JMHSR/1998 - Terms of employment and working conditions in health sector reforms

Report for discussion at the Joint Meeting on Terms of Employment and Working Conditions in Health Sector Reforms

This report has been prepared by the International Labour Office as the basis for discussions at the Joint Meeting on Terms of Employment and Working Conditions in Health Sector Reforms. It reviews the impact of health sector reforms on health workers and the implications of changes in employment and pay, labour relations, working conditions and terms of employment on the general performance of health systems in the light of the links between health policy, human health and the economy.

The meeting is part of the ILO's Sectoral Activities Programme, the purpose of which is to facilitate the exchange of information between constituents on labour and social developments relevant to particular economic sectors, complemented by practically oriented research on topical sectoral issues. This objective has traditionally been pursued by holding international tripartite sectoral meetings for the exchange of ideas and experiences with a view to: fostering a broader understanding of sector-specific issues and problems; promoting an international tripartite consensus on sectoral concerns and providing guidance for national and international policies and measures to deal with related issues and problems; promoting the harmonization of all ILO activities of a sectoral character and acting as focal point between the Office and its constituents; and providing technical advice, practical assistance and support for the latter to facilitate the application of international labour standards in various economic sectors.

At its 262nd Session (March-April 1995), the Governing Body of the ILO decided that a meeting on the terms of employment and working conditions in health sector reforms would be included in the programme of sectoral activities meetings for 1996-97. At its 268th Session (March 1997) the Governing Body decided that this meeting should be included in the programme of sectoral meetings for 1998-99 and that it should be bipartite with some representation of the private sector. It was decided to invite the following 18 countries: Austria, Belgium, Bulgaria, Canada, China, Colombia, Czech Republic, Kuwait, Lebanon, Mexico, Niger, Poland, Russian Federation, Slovakia, Sweden, Switzerland, Uganda and Zambia. A number of countries were included in the reserve list from which further invitees would be drawn in the event that a government in the first list declined the invitation. Furthermore, seven private employers' and 25 workers' representatives were invited. The Governing Body decided that the purpose of the meeting would be to facilitate an exchange of views on the impact on employment and working conditions of changes in the delivery of health services associated with the reform of the health sector in countries undergoing structural adjustment and transition to a market economy, and to adopt conclusions, including guidelines and proposals for further action, and a report on the discussions. The meeting may also adopt resolutions.

Against the background of increased competition in a globalized economy and declining public budgets, health care systems, like other public services, are increasingly subject to reforms. In many countries the performance of health care systems is severely deteriorating, at times to critical levels, and demands deep restructuring and improvements in efficiency. Owing to demographic developments (the growth and ageing of populations), the demand for health services is increasing. Restructuring and redesigning systems of financing health care (for example, by introducing user fees and other private contributions), appears to lead in the long run to a further increase in health sector employment, even though the structures of employment change.

In many countries, the increasing demand in parts of the sector often aggravates shortages of qualified personnel, whereas in others there is an oversupply. Pay, working conditions and terms of employment are often unable to attract new entrants or retain the existing workforce. Migration is the consequence of inter- and intra-country imbalances. Work reorganization, restructuring and privatization are frequent responses to the alarming situation of some health care systems. Shifts in health policies in order to make basic and primary services accessible to all population groups are also meant to improve the general situation. Health workers are torn between their professional responsibilities and economic pressures, as well as having to cope with their traditionally difficult duties.

In seven chapters, the present report outlines the changes brought about through health sector reforms and highlights the relevance of the ILO's activities to the management of change in partnership with the workforce. Chapter 1 describes the various challenges to which health care systems are exposed at present and Chapter 2 briefly outlines different patterns of health care reform as policy responses. Chapter 3 introduces the general trends with regard to the impact of reforms on health care staff. Chapter 4 analyses trends, levels and structures of employment in relation to health sector reforms. The various sections of Chapter 5 describe in some detail the impact of health sector reforms on human resource development, working conditions, work organization, occupational safety and health and labour relations. As the elements of health systems analysed in these chapters are interlinked, cross references have been made to other sections as far as possible. Chapter 6 summarizes some trends in remuneration in the health sector and the final chapter gives a brief overview of ILO policy and activities in relation to health sector reforms and improvements in working conditions. This last chapter refers to international labour standards of specific relevance to health care workers; however, preceding chapters also refer to international labour standards of general application whenever they are relevant to the subject of the section. The report concludes with a list of suggested points for discussion.

The information on which the report is based is derived from a variety of sources, although it should be noted that it was sometimes difficult to obtain comparable data on public and private health care. Extensive use was made of various publications as well as articles from the press. A number of governments which showed specific interest in the subject of the Joint Meeting, as well as affiliates of Public Services International and of the International Council of Nurses, replied to a questionnaire on issues dealt with here and the information provided was used at various places in the report; however, owing to the limited scope of this report, by no means all the information could be absorbed. The report also draws extensively on materials and data published by the World Health Organization and the World Bank. The World Health Organization provided comments on the first draft of the report. Use was also made of studies on restructuring and privatization of health care services prepared for the ILO by Stephen Bach and Sandra Polaski and of a study prepared for the ILO by Judith Healy on health care personnel in Central and Eastern Europe.

