1. The Healthcare Funding and Delivery Challenge 25 th November 2010

2. 1.Healthcare Expenditure Overview 2.Public Healthcare Expenditure 1990 – 2010 3.Economic Overview and Consequences for Healthcare Funding 4.Ageing of Population 5.Impact of Ageing on Healthcare Services 6.Sustainability of Current Funding Model 7.Sustainability of Current Delivery Model 8.Conclusion Contents

3. Total annual spend (including social/voluntary care) of €18.3 billion. Approximately 78% funded through taxation system. Significant growth in expenditure over last twenty years. Healthcare Expenditure Overview 1990 Billion 1999 Billion 2010 Billion Funded by Exchequer€2.0€4.8€14.1 Health Insurance€0.2€0.4 €1.6 Funded by Individuals€0.4€0.9 €2.5 €2.6€6.3€18.3

4. Exchequer Funded Healthcare 1990 € Billion 1999 € Billion 2010 € Billion Hospital Care1.02.44.8 Primary Care Re-imbursement schemes0.30.82.8 Care of ElderlyN/A (1) 1.3 Disability Services0.20.51.5 Mental Health Services0.20.40.7 Other Services/Central Costs0.30.73.0 2.04.814.1 Analysis of key healthcare areas funded by HSE (1) included in other services

5. €15 billion fiscal adjustment by 2014. Likely to involve €7- €8 billion reduction in day to day expenditure, €2 - €3 billion reduction of capital expenditure and €4 - €6 billion increase in taxation. Healthcare expenditure currently accounts for circa 30% of gross day to day expenditure. A total reduction in day to day expenditure of €7 - €8 billion implies annual healthcare spend of €11.9 billion in 2014 – reduction of €2.2 - €2.4 billion. Economic Overview and Consequences for Healthcare Funding

6. Population did not significantly age over last twenty years. Ageing of Population Population will age significantly over next twenty years. 199020002010Increase over 20 years Society members over age of 65 370,000420,000510,000140,000 201020202030Increase over 20 years Society members over age of 65 510,000792,0001,000,000490,000

7. Ageing of Population 280,000 additional members of society over the age of sixty five in next ten years. Greatest increase in % terms is in older members of society aged over 85. Age Band20102021% Increase 65 – 74305,000438,00043% 75 – 84157,000248,00058% 85+48,000106,000120% 510,000792,00055%

8. Provision of cancer care expected to grow at 7% per annum over next 25 years – NCRS. The number of adults with chronic conditions will increase by 40% by 2020 – DOHC. -50% increase in chronic heart disease -48% increase in strokes -62% increase in diabetes Individuals with chronic healthcare conditions are expected to live twice as long with chronic conditions - Centre for Ageing Research and Development. Chronic Conditions

9. 10% of patients admitted account for 50% of in-patient bed utilisation within public hospitals. Typically they are older (60+) and have chronic health conditions. 50% of Vhi Healthcare’s healthcare expenditure is accounted for by meeting the healthcare needs of its customers over the age of sixty. An increase of 280,000 members of society over the age of sixty five over next ten years implies a very significant increase in demand for hospital services under current healthcare delivery model. Increase in number of individuals with chronic conditions implies an increase in demand for hospital services under current healthcare delivery model. Current and Future Impact of Demographics/Chronic Conditions of Healthcare Expenditure

10. Primary Care Re-Imbursement Schemes 1990 €m 2000 €m 2009 (e) €m Total Expenditure2638062,696 Expenditure by scheme GMS2005151,767 Drug payment 21141 335 Long-term illness 11 42 148 Hi-tech drugs- 52 312 Dental 21 38 78 Others 10 18 56 2638062,696 Prescriptions issued GMS14.6m21.7m50.3m

11. Increase of 280,000 over the age of sixty five over next ten years implies significant cost increase in future GMS funding under current approach. Likely development of new high tech drugs implies future cost increases in hi-tech drug schemes. Growth in chronic conditions implies further growth in long-term illness schemes. Impact of Demographics / Chronic Conditions

12. Current annual funding of €1.3 billion. Annual budget under fair deal nursing scheme set at €980m. Remainder of budget – Home care packages / home help packages / ancillary services. Significant future increase in demand for services: - Ageing of population particularly in older age groups - Reduction of number of family carers as population ages Care of Elderly

13. Demand for and utilisation of services continues to increase but implied public healthcare expenditure is €11.9 billion in 2014. Issue is more complex than simply substituting a tax based annual budget funding model with a UHI / fee per service model / money follows the patient funding model. If utilisation of current hospital services / current primary care services / care for elderly service etc. continues to grow at historic levels it will be unfundable regardless of funding model. Resources are allocated on the basis of historic budget allocations / current utilisation trends rather than on the basis of a valued based health care delivery. Sustainability of Current Funding Model

14. Services delivery is currently fragmented. Limited integration of services. Limited focus on managing chronic conditions within community setting. Current delivery model is not funded on the basis of a value based healthcare delivery e.g. care of elderly. Home care / Home help programmes – annual spend €300m. Sustainability of Current Delivery Model Other costs of elderly care: In-patient hospital care public€2,400m(est.) Long-term care – fair deal€980m(est.) Primary care re-imbursement schemes€1,200m(est.) Private insurance in-patient care€700m(est.) Total additional expenditure on care of elderly€5,280m

15. Funding and care model needs to be fully integrated. Separate payor and providers. Set up separate entity – Irish Medicare as payor which would procure all services for citizens over the age of sixty-five in Ireland. Irish Medicare would procure and pay for the relevant services from the relevant providers. Primary care re-imbursement would be significantly restructured to focus on funding care for the elderly with chronic conditions. Funding model combination of central funding from Exchequer and % of income for defined services. Potential Approach

16. Current funding model is unsustainable due to fiscal adjustment. Current delivery model is unsustainable due to fragmentation. Public resources will decline yet demand for services will continue to increase. Requirement to fully integrate funding and care delivery for most significant users of services. Higher element of co-pay will be required in funding model. Payor / provider will have to be separated. Conclusions