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Introduction: Professor Charles Normand, London School of Hygiene and Tropical Medicine
Professor Normand began by outlining the priorities of the participants in health care finance schemes. Citizens feared being denied access to care while health care professionals had an interest in ensuring that services had adequate and reliable finance. Employers wanted healthy and happy employees, while governments wanted good services, low unemployment, no exploitation of monopoly power and control over costs. He added that while there were distinctions between the various methods of financing health care, in practice no country had a system that was a pure version of any model.
Professor Normand turned to reforms in central and eastern Europe, which had involved a general switch from tax-financed and government provision to social insurance and diverse provision of services. The Czech Republic moved rapidly towards this model, while Romania attempted a similar objective but started later, with more gradual progress. Hungary introduced democratic elections of health insurance leaders, and transition was being made through an earmarked tax fund in the Slovak Republic.
Professor Normand noted the changing structure of employment in relation to health service finance. There had been a rapid rise in unemployment and self-employment, together with a proliferation in part-time jobs. This had contributed to a wider trend in short-term unemployment and more career changes. These patterns had made it more difficult to organise revenue collection based on the payroll, whether for tax or insurance and also estimates of income are increasingly unreliable.
He stressed the need for clarity in health care objectives and that financing systems must be the servants of health policy. He outlined several health policy objectives, firstly to ensure access to a minimum level of treatment and care to all citizens. To this he added patient choice, cost control and efficiency and health gains. A finance system should have several core characteristics to enable it to meet the objectives outlined. It should have sufficient resources to support the health sector, provide access to those in need at the time of need. There should be clear entitlements, control of costs, and it should be efficient and cheap to run.
Professor Normand indicated that there were usually three problems when paying for health services. Firstly there is uncertain need, secondly there was a problem of timing; as need tended to be greatest early and late in life, yet ability to pay was most likely to occur in the middle. Finally, the financing mechanism might be seen as a means of redistributing resources.
He underlined the advantages of the traditional method of social insurance and finance through the payroll, transparency, reasonable levels of equity, stable revenue and all people treated as private patients. However, there were drawbacks to this system, namely the decline in formal employment making assessment less simple, the principle of equity was undermined by the increase in non-salary income, and 'risk rating' could take up a large amount of revenue raised.
Professor Normand then turned to the payment of care providers, which had a major effect on costs, activity and efficiency of services. He stated that the argument for payments on the ground of motivation was without evidence to support it. Moreover, fee for service arrangements tended to lead to over-provision while capitation services could encourage under-provision. Payment per day lengthened hospital stay while prospective payment shortened it. He added that the pattern of provision could be affected by payment incentives.
In conclusion, Professor Normand highlighted features which would not disappear, the most important being that money was taken from the citizen and given to the health services. While this would always be painful, its excesses could be tempered by good cost control and matching finances to remit of policy goals helps guide the choice.
Discussant: Ms. Bogatyryova, Deputy Minister of Health Care of Ukraine
Ms. Bogatyryova stated that health care in Ukraine was funded through taxation and that 13.5% of GDP is spent on health care annually. However, it was not enough to maintain the system of care or to pay the wages to staff.
Ms. Bogatyryova acknowledged that attempts had been made to change the system of funding in Ukraine. There are 49 regions which were allocated funds or subsidised, each also raised its own funds. They varied across regions, with those areas suffering from higher accident levels receiving more. The capitation model had also been introduced, with money following the patient. She stated that funding occurred at several levels. There was a federal level beneath the Ministry, and regional budgets - none of which had yet been approved.
A bill on obligatory sickness insurance was under preparation. The government intended to maintain tax at 30% while the sickness bill would require employee and employer contributions, hence it had attracted much criticism. The intention was to introduce a mixed system of health provision.
Ukraine was the last country to introduce this model and as a result it made it possible to establish insurance companies for risks such as childbirth. This systems also showed an increase in the level of unemployment and the non payment of staff.
Discussant: Mr. Michael Kuzmenko, Chairman, Health Workers Union of the Russian Federation
Mr. Kuzmenko began by outlining the goals of an ideal health care system, which included coverage and equal access to assistance when required. He underlined that governments should play the key role in regulating health service finance.