The report was prepared by the Salaried Employees and Professional Workers Branch and is published under the authority of the International Labour Office. Contributions to the report were provided by external collaborators (Mr. Axel Weber, senior specialist in health systems, Ms. Gabriele Mussnig and Mr. Derek Robinson).

The quality and quantity of health care depends largely on the availability of adequate numbers of properly trained health workers, who constitute the health sector's most important resource. This conclusion, adopted by the Joint Meeting on Employment and Conditions of Work in Health and Medical Services in 1985, is as valid today as it was 13 years ago.

The role and responsibility of the health sector are vital in underpinning the growth and development of society as a whole. Public sector reforms, especially in the health sector, should respect basic guiding principles: continuity of values, transparency and openness of policies, equity in access to services, provision of better services to citizens, the importance of good working conditions and the application of international labour standards to improve morale and performance.

Health reform may be defined as the attempt to improve the efficiency, equity and effectiveness of the health sector -- a definition which touches on a wide range of economic problems, as well as purely medical and social issues.

Indeed, the link between health policy, human health (defined as a state of physical and mental well-being) and economics is profound. The health sector is of crucial importance, not only for the health of the population, but also for the productive potential of the economy as a whole. Neglecting the health of a section of the population will have damaging effects on long-term productivity. The interplay of economic forces, and the way those forces are directed by governments, have the potential to improve or harm human health, and inevitably have an effect on present and future human welfare. The concept of welfare itself encompasses a broader vision than is implied by the more narrowly scientific medical terms.

The contours of the world economy have changed very considerably over the past few years as a whole series of countries have embarked upon radical programmes of reform. The optimism of the late 1970s, with the revolution in primary health care, has increasingly given way to concern over problems, such as the drastic reduction in health budgets caused by economic crises. This has frequently led to the adoption of structural adjustment programmes, and free market systems, increased inequity in access to health services, the appearance of new diseases such as AIDS and Ebola and the resurgence of diseases of poverty, such as cholera in Latin America and Africa and tuberculosis in Eastern Europe.

The current spectrum of ill health can be depicted as follows: populations in transition, as they become more "developed", gradually move from a situation in which ill health and premature mortality are caused primarily by infections and malnutrition to a situation characterized by a predominance of chronic, non-communicable diseases with high morbidity, particularly among the elderly. However, in many developing countries today both stages commonly exist at the same time, and this diversity complicates the setting of priorities for financing health services as well as health care provision itself.⁽¹⁾

These combined factors, together with the lack of sustainable finance and/or cost escalation, have led to the need for health care reforms throughout the world.

It is worth noting that in many countries, there has until recently been little interest in employment practices in the health sector, a fact which is reflected by the absence of published studies in this field. It was in this context that a request for information was addressed to governments, trade unions, nursing and other professional associations of health care providers, in order to fill this gap. The information gap concerns in particular recent upheavals within health systems, their direction and outcome. Comparative analysis is further complicated by the fact that, even between relatively homogeneous groups such as doctors and nurses, definitions of occupational groups and the tasks that they undertake vary considerably between countries.⁽²⁾ Hence, the relevance of the present Joint Meeting under the auspices of the ILO.

Beyond its general concern about health protection for workers and their social protection in general, the ILO attaches great importance to the fact that the improvement of employment and working conditions of health and medical staff is vital to the satisfactory delivery of services in this sector. In view of the critical importance of the health sector, in terms of its workforce and sheer size in terms of percentage of global GDP, the ILO has adopted a sectoral perspective, in accordance with its mandate, to deal with terms of employment and working conditions of health care delivery staff affected by recent health care reform initiatives. Such sector reforms are most likely to achieve their objectives of ensuring efficient, effective and high-quality services when they are planned and implemented with the full participation of health workers and their unions and of consumers of health services at all stages of the decision-making process. It goes without saying that the commitment of health care personnel to reform is crucial to its success. Effective communication, consultation and negotiation with a view to reaching consensus with workers and their unions, is essential during the restructuring process.

1. WHO: Towards an equity-oriented policy of decentralization in health systems under conditions of turbulence: The case of Zambia, by Katele Kalumba (Geneva, doc. WHO/ARA/97.2, Mar. 1997), p. 2.

2. Stephen Bach: "Restructuring and privatization of health care services: Selected cases in Western Europe", in Gabriele Ullrich (ed.): Labour and social dimensions of privatization and restructuring: Health care services (Geneva, ILO, 1998), p. 54.

Health systems, like other public services, are increasingly subject to reforms. Many societies and the world as a whole are facing a number of challenges which result from structural, social and economic changes and make reform initiatives necessary.

