Opening Speech by Minister for Health, Dr James Reilly, T.D. on the Second Stage of the Health Service Executive (Financial Matters) Bill 2013 on 13th February 2014.

13th February 2014

A Ceann Comhairle

I am pleased to introduce the Health Service Executive (Financial Matters) Bill 2013 to the House.

The Bill provides for the disestablishment of the Vote of the Health Service Executive and the funding of the Executive through the Vote of the Office of the Minister for Health.

It also provides for a new statutory financial governance framework.

This Government is reforming the health services. It is reform of unprecedented breadth and depth. It is radical. It will ultimately see the introduction of Universal Health Insurance.

In November 2012, I set out the building blocks for this reform in Future Health. Many of the initiatives – like the eventual replacement of the HSE - will require further and other legislative changes. This Bill is therefore a transitional measure, building on earlier changes provided for in the Health Service Executive (Governance) Act, which was passed last year.

The Health Act 2004 provided that the HSE had its own Vote and that the Minister for Health had no legal role in setting its budget. The House will understand that the intention then was to give the HSE greater operational autonomy from what at the time was characterised as a politicised decision-making system. However in my view, it crucially weakened the accountability of the HSE to the Minister for Health and the Department of Health.

This Bill seeks to rectify that situation by restoring the Vote of the HSE to the Office of the Minister for Health and thus re-establishing appropriate and proper accountability for the HSE to the Government. It is also, as I have said, another step on the reform journey, including the dissolution of the HSE, the establishment of a Health Commissioning Agency, new community care structures and the establishment of Hospital Trusts.

It’s appropriate that I take this opportunity to tell the House that we have been progressing our reform since the publication of Future Health just over a year ago. We published reports on establishing Hospital Groups and on the future of smaller hospitals. Since publication, we have appointed chairpersons for each of the seven groups and we are currently in the process of appointing the CEOs.

In March 2013, we published Healthy Ireland, our strategy for empowering people in Ireland to get healthier. As part of Healthy Ireland, we published Tobacco Free Ireland, our strategy for making Ireland tobacco free by 2025. We have also published a package of measures to tackle alcohol misuse in the form of a Public Health (Alcohol) Bill. And we are moving to tackle obesity through the Special Action Group on Obesity. We have also published an eHealth Strategy and will be progressing work on that through 2014. Finally, shadow funding for selected hospitals under “Money Follows the Patient” (MTPF) commenced in 2013 and it is being rolled out to all hospitals this year.

In addition A draft of the White Paper on Universal Health Insurance is being completed and I anticipate that this will be published early this year.

Deputies will also be aware that there have been a number of reports highlighting the need for changes in the way the health services are financially managed. The successful implementation of the Reform Programme requires a fundamental change in the financial management systems in the HSE. To this end a financial reform programme has been initiated within the Executive with the establishment of a Finance Reform Board to oversee the programme and in particular to oversee the establishment of a National Financial Management and Procurement System in the HSE.

Overview of the Bill

The Bill provides for the disestablishment of the Vote of the Health Service Executive from January 2015 and from that date the funding of the Executive will be mainly through the Vote of the Office of the Minister for Health by way of grants paid to the Executive.

The Executive will itself continue to collect the income it generates through statutory charges, superannuation contributions and other miscellaneous income.

The Director-General of the HSE will become an accountable person rather than an Accounting Officer and the Bill sets out an alternative statutory framework to govern the funding of the HSE and ensure that proper controls, in relation to its expenditure, are exercised by the Director-General. The Bill also makes consequential changes to the Service Plan process to align it with the new budgetary arrangements

Provisions of the Bill

The Bill is divided into 3 Parts. Part 1 provides for Preliminary matters. Part 2 contains the amendments to the Health Act 2004. Part 3 contains transitional provisions which are required to enable the change from the current statutory regime to the new regime and ensure continuity in accountability for the expenditure of the Executive.

Part 1 has 3 sections which are technical provisions covering matters such as the title of the bill, commencement, definitions and repeals. They are standard provisions. The only provision being repealed is section 34 of the 2004 Act which required Ministerial sanction for any capital project in excess of an amount determined by the Minister. This provision is redundant as a new process for approval of a capital plan is being provided in a new section 33B as inserted by section 11.

Part 2 contains the body of the Bill which is designed to amend the 2004 Act, as amended by the Governance legislation, to put in place the new statutory framework. It amends a number of sections and inserts a number of additional sections. Section 4 amends Section 5A of the 2004 Act. Section 5A provides that expenses incurred by the Executive are payable out of moneys provided by the Oireachtas subject to the approval of the Minister for Health and the sanction of the Minister of Public Expenditure and Reform. The amendment limits the application of this provision up to 1st January 2015. This is because the provision is being replaced by a new provision, section 33A, which is being inserted by Section 11, which I will outline shortly.

