Budget health cuts proving to be a bitter pill to swallow

There is no avoiding it. After the budget, looking after your health is likely to diminish your wealth.

If you have a private health insurance policy, you're going to see the price of your insurance rise automatically due to the cut in tax relief.

And if you have been the recipient of a medical card in the past, you might find that the reduction in income limits means you will no longer qualify.

There are many "mixed messages" in this year's budget, says Eamon Timmins of Age Action Ireland, noting that on the one hand the Government is taking medical cards off people, while on the other hand it is not incentivising people to get private health cover with the cut in tax relief.

The only winners, it seems, are parents of children aged five and under. But there is still no firm timeline on when those changes will be implemented.

So how might you be affected?


Rising cost of health insurance
It was a measure that was implemented, in Minister for Finance Michael Noonan's words, to hit only those with "gold-plated" health insurance policies .

The reality, however, is that the decision to cap the amount of a health insurance policy eligible for tax relief at €1,000 for an adult, and €500 for a child, is likely to hit as many as 90 per cent of those with health insurance policies.

After all, the average price of a health insurance policy is €1,500.

Under the present system, with tax relief available at 20 per cent, this brings the net cost down to €1,200. Once the new regime is implemented, the net cost of such a policy will rise to €1,300. And the more expensive your policy, the more you are set to lose.

As our table shows, someone with an aforementioned “gold-plated” policy will have to pay an extra €495 a year for their policy.

Health insurance analyst Dermot Goode of Cornmarket says the move is going to have a "huge impact" on the elderly.

“Many elderly members, while their healthcare needs will be great, may now have to downgrade their cover,” he says, noting that this may lead to shortfalls ranging from €2,000 to €3,500 depending on the plan held and the procedure in question.

For example, some insurers now require the patient to contribute up to 20 per cent of the cost of orthopaedic procedures. So if the bill comes in at €20,000, which would not be unexpected, the patient has to pay €4,000 themselves.

Given the upward trajectory in the cost of health insurance in the recent past, Goode suggests there is no end in sight, with prices expected to rise by between 3 per cent and 10 per cent next year. This means even more people will be pushed into the tax cap.

Free GP visits
One positive outcome of this year's budget was the introduction of free GP visits for children aged five and under, which, it is said, will apply to some 240,000 children.

While it is not quite the free GP care for all that the Government had promised, struggling parents will welcome the move, given that a visit to your local doctor can cost as much as €60. And then there’s the likely trip to the pharmacy afterwards, when even a bottle of children’s paracetamol can set you back as much as €8.

So, all in all, it’s hard to find fault with the new regime. Or is it?

It seems that the introduction of the heralded service will take some time. According to the Department of Health, the implementation of the measure will require primary legislation, which means that the various administrative changes that need to be implemented won’t be done until next year.

“When the specific arrangements are in place, the scheme will be publicised,” a spokeswoman for the department said.

But if your child is about to turn five, the value of the scheme will be reduced the longer it takes for it to be implemented.

More expensive prescriptions
If you have a medical card, you must currently pay €1.50 per prescription item you get from the chemist, up to a cap of €19.50 per month per person or family. However, from December 1st this year, you will have to pay €2.50 per item, up to a cap of €25.

There has been a concern that people were loading up their prescriptions with medications, rather than having to buy them over the counter at full price.

For Timmins, however, the move shows that the Government now considers the charge as a “cash cow”, and is taxing or penalising those in need of medication. There have been suggestions that one impact of the imposition of the charge is that people are asking their doctors to write prescriptions for longer periods – hence negating the need to pay the charge on a regular basis.

For those who have suddenly found that they are no longer eligible for a medical card, they will be entitled to relief on the cost of prescriptions through the Drugs Payment Scheme.

Under this scheme, the most you will pay for your drugs is €144 a month. The scheme covers the person who applied, his or her spouse/partner, and children under 18 or under 23 if in full-time education.

Who gets a
medical card?
Potentially the biggest issue arising from this year's budget – as evidenced by the protest on the streets of Dublin last week – is the move by the Government to reduce eligibility for a medical card.

The initiative comes on the back of a tightening of the application process for discretionary medical cards, with a review finding that almost half of medical card recipients had income levels of 200 per cent above the allowable levels.

One of the main cohorts affected is the over-70s, given the reduction in income limits in the recent budget. It is the latest in a line of reductions stretching back to 2008, when the then government removed the automatic entitlement to a medical card for the over-70s.

It later rowed back on its original decision by introducing a more generous means test of €700 for an individual and €1,400 for a couple. However, this has since been cut and the latest move means that an individual over the age of 70 cannot earn more than €500 a week if they want to qualify for a medical card, while the limit for a couple has been cut to €900, down from €600 and €1,200 respectively. This is expected to push some 35,000 people out of the medical card regime.

The limits for a GP card have not been cut, and a single person with income of between €500 and €700 a week will still have free access to GP charges, while a limit of €1,400 a week applies to couples. A GP card allows free GP care but prescriptions must be paid for.

According to the Department of Health, the move means that just 3 per cent of those aged over 70 will not be entitled to a GP card.

The budget made no change to the ruling that allows someone under the age of 70, whose spouse is someone aged over 70, and who meets the income levels, to receive a medical card.

If you’re wondering whether you will be affected, it’s important to remember that the income referred to by the department is “gross” income – ie before tax – and includes any income from a pension/employment or through savings, investments or rental income.

However, income/interest on the first €36,000 of savings for a single person and €72,000 for a couple are disregarded. So if you are an individual with €40,000 in savings, interest earned on just €4,000 of that will be considered towards your overall gross income.

With regards to property, even if you own three homes, these won’t affect your potential to get a medical card if they are not generating an income, as only rental income is assessed. This figure is based on taxable income – ie total rent received minus allowable expenses.

Some discretion also applies, such as if you have a high income but a high proportion of it goes on medical expenses.

The change in income limits also requires legislation to be enacted, which the Department of Health expects will happen by the end of this year or in early 2014. Once that happens, reassessments of the eligibility of people holding medical cards will begin. This will inevitably take some time.

While some people who are no longer eligible for the medical card may feel they can keep their card until it is time for it to be renewed, the Department of Health is clear that it is up to the person to advise the HSE if they are no longer entitled to a medical card. “This will remain the case after the new legislation is enacted,” the department says.

While many people will still find themselves eligible for a card, the fear is that future budgets may further erode their benefits.

“Even those who are in the limits now are concerned that they won’t get it in the future if it continues to be pared away,” says Timmins.

The same is true of the private medical insurance premium relief: now that the Government has begun cutting relief, it will be seen as an easier target in future.

The budget will also make it more difficult for those who are unemployed and returning to work to hold on to their medical card.

At present, someone who returns to work after a period of unemployment can keep their medical card for three years, regardless of income. Now, however, they will only be entitled to a GP card.