This also applies to health care systems, where a number of trends, often also seen in other sectors, make it necessary to search for new solutions. Failure to do so will mean that the systems will be unable to fulfil their tasks and/or costs will rise faster than the incomes of the people who finance them. Many health systems around the world are already facing situations where their performance is severely deteriorating. The countries of Central and Eastern Europe in particular are undergoing deep restructuring processes which have a considerable effect on the health sector.

There are a number of distinct challenges that need to be met. Some are found in certain country groups only, others occur in almost every country throughout the world. In any case, these challenges are the underlying reason for many reform initiatives in the countries concerned.

A growing number of countries face the challenge of rapidly rising health expenditure in both the public and private sectors. Some countries have increased health expenditure from 3-5 per cent of GDP to 8-10 per cent in only a few years. Since the 1960s, the share of GDP spent on health care in developed countries overall has been on the increase. The same trend is also seen in other countries. Argentina now spends more on health care in terms of the share of GDP than Canada, which for years took second place only to the United States.⁽¹⁾

With regard to countries with developed market economies, such growth has been accompanied in many cases by even larger growth in health expenditure by public agencies. As a result of this evolution and economic slow-downs, growing public concerns over controlling health care expenditures have become predominant.

In many countries, health care expenditure is growing faster than GDP. This leads to serious cost and distribution problems, especially in industrialized nations. The notion of a "cost explosion" in the health sector has become common place and represents a major problem for governments. Contribution rates to health insurance schemes are rising, public debt is growing. But public health expenditure is not the sole indicator of rising costs. Patients complain about having to pay a larger share of the costs every year, in addition to their insurance contributions and taxes. Health expenditure affects wage costs and corporate taxes. Rising costs affect the competitiveness of a country in world markets.

There are many reasons for the rising costs. Most of these are covered by the points set out below. Whatever the reasons for them, rising costs in the health care sector are a political issue of great importance. However, it should also be borne in mind that patterns of health care spending vary greatly around the world.

In 1994, global spending on health care was about US$2,330 billion (9 per cent of global GDP), making it one of the largest sectors in the world economy. Although low- and middle-income countries account for only 18 per cent of world income and 11 per cent of global health spending (US$250 billion or 4 per cent of global GDP), they contain 84 per cent of the world's population and account for 93 per cent of the world's disease burden.

However, health systems in all parts of the world are coming under strain as they attempt to meet the growing demands placed on them while also striving to contain costs. Few countries, if any, can expect to reduce spending on health care. Most are making concerted efforts to slow the growth in expenditure and maximize income. There is near universal recognition that substantial inefficiencies exist in the allocation of resources, whether human, material or financial, and many governments are re-thinking the basic assumptions of their health care systems.

The sheer size of the sector, and the fact that growth in health expenditure exceeds income growth, mean that it will continue to be a critical area of policy.

We face today an increasing interdependency of world markets. Trade is increasing worldwide. International economic networks are growing. The world is on its way to becoming a single market.

This globalization of markets brings with it a need to reduce costs of social systems in order to improve competitiveness. Wages and wage-related costs such as social security contributions and taxes have a major impact on world market prices and competitors are therefore interested in keeping these costs as low as possible. This effect may be observed in most countries, where initiatives to reduce the cost of social benefits lead to reforms. This generally means reductions in benefits, increases in co-payments, a weakening of solidarity. It may also mean improved efficiency of health care services without cuts in services, or the setting of new priorities in health care services.

A special case is that of countries in transition. They are in the process of changing their entire economic and legal systems to create market economies. With these changes comes the need to restructure the health sector. In many of these countries, a sharp decline in GDP at the beginning of the 1990s imposed severe budget constraints. This also had an impact on the health sector. These countries thus faced a double challenge: they had not only to manage rapid changes in policy and structures but also had to maintain their health care services in spite of shortages due to budget problems. In some countries, such as Poland, health care reforms have not yet been implemented owing to budgetary cuts and controversy over the design of the reform.⁽²⁾

Another development is that of structural change which may be observed in almost all countries and occurs in various patterns and in different sectors of the economy. In some sectors, especially the industrial sector, jobs are being lost, while in the service sector jobs are being created. This structural change is accompanied by growing unemployment and creates challenges for the workforce. Workers have to adapt to changing work environments and be more flexible and prepared for lifelong learning. These structural changes go hand in hand with changes in public tasks and public spending. Public services are privatized and public expenditure reduced. This creates budget constraints for health care systems as well as the other sectors.

System-inherent challenges emerge from the specific design of a system. There may be many elements of health care systems which lead to deficiencies including:

These deficiencies can lead to a general situation where reform of a health care system is unavoidable.

The development of new technologies and the growth of the information society will lead to a need to restructure economies, employment and production. In some sectors, employment will increase, while in others it will decline. All the sectors associated with services will become increasingly important. Health care is one of these sectors. But in line with the structural changes, forms of employment will change, and this will lead to new challenges in the area of social protection and working conditions.

