Private health insurance contributes little to the overall cost of health services and there may be too many private beds in public hospitals, says a report prepared by accountants Deloitte and Touche for the Department of Health.
The "value-for-money" report is also highly critical of the way the health boards are run.
The Minister for Health Mr Martin, however, stressed yesterday he was not in favour of abolishing health boards. They were needed to deliver services at a local level.
"I've come to the conclusion, notwithstanding the value-for- money audit, that we will need health boards into the future because we will need geographical regional organisations to deliver an integrated set of packages which are necessary for older people, people with disabilities, people with mental health problems, the homeless in our society and childcare."
He said the audit's main recommendation was to have an independent review of the health board structure, which was included in the National Health Strategy.
Mr Martin acknowledged that the report was critical of certain ways the health boards worked but said: "It didn't come down specifically and say, 'Minister we'd recommend that you abolish health boards or we recommend you amalgamate them'. It doesn't actually say that.
"And I take it the reason it didn't was because it's one thing to criticise a structure and altogether another thing to come up with an alternative and that's the bottom line.
"They have made observations about what they would see to be negative elements of political representation on health boards. I would acknowledge that there sometimes are competing political interests on the boards which are geographic in nature but the medics are the same in that scenario, so you could make the same argument about medics.
"The independent review will perhaps throw up some of the responses to these issues or the resolutions here because there is a number of options here. You could abolish health boards altogether, I don't think that's an option because I think you need the local area delivery. You could amalgamate some of the health boards, that's an option that could be considered by the independent review although I think we have to allow the ERHA experience to bed in because I think it's worth our while seeing what's going to happen in the eastern region."
He said the fact that the report was published on the Department's website briefly on Monday was a "genuine mistake" for which he apologised. However, there was no question of hiding anything, it had always been his intention to publish it.
The report noted: "Private health insurance makes only a limited contribution to the cost of public healthcare." The VHI accounted for only 11 per cent to 12 per cent of current health spending during the 1990s.
While the health insurance bodies see such insurance as important, this importance "is probably much greater than its real value to the healthcare system, because of its small effective contribution. It covers less intensive rather than higher users of healthcare and they do not use it for all procedures and treatments, for example major trauma.
"An assessment is required of whether the activity generated by the insured population justifies the current allocation of private beds in public hospitals (currently 20 per cent), having regard to the age profile, income and health of those with private insurance," it says.
The report rebuts suspicions that some consultants may manipulate waiting lists to encourage patients to take private treatment. "We have identified no systematic evidence to support any widespread abuse of public sector responsibilities by consultants."
However, "the lack of hard evidence on the amount of activity in the private sector carried out by individual consultants hinders a conclusive assessment of this issue. Currently, there is no systematic and shared record-keeping between private and public systems. Both sides, and consultants too, could benefit from an open and transparent system of sharing data which dispelled the current climate of suspicion, in which consultants are widely perceived to be under-performing in the public system without any significant documented evidence to support this."
Its most scathing comments are reserved for the health boards. Most of the current managers have grown up in a system where administration mattered more than service, it says. As a result, health board managers have the wrong skills and there is a lack of new thinking in these organisations.
Politicians should no longer have a say in health board decision-making. Their role should be "representing the local population, and not on a decision-making basis".
Health board managers have found it difficult to change from a situation where money was scarce to one where a lot of extra funding has been introduced.
It also complains that health boards compete too much with each other and co-operate too little. Those major acute hospitals which are managed by health boards should manage themselves - while still being accountable to health boards - "to bring decision-making closer to the point of service delivery."