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Last April, the main opposition party unveiled a radical plan to abolish our two-tier health service. Fine Gael has promised that, in government, it will introduce mandatory health insurance so that everyone has a guaranteed minimum package of health services.

The prospect of a health service where the consumer really is king sounds great, but is the Dutch system of regulated competition all it is cracked up to be? Can it be introduced here at little or no extra cost, as the architects of this new plan believe? Can it keep premiums and costs in check? And can it square the circle of access, equity and quality?

The experience of the first two years of the mandatory health insurance experiment in Holland suggests it is still a work in progress and will take time and tweaking before it can be hailed as a success.

Public anger

Like Ireland, Holland has traditionally operated a mixed healthcare system with substantial public funding and significant private provision. Like Ireland, rising costs, growing waiting lists and a lack of innovation were sparking public anger and prodding policymakers towards reform.

Like Ireland, reform had been piecemeal and made more difficult through the constraints imposed by consensus politics and the stagnation wrought by proportional representation.

But there is at least one key difference between the two countries that could limit the scope for such a scheme here. In the heyday for private health insurance in Ireland, not much more than half the population was covered. In Holland, by contrast, just 2 per cent of people were uninsured when two historic insurance schemes — one public, one private — were merged into a single, highly-regulated, largely-mandatory entity, run mainly by competing, for-profit insurance firms.

The Health Insurance Act of 2005 obliges every health insurer in Holland to offer — and almost every citizen and resident to purchase — a basic package of primary and specialist services, up to a year of hospital care, maternity care, dental care, prescription medicines, ambulance services and rehabilitation.

People are free to shop around for the best price on the basic product. Nobody can be refused cover. Everyone is entitled to the same essential services. Insurers get compensated for carrying costly customers. Under-18s go free. A sliding scale of public subsidies aims to ensure that insurance is affordable even for people on low incomes. All in all, it looks like a pretty good deal for the consumer.

Basic service package

So how much does the basic service package cost there and how does that compare to here? In Holland, each adult pays a premium of around €1,100 per year, and contributes a further 6.5 per cent of their salary, up to a maximum of €2,000. With annual income running at €53,000 per household, the annual cost of health insurance is somewhere between €4,525 and €5,625, or 8.6 to 10.7 per cent of household income.

In Ireland, we spend in the region of €3,800 per person per annum on public health services, or somewhere between 6 per cent and 12 per cent of household income.

In other words, the two countries spend similarly on health but deliver remarkably different service entitlements.

Fine Gael believes that radical change would mean we could do as well as the Dutch. Fianna Fáil, for now at least, is wedded to the status quo. This is not to say the latter is intrinsically reactionary, or the former could not implement its preferred alternative.

But Ireland is not Holland, and there are real difficulties that could delay or derail the new plan.

First, the context is different. The Dutch have had mandatory health insurance for low- and middle-income groups since 1941. In Ireland, health insurance has always been an optional extra, and for only half the population at that. The ongoing controversies about co-location and the National Treatment Purchase Fund (NTPF) underline the political reality that many people remain deeply suspicious of private sector ‘creep’ in healthcare and will not be easily persuaded that handing over the supply of health services to profit-driven insurance companies is a good thing, even in a tightly regulated market.

Second, there is a big question mark over whether mandatory health insurance can keep costs down and premiums in check. In Holland, total healthcare costs, which had begun falling before the new system was introduced, began climbing again after the changeover.


In fact, costs rose 9.5 per cent and premiums 8-10 per cent in the first two years following the introduction of the new system. The Dutch Central Bank predicted that insurers would lose €360 million (the industry reckoned €400 million) over that period, mostly on the basic plan, but argued that higher premiums, increased reserves, and the ability of insurers to absorb these initial losses would prevent the system from imploding.

A further issue is that risk equalisation compensates insurers well for costly customers but does not actively incentivise them to drive down costs.

Third, the problems in the primary care and emergency care infrastructure were tackled before the mandatory insurance scheme was put in place. To be fair, the Fine Gael plan is quite explicit about the need to eliminate deficits like this first.

Finally, the principle of universal coverage was already well established and widely supported before the changeover and, significantly, the political and administrative institutions responsible for reform enjoyed high levels of public trust.

Subsidies for the less well-off have helped maintain access while preserving equity and there is an explicit redistribution effect from the healthy to the sick, from the young to the old, and from the over-18s to the under-18s who get free cover.

Quality is perceived to have worsened, but few would argue that health insurance per se can do much to improve that.

The significance of these issues should not be underestimated. Can those who object in principle to the current mixed system – and the increasing numbers who can no longer afford the pragmatic option – be persuaded that this alternative is viable and preferable?

Would premiums have to rise significantly so that insurers could swell their reserves, and how would that affect the position with regard to the numbers carrying insurance and the perception of those who would be forced to carry it?

Would citizens be prepared to trust a political class and public service that failed so spectacularly in their duty of oversight in the financial sector to do any better at this? Would the insurance industry be able to absorb the losses that could arise? What would happen

if the financial pressures on the system grew too great?

These are serious questions. The Fine Gael plan offers a potential alternative to the current broken model, but only if the four defining features of the Dutch approach are implemented simultaneously here, and only if we can learn from their setbacks and successes.

The new model

Ultimately, the new model could prove more effective than any reform we have ever tried, but it will require a consensus the party may not be able to forge ahead of a general election, and a degree of trust the voters may be reluctant to give when the time comes.

And it will not be a cost-neutral nirvana. This plan is going to be expensive, more expensive perhaps than either the party or the public yet realise. But it is still worthy of vigorous political debate.