New study suggests cutting pay of new hospital consultants was policy failure

The 2012 decision to cut the pay of new hospital consultants is an example of a policy failure that was influenced by political and union self-interest, a new study suggests.

The decision resulted in "unintended negative consequences" by making it more difficult to recruit and retain doctors in public hospitals, and was driven by policymakers' "irrational belief" about the likelihood of recruiting consultants on lower salaries, according to Dr Fiona Kiernan of UCD's school of economics.

With the government at the time constrained by the terms of the financial bailout and required to cut public expenditure, the decision was also influenced by “the ideology of austerity”.

“Austerity also created an environment that allowed blame for excessive public sector pay to be focused at public hospital consultants.”

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In September 2012, the government imposed a salary reduction for new entrants to the public sector, most of whom worked in health or education. The reduction was larger for hospital consultants than for other public sector workers because their base salaries were higher.

The measure was partially reversed in 2015, but remains a bugbear within the profession and is widely blamed for the growing number of unfilled consultant posts in the health service.

Dr Kiernan, writing in the journal Administration, said it was difficult to determine the original percentage cut in pay for new entrants compared to pre-2012 consultants, though the Irish Medical Organisation (IMO) has estimated it at about 30 per cent.

She said "self-interest" may explain some of the decision-making at the time, with then minister for health James Reilly facing a Dáil motion of no confidence within days. The European Commission had also criticised the Irish public finances, and in particular management of the health service in a report published weeks earlier.

“Minister Reilly’s decision to introduce lower salaries appears to have been helpful in defeating this motion of no confidence,” said Dr Kiernan.

Uncontested

Meanwhile, the focus of the medical unions – the IMO and the Irish Hospital Consultants’ Association – “remained on the welfare of those appointed before October 1st, 2012, rather than the welfare of potential future consultants”, she said. “There was little evidence that the unions were vocal in their disagreement with the new entrant salary reduction.

“The decision was, therefore, relatively uncontested, meaning that the reductions were introduced before adequate examination of the potential negative impact took place.”

The Health Service Executive (HSE) also had an "irrational belief" it and public hospitals were, and would remain, monopoly employers. "This belief was irrational, and did not include available evidence on doctor migration that occurred prior to the recession."