In medicine, too -- as in many other economic sectors -- reform is under way as a result of this kind of change. Medical technology has advanced significantly in recent decades. Advances in electronics and biotechnology will bring about radical changes in the treatment of many diseases and the role of doctors and nurses will change accordingly. Diagnosis and surgery will change in a way which will further reduce hospital stays. Information and communication technology are likely to improve the quality of health care while cutting costs and waiting lists.⁽³⁾

Telematics in medicine, new procedures and machines, gene technology, etc., will lead to changes in the nature and organization of work, new requirements in terms of qualifications, new jobs and new occupations. This also requires flexibility on the part of workers and employers and poses problems for all concerned. This is why workers' participation in questions relating to the implementation of new technologies and subsequent changes in occupations and working conditions is of great importance. In general, experience suggests that workers are open to technological innovations.

The result of both trends is still not clear. In the short term, the new technologies require major investments in equipment, training and restructuring. The present climate of cost-containment might not be very conducive to such investment.⁽⁴⁾

In any case, the question of equal access to health care will also be posed by technological advances. Even today, the question arises as to which of the new technologies are available to everybody and which are available only to those who can pay for them.

Access to health care is still often inadequate and inequalities persist between countries and within countries. It remains a challenge throughout the world, especially in the developing countries, to ensure universal access at least to primary health care and family planning.

Health problems and reform issues are particularly difficult in most of the low-income countries, although there are variations within that group. With populations living "on the edge", health providers and governments in the world's least-developed countries must make a far greater effort to build a basic health infrastructure which can help ensure a decent quality of life for their citizens. At the end of the last decade, basic health care was available to less than half the world's population. Rural inhabitants, who make up the vast majority of the world's population, were particularly disadvantaged.

Table 1.1. Health indicators -- World averages


Country group	Life expectancy at birth	Under-5 mortality rate	Fertility rate	Health expenditure as percentage of GDP

East Asia and Pacific	68	53	2.2	3.5
Europe and Central Asia	68	35	2.0	5.5
Latin America and the Caribbean	69	47	2.8	7.2
Middle East and North Africa	66	72	4.2	4.4
South Asia	61	106	3.5	4.1
Sub-Saharan Africa	51	157	5.7	5.6
Low and middle income	65	60	3.1	5.6
High income	77	7	1.7	9.9
World	67	81	2.3	9.1
Source: World Bank.

In many developing countries, existing health care schemes cover only the small formal sector of the economy and the majority of the population lives entirely without or with very limited health care services.

It is well known that improvements in health care result in a more productive labour force, increasing life expectancy and better quality of life. On the other hand, this requires investments in health care which in many cases cannot be made by the respective countries alone, but depend on help from donors. Greater solidarity between poor and industrialized nations is necessary if the world's poorest countries are to advance in their struggle to provide basic health care for their people. The international community as a whole must seek ways to provide more favourable conditions of trade, debt relief and generous and carefully targeted assistance to enable these nations to build and maintain the basic infrastructure needed for health and well-being and to achieve economic growth which enables them to improve living conditions.

However, international assistance in most of the least-developed countries still covers on average less than 2 per cent of total health expenditure. An exception is sub-Saharan Africa, where aid flows represent more than 10 per cent of total health expenditure.


		Percentage

	Sub-Saharan Africa	10.40
	India	1.60
	China	0.60
	Other Asia	1.40
	Latin America	1.30
	Middle East	1.20
Source: World Bank.

The major challenge in developing countries is thus the extension and improvement of existing health care schemes.

But not only developing countries face the problem of insufficient access to health care. In transition countries and in some industrialized nations, where per capita income is much higher than in developing countries, some social groups, such as the urban poor and migrant workers, are in some cases excluded from adequate health care services.

The world population is ageing (see table below), although there are imbalances in this process between regions. In certain regions such as Africa and India, the problem of ageing is not as serious as in the industrialized nations or in China.

Table 1.3. Age structure of the world population, 1950-2030 (percentage)


	1950	1980	1990	2000	2030

0 to 4	13.5	12.1	12.0	11.0	8.4
5 to 14	21.0	23.0	20.4	20.5	16.7
15 to 59	57.5	56.4	58.3	57.8	59.7
Over 60	8.0	8.4	9.3	10.6	15.2
Source: World Bank.

The ageing of the population in most countries will lead to increasing health expenditure because older populations will need more and different kinds of health care. This effect will lead to a discussion about a new definition of solidarity and access to health care. Many countries are discussing new priorities in health care and new systems of social protection. Health schemes compete with pension schemes for scarce resources.

At the same time, the ageing of the population will result in fewer active and more economically inactive people in society. This will increase the burden on the active population and will lead to attempts to decrease this burden.

Even now it is evident that a major share of health spending goes on care for older people. For example, health spending in 1993 for people aged 65 and over as a share of total health care spending amounted to 42.9 per cent in Japan, 32.3 per cent in Germany, 41.1 per cent in France, 42 per cent in the United Kingdom and 37.2 per cent in the United States.