He indicated what was felt in the Russian Federation to be the most successful combination of health service financing. This involved state funding of 5-6% of GDP, receipts from employers through the system of health insurance, within the limits of 8-10% of wages' fund and 25% minimum from regional budgets. Such an approach, he believed, would amount to health care spending of 9-10% of GDP. In 1992 a system of health insurance was introduced in Russia. It was to be developed gradually up to 2003, encompassing the elements of financing previously mentioned.
Mr. Kuzmenko outlined the context in which the system was introduced. The state allocated only 3% of GDP, 20% came from regional budgets and the insurance rate was 3.6% of wages' fund. Mortality and morbidity rates were growing, with the latter showing a steady rise over the last 5 years. Working conditions had affected health in the region, with an annual increase of between 10 and 11 thousand cases of occupational diseases or poisonings. In addition, he noted that only 10% of schoolchildren were considered healthy. This situation was worsened by health workers' wages being the lowest in the country, with 80% living below the poverty line. Payment is often between 3-19 months overdue and payments owed to health workers amounts to US$60m.
Having set the scene, Mr. Kuzmenko assessed what had happened to health care financing in the Russian Federation. With the reduction of GDP came the lower allocation of funds to the health service (around 1%). Expenditure on health care fell to 15% in the regions with services receiving only 20-30% of the minimum financial requirement and with the result that over the past four years virtually no resources had been allocated for repairs, amenities or the purchase of equipment. To continue providing a service, patients' own bed linen, cutlery, food and medication were brought in as they were admitted. Several out-patient facilities began charging for medical assistance, in breach of Russian legislation and the constitution under which it was illegal to require payment for medical services.
In addition, noted Mr. Kuzmenko, the state no longer regulated the price of pharmaceuticals, which were now inaccessible for many people. Moreover, the state no longer paid for those who should receive free of charge such as babies, invalids and terminally ill patients. The health care system had reached virtual disintegration.
In order to change this, his Union had attempted to place health issues to the fore. With the full support of the Russian Federation's Health Ministry, the union had asked the president to consider health care at the Government of Russia's meetings, which were involved in the formulation of health care legislation; and called upon international organisations to continue highlighting areas of concern.
Consequences for changing the system of financing alongside reducing the overall budget
The representatives of the Government of Slovenia described their compulsory health insurance system, legislated for in 1992. The rates of contribution and extent of coverage were determined by parliament, based on recommendations made by the National Health Insurance Institute. Since February 1996 all employers and employees paid a total of 13.25% of gross income. This corresponded to 6.4% by each, plus an extra 0.45% by the employer to cover work injuries. The insurance covered health care expenses irrespective of either the level of their contribution or cost of care and provided the majority of health care provision. For those who wanted better coverage there was the option to take up voluntary health care insurance. The health budget made up for the largest share of public funds and additional sources for the health sector were provided from the state budget for capital investments for all health care facilities. This budget also covered expenditure for national public health programmes, including traditional preventive programmes, some new health promotion programmes, medical education and training, research and the national health information system. Additionally, the government covered disadvantaged groups. For example there was a special state budget for refugees and the unemployed were paid for by the local authority.
The worker representative from Slovenia said that the trade unions reacted strongly to the change, although softened their response when they realised the fiscal difficulties. In times when financial circumstances improved, staff would gain a pay rise. The former system had high equity of users at all social levels, a high level of professionalism and good health care. The weakness in the system were long waiting times. There was highly qualified staff but low salaries. He emphasised that each citizen was entitled to health care and stated that the single system of insurance was depriving individuals of care because there was no longer equity of access. Furthermore he claimed that citizens did not support the insurance system.
The worker representative from the Czech Republic suggested that whenever there was a lack of funding governments talk only about providing the necessities. The basic care being offered differed and changes depending on how much can be afforded. This also has an effect on staff and wages.
The worker representative from Poland said that it was the Minister of Finance who determined the level of funding. With only 20% of the health budget being spent on wages, he believed the only social dialogue took place on the street with unions demonstrating.
A Narrow Perspective on Reform
The spokesperson from WHO considered the philosophy of health care in central and eastern Europe to be narrowly focused on the consumer. It did not take into account the needs of the provider who had direct contact with the consumer in the delivery of health care. She also said that there are public health matters which need to be addressed. For example the level of suicide, violence and alcoholism is growing. Pollution causing environmental and industrial diseases is increasing, and the other major challenge is the growth in teenage smoking. All of these factors have an effect on the economic costs of a countries health system.