Section 5 amends section 16G which was inserted by the 2013 Act. Section 16G sets out the general functions of the Director-General. The section specifically provides that the Director-General is responsible to the Directorate, as the governing body, for the performance of his or her functions, except where he or she is acting as chairperson of the Directorate. The amendment provides an additional exception where the Director-General is required to report to the Minister for Health if he or she is of the view that the actions of the Executive are likely to lead to a breach of its budget limits, which is provided for in section 34A as inserted by section 12 of this Bill.

Section 6 amends section 28 of the 2004 Act which provides specific definitions for Part 7 of that Act. Part 7 sets out the Accountability framework for the Executive. This Section adds further definitions which are required arising from the other provisions of the Bill. The main ones are in relation to net determinations (budgets), approved capital plan and related matters.

Section 7 inserts a new section, section 30A, enabling the Minister to determine a net budget for the HSE and sets out the process for doing so. Essentially the Minister is required to notify the HSE of its budget no later than 21 days after the publication of the Estimates for the Public Services, more commonly known as the Abridged Estimates Volume or AEV. In practice it is likely that the Net Determinations will be issued on the day the AEV is published or the next day. The section also allows the Minister to adjust a Net Determination for the HSE in the course of the year.

Section 8 amends section 31 of the Act, which provides for the Executive to prepare and submit a Service Plan to the Minister for his or her approval. The amendment is consequential on the insertion of section 30A and requires the HSE to submit its Service Plan 21 days after receiving notification of its budget from the Minister. The section is also amended to require the HSE to submit an estimate of its income and expenditure as part of the Plan and ensure that the Plan complies with the Budget notified to it by the Minister.

Section 9 amends section 32, which allows approved Service Plans to be amended. This is a consequential amendment to the insertion of section 30A (3) and sets out the process for amending a Service Plan if a Minister amends a Net Determination during the year.

Section 10 inserts a replacement section for the existing section 33, which requires the HSE to manage services in a manner that is in accordance with the approved Service Plan. The section is being expanded to require the Executive to manage the services within the Net Determination notified to it by the Minister. Subsection (2) reintroduces the concept of first charge principle. Under this principle if the HSE exceeds its budget in one year that deficit is a first charge against the following year’s approved budget. If the Executive has a surplus it would be allowed to carry over the surplus into the following year. In the interests of proper governance and accountability I will be bringing forward an amendment at committee stage to make the latter provision subject to the agreement of the Minister for Health and the consent of the Minister for Public Expenditure and Reform.

Section 11 inserts 2 new sections. Section 33A is a technical provision allowing the Minister to issue grants to the Executive, with the agreement of the Minister for Public Expenditure and Reform. This effectively replaces section 5A as I already mentioned. Section 33B is also inserted by this Section. It provides for a separate process for approving a Capital Plan and provides for the governance arrangements regarding the approval of such a Plan.

Section 12 inserts 2 new sections regarding the functions of the Director-General of the HSE. The new section 34A gives the Director-General the statutory responsibility to ensure that the HSE operates within its budget, both in respect of capital and non-capital expenditure. It also obliges the Director-General to notify the Minister if actions being undertaken by the Executive are likely to lead to it breaching its financial limits. A new section 34B provides that the Director-General shall be accountable to the PAC in respect of the HSE’s annual financial statements and any other reports made by the Comptroller and Auditor-General. This provision is required as section 40G of the Governance legislation making the Director-General the Accounting Officer of the HSE is being amended so that he or she ceases to be the Accounting Officer with effect from 1st January 2015.

Section 13 amends section 40G and makes the Director-General the Accounting Officer for the HSE for the years 2005 to 2014. This means that the Director-General is still accountable for the Appropriation Accounts for those years and that the HSE has to produce Appropriation Accounts for 2014.

Section 14 amends section 40I, as inserted by the 2013 Act which sets out the functions of the Audit Committee of the HSE. The existing subsection (3) (b) reflects the current statutory position of the Director-General as being the Accounting Officer. It is being amended to delete that reference and replace it with an obligation on the Audit Committee to ensure that the Executive is complying with the implementation of the Service Plan in accordance with the Net Determination and the Capital Plan in accordance with the limit set under section 33B.

Part 3 provides for the transitional arrangements to enable the change over from the current system to the new funding arrangements.

Section 15 provides that the HSE’s Vote shall be abolished on 1st January 2015 and that funding will be arranged through the Vote of the Minister for Health in 2015. It also provides funds in the Vote of the Minister for Health for 2015, so as to enable the Department to provide grants to the HSE pending Dail approval of the Minister’s Vote. The provision will cease to have effect when the Dail approves the Estimate for the Minister for Health for 2015.

Section 16 is a technical amendment to the Valuation Act, designed to ensure that the buildings of the Health Service Executive continue to remain exempt from rates.

As I have outlined, this Bill is another step on the reform journey, the ultimate destination being UHI. The central aim of the Health Reform Programme is to improve equity and access to services. This Bill is an essential, if technical, part of that goal. Transparency and accountability around service delivery are fundamental tenets of the health reform programme. I believe that this Bill, together with the other changes I am making, will help ensure more accountability during the time the HSE continues in existence.

I commend the Bill to this House.