In Germany in 1970, 26 per cent of all members of health insurance funds were pensioners. In 1990, the figure was 29 per cent.

These percentages tend to increase as the population ages. Although according to some studies only 8 per cent of the elderly are seriously impaired or dependent on extensive supportive care and 4-6 per cent of them live in institutional settings, older people suffer more from chronic disease such as those related to vision and teeth. For example, a study of urban people aged 60 and over in nine provinces of China found that 59 per cent of them suffer from at least one kind of chronic disease -- mainly hypertension, chronic bronchitis, coronary heart disease and rheumatic arthritis.

Some experts even argue that it is precisely the demographic ageing in the developing countries of Asia and other parts of the world that is directly responsible for the emergent crisis in health care. They point out that the ageing phenomenon causes significant shifts in predominant disease patterns and also creates new demands on health systems that are typically overburdened even before such new needs arise. They maintain that in some developing regions, for example, the prevalence of chronic illness will soon surpass that of acute, largely infectious disease. Thus, the demographic transition is primarily responsible for the crisis in health care that is emerging in the developing world.⁽⁵⁾

This development will require the enhancement of medical services provided to the population in the regions of the world especially affected by ageing if the quality and quantity of medical services to the population is even to be maintained, let alone improved. As a result, employment in the health sector may increase especially in those occupations which deal with medical problems associated with ageing, in specialized institutions, clinics or the home.

Unemployment has become one of the most important political and economic problems of recent decades. In most industrial nations, long-term unemployment is a special challenge which is of increasing political and social importance, and one which has an impact on the health sector. Long-term unemployment leads to increasing rates of mental illness, suicide and violence. A special group among the long-term unemployed are young people who are lacking a perspective for their working life.

The health sector itself does not have the means needed to combat long-term unemployment. However, it can, in cooperation with the social sector as a whole, deal with its effects through self-help groups, medical assistance, social workers, etc.

In many developing countries, a growing population means that, in spite of a growing economy, GDP per capita is actually falling. This is an indicator of the scarce resources available for health care and family planning purposes. Most of these countries thus find themselves in a vicious circle: per capita income falls because GDP growth fails to keep pace with population growth and the population grows because there is no money for effective family planning and health care.

Table 1.4. Population and GDP per capita in selected African countries, 1960-90


	1960	1970	1980	1990

Ghana	6 774 177.6	8 612 251.9	10 736 412.3	15 020 381.0
Niger	3 028 147.9	4 165 153.1	5 586 447.4	7 731 319.6
Nigeria	42 305 99	56 581 214	78 430 1 130	108 542 296
Zambia	3 141 199.4	4 189 415.8	5 738 626.4	8 138 416.1
Zaire	15 333 215.1	20 270 232.9	27 009 520.5	37 391 191.9

Population in thousands, GDP per capita in US$ (second figure). Source: Eurostat.

Thus, per capita income is falling while the needs for public efforts in health care constantly increase as population grows. The margin for more public spending in most cases is very limited.

Population growth in many developing countries also leads to increasing urbanization. Because people have no means of subsistence in the countryside, they migrate to find work in the cities. There, they form the population of the growing slums with their well-known problems of disease, exclusion and poverty. Urbanization in most developing countries is a growing problem and the urban slums are a challenge to any health programme.

If we look at the different challenges facing the health sector from a regional point of view, four basic patterns can be observed, each of which represents a different mix of challenges for reform policy.

The first pattern is typical of industrialized nations and a few developing countries that have achieved high levels of health care.

In such countries, infant and maternal mortality rates are low, fertility tends to be low, life expectancy at birth is relatively high and the proportion of elderly people is growing.

The health problems these countries face are typically those associated with an ageing society, good life expectancy, personal lifestyles and environmental factors. Cardiovascular disease and cancer predominate, but care is often required for mental and neurological disorders, degenerative diseases, chronic diseases and conditions affected by behaviour.

A particular feature found in these countries is the tendency for health services to become increasingly a large market where people pay for additional services to promote or improve their own health in addition to publicly financed health care.

The major challenges facing these countries are: to extend quality health services to previously excluded socio-economic groups; to provide sophisticated treatment for the increasingly complex medical conditions they face; to provide long-term care for the growing proportion of the population that is entering old age and extreme old age; and to bear the financial burdens that such care implies. In addition technological advances in medicine are bringing about major reforms in treatment patterns. Finally, these economies are also under pressure to contain costs due to increasing world competition.

These countries have made considerable progress in building a health infrastructure based on primary care.

Their past efforts have been rewarded by declining infant mortality rates, increasing life expectancy at birth and diminishing fertility rates.

The traditional causes of mortality -- infectious and parasitic diseases -- remain the major killers, but new health problems such as the chronic non-communicable diseases associated with ageing and modern lifestyles are also appearing.

Given the rapid demographic changes that are now occurring and the shifting demands and expectations of the various population groups, these countries face both traditional and new health problems with limited resources. They will need to extend their infrastructures to provide essential health services to the rural groups and urban poor who are at present excluded, while at the same time developing more sophisticated treatment for an ever-growing portion of their population.