General Points and Summary
The representative of the International Council of Nurses mentioned the matter of financial incentives, suggesting an examination of how it influences the behaviour of health professionals. She said that pay according to responsibilities did not always reflect what nurses did and was an issue which most often affected women.
The worker representative from Bulgaria said that different models of health care financing prevailed in her country which were linked to macro economic developments and pressure from the World Bank and the International Monetary Fund.
Professor Normand commented on a number of points arising from the experiences described. He believed that against the current background of extraordinary circumstances it was difficult to achieve change. There was a need to examine the speed of change. In a collapsing economy, this was impossible. Special skills were needed within new social insurance arrangements including the ability to network and share information. He said no system was painless and it was necessary to manage the best possible .
Introduction: Mr. David Hall, Public Service Privatisation Research Unit, London
Mr. Hall aimed to provide an overview of privatisation in central and eastern Europe, discuss the relationships between privatisation and employment protection, and highlight some of the contradictions between privatisation and health care policies.
His first section dealt with the types of privatisation seen in the region. One of the methods was decentralised administration, where hospital administration was dealt with at a municipal level. While not privatisation itself, the shift might undermine bargaining arrangements, with hospitals applying personal pay systems. Private practice had also proved popular, with doctors converting to self-employment in the Czech Republic, Poland and Hungary. The same countries had encouraged, or developed as a policy, private health insurance. These had been fraught with difficulties and many going bankrupt. As for pharmacies and spas, most countries had privatised these, making staff more vulnerable to market forces and lower pay through loss of risk-pooling. Higher sales might offset these problems.
Mr. Hall indicated that developments in the pharmaceuticals market had a damaging effect on employees in health services. The liberalisation of the prescription system led to a boom in sales to the region which, because of poor regulation, led to higher prices. As health spending on drugs rose rapidly in the region (up to 30% of total health spending) other health care expenditure was reduced, much of which was labour costs.
He observed that there were very few hospitals set up by, or transferred to, private companies. Two attempts in Hungary to use private companies for hospital facilities management had ended in failure, one of which failed to make profits, the other is facing criminal charges. Hungary's military hospital was being built and run by UK-based HMCI, but it remained under the control of the state through the Ministry of Defence.
Some cleaning and catering services had been contracted out in the Czech Republic, Slovenia, Poland and Hungary. These contracts had been taken mainly by multinationals, and the fear was that staff cuts will follow to boost profit margins. Mr. Hall also mentioned the information and technology services being put out to tender which, should computer multinationals replace incumbent firms, might lead to pay reductions.
Mr. Hall acknowledged that controlling the effects of privatisation was done mainly through social dialogue, but he considered the role of the legal framework in mitigating the impact of privatisation. He turned first to the EU acquired rights directive, which secured the status quo following transferral and meant that the process of privatisation itself should not result in cuts in jobs, pay and conditions. A second EU directive required companies with over 1,500 staff (usually multinationals) to establish works councils to which employees can send representatives.
Aside from EU laws, a great deal depends on national legal systems regarding collective bargaining and collective rights. In the UK, there was no statutory system regarding collective bargaining and collective rights. Also the UK had no statutory system of industry agreements, hence private contractors could ultimately introduce their own pay and conditions. The reverse was true in Denmark where employers must follow sectoral agreements negotiated with the trade unions.
Mr. Hall noted that the privatisation of health care was riddled with contradictions; at its heart was the distinction between health care for all and profit maximisation. He cited another example of the difficulties of contracting out services. In the UK, a firm was criticised for not cleaning up bloodstains. The reply was that bloodstains were not specified in the contract, and to re-negotiate would cost extra. In addition, he observed the difficulty of curbing drugs expenditure at a time when more marketing programmes were being offered by the drugs multinationals.
Private health care operators could not be solely risk-takers. Governments, said Mr. Hall, would not allow them to go bankrupt, leaving thousands uninsured or hospitals to go to ruin. If the government would always step in, this seems to undermine the principle of privatisation itself. He noted that PSI advocates studying privatisation in relation to its alternatives and urged governments to be receptive to all possibilities.
