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Rich nations can learn from Ireland’s health shift

LONDON, Jan 9 (Reuters Breakingviews) – Ireland is performing open-heart surgery on its healthcare system. Plans to move from an American insurance model to a UK-like universal offering are bold and expensive, but Dublin has the money and the political will. Any country thinking of similarly radical changes will need fiscal strength and public consensus to increase the chances of a successful operation.

If a government were to build a national healthcare service from scratch, what would it look like? Ireland is about to provide the answer. The country wants to build a system based on patients’ clinical needs, not their ability to pay – much like the once admired but now troubled UK National Health Service.

Ireland has had a two-tier healthcare system since 1957. Under the original plan, ordinary citizens used free public services, while state-backed insurer VHI Healthcare provided coverage to the top 15% of earners for a fee. Over the years, the proportion of citizens using private insurance has grown as people sought protection from soaring waiting times for elective procedures such as hip replacements and diagnostic tests. In 2022, 47% of the population used private health insurance, paying around 120 euros a month to companies like VHI, as well as Laya Healthcare and Irish Life Health.

The insurance model has proved inefficient. Despite nearly half the population being covered by these companies, insurance only pays for 12% of the country’s healthcare costs. The state and some out-of-pocket payments pick up the rest of the near 29 billion euro annual bill. The system has also exacerbated feelings of inequality, because those who can afford insurance are treated quickly while those who don’t have it face long waits. In 2023, nearly 500,000 people exceeded the government’s maximum waiting times for outpatient appointments and endoscopies.

To fix these problems, Dublin came up with “Sláintecare”, from the Irish word for “health”. The plan, first unveiled in 2017 and expected to be implemented by 2030, is to create a universal healthcare system free at the point of delivery for all patients. As part of the overhaul, beds in public hospitals would be taken back from private health insurers – a key measure designed to expand capacity and reduce waiting lists. The new system could also give the state greater heft in negotiating drug prices. That, in turn, could reduce Ireland’s overall expenditure on pharmaceuticals – the third-highest per head in Europe in 2018, according to the Organisation for Economic Co-operation and Development. With a larger state offering, medical staff wages may also come down, as there would be less competition from private insurers that offer higher salaries.

To make the transition work, medical staff currently working in the private healthcare system will be encouraged to switch to the new public model. By the end of 2022, the government had recruited more than 16,200 staff over two years, including 4,600 nurses and midwives, 2,650 health and social care professionals, and over 1,750 doctors and dentists. The state is planning to recruit an additional 1,000 consultants, or senior doctors, by 2030, and is offering a base wage of up to 261,000 euros a year for a 37-hour working week. That’s a generous offering considering top UK consultants can only earn a maximum of around 150,000 euros.

If successful, Sláintecare could provide a blueprint for other governments with insurance-focused systems that are struggling to deal with soaring health costs and ageing populations, such as Germany. The United States could also learn from Ireland’s experiment.

The world’s largest economy currently spends 19% of its GDP on healthcare, nearly twice as much as the average of the 38 countries belonging to the OECD. Despite this eye-watering spend, by 2020 U.S. life expectancy at birth was 76 years, five years below the UK average, according to data from the Commonwealth Fund. Maternal deaths in the United States are more than twice the OECD average, while infant mortality is also far above that of other industrialised countries.

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Any country looking to copy Ireland’s ambitious plans will need two key ingredients. The first is political will. Ireland’s vision had the backing of all the main political parties, which formed a cross-party parliamentary committee. This agreement among politicians with often wildly opposing views on the economy, housing and taxation was meant to remove any threat to future funding of healthcare, despite some criticism from the medical profession.

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Across the Atlantic, however, the funding of healthcare is a deeply polarising issue even within the Republican and Democratic parties. The powerful insurance lobby, which routinely threatens to cut off donations to politicians if they inflict financial damage to the likes of UnitedHealth (UNH.N), is another obstacle.

The second fundamental resource is money. Sláintecare could cost as much as 20 billion euros or around 3% of Ireland’s GDP in the first 10 years, according to the Irish Hospital Consultants Association. For Ireland, money is currently no object. In 2022, Dublin basked in a record budget surplus of over 8.5 billion euros, around 1.7% of GDP. That fiscal fortune is largely derived from a host of U.S. multinationals, like Meta Platforms (META.O), Google owner Alphabet (GOOGL.O), and Apple (AAPL.O), that are headquartered in Ireland to benefit from its low corporate tax rate.

The United States, which had a budget deficit of 8.8% of GDP in 2022, is in a much tougher spot. The federal government’s accounts are expected to be in the red to the tune of at least 7% of GDP until 2028, according to the International Monetary Fund.

Even if it has the political backing and financial resources, Ireland’s bold plans are fraught with dangers. The sorry state of Britain’s NHS, which is currently struggling with record waiting times for cancer screenings, surgeries and accident and emergency services, is a cautionary tale. Decades of under-investment by successive governments have left the UK healthcare system bereft of staff, equipment and patients’ goodwill.

Like in the UK, Ireland’s population is ageing and requires a constant stream of skilled staff willing to work for relatively low wages. That challenge has been exacerbated by the pandemic, which triggered an exodus of workers from Ireland in search of better working conditions and pay. Ireland trains around 750 Irish and European doctors each year, but in 2022 442 emigrated to Australia, according to the Royal College of Surgeons in Ireland. To reverse this tide and make sure it doesn’t disintegrate like the NHS, the new model will need ample funding.

The U.S. and other countries may struggle to embrace such drastic changes, but with healthcare costs ballooning globally and countries still struggling with the impact of Covid-19, they will be looking at Ireland’s healthcare makeover with a mixture of envy and hope.

Source: Reuters