The third pattern occurs most frequently in the world's least-developed countries, particularly in Africa and South Asia.

The health outlook there is particularly distressing, since these nations face critically difficult situations and have limited financial and human resources with which to develop their health sectors. Their rapidly growing populations live in extreme poverty and often in deplorable conditions of health and hygiene. The most urgent health needs such as hygiene and nutrition, have to be met by economic development and distribution measures and cannot be met by the respective health care systems alone. Public health expenditure is insufficient to ensure clean water supplies, sanitation facilities and access to basic health care for large sections of the population.

Infectious and parasitic diseases, acute respiratory tract illnesses and malnutrition contribute to high morbidity and mortality.

Those responsible for providing health services in these countries face two main challenges: the first is to optimize the impact of existing health resources; the second is to greatly increase those resources, both domestically and through international assistance.

The fourth pattern is found in the transition countries of Central and Eastern Europe.

For many decades these countries have pursued a health care strategy quite different from the one in Western industrialized countries. For several decades, they had far higher physician and hospital bed ratios than those in the rest of Europe.

Despite this large medical sector, the epidemiological situation in the countries of Central and Eastern Europe compares unfavourably with that in the rest of Europe. Indeed, life expectancy in those countries is roughly five to seven years shorter and is actually declining in some countries.

Environmental factors, such as contaminated water supplies, air pollution, unsanitary waste disposal and inadequate food safety, have contributed to the relatively low health status of the population, as have poor personal health habits such as high rates of smoking, excessive alcohol consumption, frequent abortions and unhealthy diet.

Many of these countries are undergoing major reforms which reorient the health care system towards an insurance scheme with an emphasis on preventive and primary care. Private health care provision is increasing while public services are being cut back.

1. World Bank: Health nutrition and population (Washington, DC, Sep. 1997), p. 4.

2. Christopher Bobinski: "Polish health reform may be stalled", in Financial Times (London), 19 Mar. 1998.

3. Vanessa Houlder: "Anatomy of advancement", in Financial Times (London), 3 Feb. 1998, p. 9.

5. G.C. Mayers and S. Maggi: "World population aging: Implications for health research", in Aging and clinical and experimental research, 5(29), 1994, pp. 77-79.

Reform is a word with a generally positive meaning. Reform implies evolution towards a status that has been planned and, at least in the eyes of some social groups, means something better than the existing situation. In many countries, especially during the past decade, we have learned that reform may mean not only planned processes of improvement. It may also mean in many cases adjustment to deteriorating conditions. As an example of this one could cite the budget adjustments made in response to deteriorating world market conditions in many developing countries.

Many reform programmes are initiated in response to such challenges. Reform programmes may comprise different elements of differing relative importance, depending on the challenges to be met. These elements include the following:

Health care reforms may take place at one go or as part of an ongoing, continual process. Reforms at one go may lead to major changes in the system. The groups affected by the reforms will have to get accustomed to a lot of new regulations and will have little time to manage changes. This confirms the importance of consultation and workers' participation in health sector reform processes.

Ongoing reform processes, on the other hand, may result in a system failing for decades to get past the reform process. All areas may be subject to constant change. The workers in the health system may be confronted with ever-changing regulations and conditions. Their involvement in the reform process is of vital importance for its success.

In this context another effect should be mentioned. Reform normally means reform by political decision-making, by legislation, by administrative implementation (see the definition of reform in the introduction). But there is another kind of reform which also places a burden of change on all the partners in any economic sector. This type of reform is the result of the challenge of "technological progress" which brings about changes in skills and technologies and thus initiates a gradual reform of its own. In Denmark, for example, technological advances have brought about changes in patterns of treatment (see also section 5.8 of this report).

Some of the effects are long-term, others are medium- and short-term effects. In general there are opposing trends towards both increases and reductions in health care expenditure. The direction and relative importance of these opposing trends may vary between industrialized, transitional and developing countries. Ultimately, the observed trends will create the constant need to reform health care systems. These reforms will involve restructuring benefits, setting new priorities in the provision of health care services and finding new ways of financing health care.

The different challenges have different impacts on reform initiatives and health care policy. The following table gives an overview of the different challenges facing health care schemes and different types of reforms as responses to those challenges.

Table 2.1. Trends in health care, their effects and possible policies or strategies


Challenge	General effects	Policy

Rising health costs	Rising contribution rates, rising wage costs, rising public expenditure.	Improving efficiency, privatization, improving performance of labour force and management.
System-inherent deficiencies	Rising health costs, deteriorating quality of care.	Improving management. Improving provider payment schemes.
Technical advances in medicine	New treatments (in the short term), rising costs (in the long term), possibly reduce costs as a result of rationalization.	Setting new priorities, reshaping benefit schemes, increasing individual responsibilities.
Globalization of markets	Growing competition.	Reducing benefits, increasing co-payments and user fees.
Development of new technologies and evolution towards the information society	Changing labour world. New forms of labour. Restructuring of economy and production.	Reshaping and redefining social security benefits and finance including health insurance.
Ageing society	Higher health costs, smaller number of contribution payers.	Efforts to reduce the burden on the active population.
Increasing long-term unemployment	Increase in mental illness, suicides and violence.	Preventive care approaches, social services.
Better access to basic health care, especially in developing countries	Increasing life expectancy, increasing productivity, higher health costs.	Developing and improving health care services to reinforce economic growth.