In concluding, he underlined three issues already touched upon; the role of the EU directives, the regulation of pharmaceutical companies and the consideration of privatisation against its alternatives.
Discussant: Ms. Jana Davorakova, Vice-President of the Trade Union of Health Services and Social Care, the Czech Republic
Ms. Dvorakova, representing the Czech trade union of the health service and social care, explained the transformation of the health care system in the Czech Republic. In 1990, the regional structures of health care provision were abolished, and free choice of physicians and hospitals was introduced. At the end of 1992, the payments for providing health care were changed from state budget contributions to financing through the health insurance fund, which consisted of contributions from employers and employees. For those not in work, the state paid. Yet, there were problems, since doctors were paid according to a point system and as more points meant higher wages, hence there were many superfluous examinations to ensure more income for the doctors.
Ms. Dvorakova stressed that her union played an influential role in the privatisation process, with representatives on privatisation committees. There were several methods of privatisation discussed including the restitution of property owned before 1948, direct sale to a government appointed entity, public tender according to specified criteria, auctions, establishing a joint-stock company and free transfer to the municipality. From the perspective of the union, the important factor was that the obligations of the former proprietor were passed to the new company.
Difficulties with the programme meant that after three years, privatisation was still incomplete. Of 134 hospitals earmarked for privatisation, only three have been transferred, and even in this limited enterprise, several problems had occurred including the government seeking to devolve responsibility for health policy to the insurance companies and patients, insufficient accessibility and quality of care in the private sector. In addition, Ms. Dvorakova stressed the rising costs of health care and the corruption of officials.
The lack of health service regulation gradually deteriorated the balance in health insurance which, after four years, reached a deficit of 8-10 thousand million crowns with several companies going bankrupt. Ms. Dvorakova argued that instead of solving the problem of neglected health care, the Government attempted to cut wages and remove the system of pay which kept health sector pay in line with that of other public sector trades. Her Union was resolutely opposed to the state's ideological objective of ending free health care. The union was assisted in this by constitutional order in the Czech Republic which stated that health care should be provided free of charge. She added that privatisation jeopardised the very functioning of the health service, and offered several illustrations of this. This included a hospital in Ostrov nad Ohi which closed its psychiatric department one year after privatisation and as a result, the state had to rent a hospital and secure patient care. She advised caution where change was radical and ideologically-driven, as a consequence of which, the Czech system was under-performing for its staff and patients.
Discussant: Mr. Maris Revalds, Representative of the Private Employers, Latvia
Mr. Revalds stated that change was sweeping Latvia, with structural adjustment programmes being funded by the World Bank, the European Union, the UK and Denmark. New legislation on medical practice and privatisation had been introduced and doctors were required to register before setting up a practice. Mr. Revalds also pointed out that pharmacies had been privatised, despite opposition from the pharmacists.
New regulations on health care financing had introduced insurance schemes. Funds provided by the State to hospitals account for 80%, with the remainder met by individuals.
Entrepreneurial relations in the health service depended on local management and administration. The extent of private sector involvement depended largely on the political composition of local management. He also admitted that there have been problems with corruption.
Reforms based on the value of competitiveness and social solidarity
The worker representative of Albania said their federation had studied the problems that emerged when a public system of health care was privatised. He said the problem mainly stemmed from a rigid political ideology which lacked sufficient vision and would have to take a logical or pragmatic approach to health care provision. Currently, there was a discussion of assessing different disciplines in health care including lowering the status of doctors. The trade union had been challenging government imperatives to privatise but a national spirit to challenge was not present. He suggested, that the future basis of the health care sector lay in training and re-training programmes, prevention, secondary and tertiary care which should all be free of charge. He supported a market economy, but not in health care. The management of health care should have more central direction, particularly in relation to vulnerable groups such as children and the chronically ill.
The worker representative of Slovenia stated that the change to a private system in primary health care was inappropriate for preventative health education, development and research. He said the private system appeared to be cheaper because they had not to invest in these areas.
Mr. Hall in concluding the discussion said that there was an extraordinary wealth of examples on the process of privatisation particularly which generated problems. He also said that a problem for membership of the European Union was a legal frame work which excludes protection under leasing.