances expenditure

  • In 2018, expenditure on emergency department attendances is estimated at €420m. We project this expenditure requirement to increase, in nominal terms, to between €680m and €880m by 2035.
  • Removing the effect of pay and non-pay cost increases (real terms), we project expenditure requirements of between €470m and €500m by 2035.

Outpatient department attendances expenditure

  • In 2018, expenditure on outpatient department attendances is estimated at €680m. We project this expenditure requirement to increase, in nominal terms, to between €1.1bn and €1.4bn by 2035.
  • Removing the effect of pay and non-pay cost increases (real terms), we project expenditure requirements of between €760m and €800m by 2035.

Day-patient discharges expenditure

  • In 2018, expenditure on day-patient discharges is estimated at €920m. We project this expenditure requirement to increase, in nominal terms, to between €1.8bn and €2.4bn by 2035.
  • Removing the effect of pay and non-pay cost increases (real terms), we project expenditure requirements of between €1.1bn and €1.2bn by 2035.

In-patient discharges expenditure

  • In 2018, expenditure on in-patient discharges is estimated at €3.2bn. We project this expenditure requirement to increase, in nominal terms, to between €6.0bn and €8.0bn by 2035.
  • Removing the effect of pay and non-pay cost increases (real terms), we project expenditure requirements of between €4.0bn and €4.5bn by 2035.

Public acute adult psychiatric in-patient services expenditure

  • In 2018, expenditure on in-patient care in public acute adult psychiatric services is estimated at €180m. We project this expenditure requirement to increase, in nominal terms, to between €300m and €400m by 2035.
  • Removing the effect of pay and non-pay cost increases (real terms), we project expenditure requirements of between €210m and €220m by 2035.

Dr Conor Keegan, ESRI Research Officer and lead author, said:

"This report examined the drivers of projected public acute hospital expenditure in terms of both demand and cost. Projected changes to the size and structure of the population will increase demand for hospital services while the labour-intensive nature of healthcare delivery means the cost of delivering these services will be particularly sensitive to future trends in pay.”