Privatization is one of the key elements in the process of transition from a communist regime to a democratic political system and market economy. It has been broadly supported in the countries of the former Soviet Union and the countries of Central and Eastern Europe.

But other governments around the world have also been experimenting with privatization for a variety of reasons. Privatization initiatives in the health sector were developed in both advanced and developing economies mainly in an effort to contain costs. Before entering the controversial debate surrounding the privatization of health care, a major concern is the question: who decides the appropriate level of services provided? This concern is currently reflected in health reform debates about priority setting and rationing in a number of countries. Is it a matter for the public planner, epidemiologist or health economist to decide? Or should the core market mechanism centre on patient choice and consumer sovereignty? In this context, the Ljubljana Charter,⁽¹⁾ which will be discussed in detail in section 2.5, stipulates that "the exercise of choice and of other patients' rights, requires extensive, accurate and timely information and education. This entails access to publicly verified information on health services' performance". Countries in different categories (e.g. OECD or low- and middle-income) have adopted different positions in their national health policy debates.

The alleged limitations of government and the financial responsibilities of individual citizens are the principal foundations of this approach. Internationally, these positions are embodied in the approach to growth and development of the major lending institutions, the International Monetary Fund and the World Bank. In relation to health care, their clearest manifestation in official policy statements is perhaps found in the 1987 World Bank publication on "Financing health services in developing countries: An agenda for reform".⁽²⁾ This publication marked a major departure in the sense that the World Bank, which had previously restricted itself to other sectoral or general development issues, now began to devote large-scale finance and technical expertise to health. Since then, the debate regarding modalities of financing appropriate to the health sector has to a large extent been influenced by the World Bank, which has advocated greater reliance on user charges, insurance mechanisms, the private sector and administrative decentralization as the main pivots of policy change.

The influence of these agencies and their approaches to development policy is substantial, and they have been effective in supporting the increasing importance of the role of economists in determining the direction of health policy. The same applies to other sectors of the economy, particularly in low- and middle-income countries. The theoretical position of these major finance institutions has subsequently been refined in the light of practical experience, and as a result those agencies have tended to adopt "mixed approaches", as outlined below.

Box 2.3
Forms of privatization

Several forms of privatization may be distinguished and all have differing impacts on users of health care services and employees in the sector. They include:

privatization of ownership, which means that the ownership of facilities and service units is shifted from the public to the private sector. This may happen by sales of shares, voucher privatization (as in the Central and Eastern European countries), transfer to management or employees, direct sale, etc.;
privatization of responsibility, by formal transfer of responsibility for the service to a private organization, transfer to users via abolition or reduction of service, liquidation of state-owned enterprises, liberalization and reduction of planning of the sector;
privatization of provision through contracting out, leasing, operating concessions, management contracting, purchasing of private goods and services;
privatization of finance through higher co-payments and user charges, or by shifting to private health insurance funds, private capital for public infrastructure investment, joint ventures with private enterprises;
privatization through the introduction of markets (for example, competitive tendering between in-house and external contractors), creation of markets by splitting purchasers and providers or introducing greater choice for patients. ¹

¹ Public Services International (PSI): Public services and private interests (Ferney-Voltaire, France, 1997), p. 8.

An effort will be made to describe the concept of privatization per se in relation to health care. Under the broad heading of "cost recovery" in low- and middle-income countries, several initiatives have been undertaken ostensibly to improve efficiency in the health sector. Statements to the effect that the introduction of user charges provides a major source of revenue to the health care sector in most countries, taking into account both governmental and non-governmental health care providers, have been matched by statements advocating fees as a way of helping consumers (patients) to understand the true cost of health care provided free (or subsidized) at the point of delivery. In some cases, a concern to promote cost recovery in the health sector, in keeping with a general policy of economic restructuring and reviewing government functions in the broader context, has resulted in a narrow focus on raising revenue as an end in itself.

In this shift, the concept of "need" as a criterion of allocational efficiency is replaced by the concept of expressed demand (i.e. ability and willingness to pay). However, since health and education are different from other goods, it is accepted that, in order to measure the performance of health care systems, some operational assessment of need is necessary. The choice between need and demand as allocational devices is therefore a fundamental one: either financing and consumption patterns for health care are left to market forces, or overall health status is pursued as the policy objective.

