How can runaway spending in the health service be reined in?
The health service’s warning sign came early, like the smell of smoke before the flames. It took only the first three months of the year – a period that sent the Health Service Executive ’s (HSE) 2026 financial deficit to €250 million – for senior health officials to become concerned. The first quarter is always a difficult time financially. Winter illnesses lead to increased numbers of people attending hospital emergency departments and higher than typical rates of sickness among healthcare staff. This, in turn, leads to the health service needing more agency staff to provide cover, which, in turn, leads to higher costs. But 2026 was different. This year marked the first time funding was devolved into the newly established six health regions, which would be responsible for managing their own individual budgets. By April, the cracks were undeniable. HSE chief executive Anne O’Connor put three of the six HSE regions – HSE Dublin and Midlands, HSE Dublin and South East, and HSE South West – into what is known as “tier three escalation”, which triggered employment controls and greater scrutiny on spending. It wasn’t enough. The figures deteriorated further over the summer, resulting in what appeared to be a loss of patience within Government and a dramatic U-turn in policy by September. Four of the six regions were stripped of their powers to oversee day-to-day spending, with Minister for Public Expenditure Jack Chambers indicating this would continue into next year. These regions are the West and North West, the South West, Dublin and South East, and Dublin and Midlands regions The deficit has continued to climb, reaching €781 million by the end of September – 8.6 per cent higher than the same period last year, despite the sector only receiving a 5 per cent budget uplift during that time. The Parliamentary Budget Office (PBO), which provides independent analysis and advice to the Oireachtas, warns the trajectory risks an estimated overrun in health of €1 billion by the end of year. The Government maintains that steps are being taken to prevent the deficit from reaching this level, but concerns abound nevertheless. According to the PBO, health is a “consistent source of current expenditure overruns, accounting for a large share of the total overrun expenditure in recent years”. But if the health system is no stranger to financial overruns, what is causing them and what can be done to prevent them? Hospital waiting lists climb above one million people Each October, when the Government unveils its annual budget for the following year, the headlines announce that a record health budget has been allocated. Next year it will receive €29.1 billion, rising from the €27.4 billion budget this year, but Opposition parties fear this uplift in funding will largely be swallowed by the gaping hole in this year’s accounts. Killian Carroll, senior economist at fiscal watchdog the Irish Fiscal Advisory Council (Ifac), says health overruns are often discussed as a failure to control spending during the year. “But some of the problems start earlier, when budgets are set. In health, and especially in hospitals, budgets have repeatedly been set as if the previous year’s actual level of spending did not happen,” he said in analysis published before the budget in September on the council’s website. “This means they have implicitly assumed large savings from efficiency or better care models, even though similar savings failed to materialise in previous years.” Carroll says a “realistic” budget must be set for health in order to avoid overruns, with Ifac advocating for multiannual funding. It takes a giveaway budget of €8.5bn to not annoy anyone – except Patrick O’Donovan This is an argument many of the voluntary hospitals – HSE-funded organisations that are run by their own boards of management – also make. A recent survey of voluntary hospitals, which includes Beaumont Hospital, the Mater and St Vincent’s in Dublin, found almost two thirds (63 per cent) reported carrying deficits accumulated over previous years. Minister for Health Jennifer Carroll MacNeill said this year’s deficit has been largely driven by two elements: the pay bill and the increasing cost of drugs and medicines. Medicines was a success story, but an expensive one, she said, adding that the pay bill is something that “we can control”. “There was provision for 3,300 people on average salaries to be recruited in the second half of 2026 – contingent on reducing overtime and agency spend,” she told The Irish Times earlier this week at a post-budget press conference. “Unfortunately, 3,600 people were recruited in the first half of the year without the commensurate and necessary reduction in agency and overtime.” Last month she singled out Cork University Hospital as a hospital that exceeded its pay budget, after it hired 233 people this year. “That is more than any other Model 4 hospital in the country, and that includes Beaumont, the Mater, St James and UHL [University Hospital Limerick] and by some distance,” she said. Agency spend and overtime are consistently pointed to as a reason behind breaching budgets. The HSE is setting up staff banks – established within the HSE with the aim of replicating the flexibility of agency staff at a better value cost. But senior sources have suggested expenditure on agency has actually increased in recent months as tighter employment controls take effect. Two regions – Dublin and North East, and the Mid West – have stayed within budget. The Minister said the West and North West, which covers Donegal, Sligo, Leitrim, Roscommon, Mayo, and Galway, has improved its position, and may come in less than 2 per cent over budget by end of year. But the other three areas have “over-recruited” this year, she said, and “very clearly have eaten into next year’s [budget] provision”. Budget day has lost all excitement. It is now an attritional struggle between ministers Ronan Mahon, lecturer in health economics at the University of Galway, said this could serve as an “incentive” for regions to stay within their budget, rather than being “rewarded” with additional funding when they exceed it. “If you look to the UK, the care trust have a statutory break-even requirement. They just have to do it. There are equivalents in other countries as well,” he says. Carroll MacNeill has consistently criticised the productivity of the health service, saying there has not been a commensurate increase in activity to match the investment into the system. Government focus has been on increasing evening and weekend working shifts, primarily driven by the public-only consultant contract (POCC) which seeks to remove private care from public hospitals. Though a majority of consultants are now on the new contract, recent figures showed one in seven were rostered to work Saturdays, while 38 per cent were working extended days. The move to the POCC is having a financial impact too, with the HSE stating the shift to the new contract is likely to result in a 2026 shortfall in private patient income of about €145 million. Mahon says productivity is not just about return for investment, but also whether or not the State is funding the right mix of healthcare. “In the Irish context, that means trying to move activity out of the acute hospital setting into primary care and the community,” he says. How Budget 2027 will impact families: From renters to stay-at-home parents Hospital care is considerably more expensive to the taxpayer than community care, and Budget 2027 points explicitly to a focus on increasing primary resources. In addition to this, Mahon believes further work could be done when making funding decisions. The cost-effectiveness threshold when deciding on whether or not to reimburse a drug in the public system is “too high”, he says. “Meaning when we price drugs to that threshold we are probably paying too much and the opportunity costs are too high,” he says. “We use health technology assessment and cost effectiveness when trying to decide what brand of drug to use and for what price. That same methodology could be applied across the health system.” Some elements of increased expenditure are unavoidable; an ageing population results in increased demand and complexity of care on health services. Add this population change to inflation, and representative unions claim the additional funding will only enable the system to stand still rather than expand – unless a systemic change to the way it operates takes place.