Consequently, the whole controversy surrounding the privatization of health services tends to centre on the question whether (and through the application of which mechanisms) it might be feasible to redirect, restructure and reorganize health care to achieve both economic efficiency and social justice. The effectiveness of health care delivery should be measured in terms of health outcomes and long-term benefits to individuals and society as a whole. While such considerations have prompted modifications to target the level of user charges and provide exemptions for the poor, detractors of this approach have maintained that the obligation to provide care for the poorest (or in developed countries, for those affected by exclusion) -- a priority on grounds of social justice -- and privatization are quite simply mutually exclusive, however "refined", and "well adapted" the specific mechanisms may be (e.g. by being adapted to local conditions or socially stratified to allow exemptions).

In a fundamental shift away from the public sector (although not strictly speaking "privatization"), several developing countries have begun introducing simple social health insurance or prepayment schemes. Many recent insurance schemes centre on the principle of starting with compulsory insurance for workers in the formal sector and later on expanding this to include voluntary insurance for other population groups, such as:

Inclusion of these groups can be realized in stages, but basic respect of the principle that all risks must be pooled in order to achieve true health insurance is essential. If, for some reason, the pooling, or spreading, of risks between the healthy and sick -- the fundamental principle of health insurance -- is not guaranteed, this adverse selection (of persons at above average risk of illness) will invariably increase the average health cost of the insured, thus driving up insurance premiums and deterring the poorest from becoming members. In response to some of these inherent difficulties, some governments have adopted the concept of differential health insurance premiums, i.e. premiums that depend on the economic status of the insured, with the objective of attracting as many people as possible from the lower-income categories. This is equivalent to subsidization of health insurance premiums.⁽³⁾

There has been only limited empirical work in developing countries to illustrate the impact of expanding health insurance on the distribution of skilled health care personnel. Generally speaking, however, the growth of social health insurance combined with increased competition is likely to result in a movement of skilled personnel away from the public to the semi-public or private sector. The Chilean experience of privatization seems to support this view. By 1992, private health plans in Chile employed 38 per cent of practising physicians and more than half the employed nurses, although private plans cover only about 25 per cent of the population.⁽⁴⁾

"Privatization" in low- and middle-income countries has frequently been advocated, or used as a new label, for services that were otherwise run on a largely public basis, on the grounds that such a measure, when widely applied across sectors, sends a signal to domestic and foreign investors that the economic climate has improved. To that extent, the term has ideological connotations and has been employed, perhaps intentionally, irrespective of lines between sectors, by international finance institutions assuming extensive responsibilities for improving the domestic and international fiscal deficits of poor countries.

Conversely, investor-owned hospitals have presented a "vision of the future" (a future that already exists in some highly competitive environments generally in the OECD) and, under the broad heading "multi-hospital system management", have pioneered the use of multi-hospital system management models. They have demonstrated that system benefits, including standardized management applications, common accounting systems, distributed data processing capabilities, joint purchasing arrangements, and other mechanisms for achieving economies of scale and reduced redundancies, may be "the hospitals' best line of defence in the new market-driven environment".⁽⁵⁾ Such concepts are prevalent mainly in the United States, but are also increasingly being discussed in Europe. As far as changes in the professional structure are concerned, this evolution has created a "new breed of health care executives".⁽⁶⁾

As early as the 1980s, the Conservative Government in the United Kingdom introduced policy measures to enhance efficiency and to develop a more commercial ethos. These measures included the introduction of labour force targets to reduce staffing levels and obligations on health authorities to raise additional income and improve service to patients by, for example, opening shopping malls in hospitals. Most important was the introduction of mandatory competitive tendering for cleaning, catering and laundry services which allowed senior managers to alter employment practices and undermine terms and conditions of employment.⁽⁷⁾

If we briefly review the debate, the controversy of which is fuelled not only by ideological divergences about what constitutes "social justice", but also by extreme polarization along geographical lines (OECD versus low- and middle-income countries), we see that a degree of caution is warranted. Although privatization initiatives have occasionally brought a "notion of efficiency" into the health sector, the application of monetary, fiscal and pricing policy solutions to health care, as they are applied to other sectors, has in some cases been detrimental to health care objectives.

For the same reasons, ethical values have to a certain extent been undermined as commercial interests have entered the health sector through privatization and marketing initiatives. Although privatization and (social) marketing may be effective instruments for improving equity and access to health care and providing good health, these processes may have unpredictable consequences when managers respond to market signals in a way that is implicitly and explicitly inimical to the purposes of social health care provision. Beyond economic efficiency, a wide range of other criteria (epidemiological, technological, social) needs to be taken into account in assessing whether a particular configuration of health resources is socially efficient or not.

In recent years, various attempts have been made to introduce private sector management methods and elements of competition into public health services in developed and developing countries. There is now considerable experience in the health sector in northern Europe that demonstrates in a convincing manner that private ownership is not a prerequisite of competitive incentives. Public ownership of institutions -- as in the health sector in Sweden and the United Kingdom -- is perfectly compatible with the concept of vigorous competition.

An alternative term for this is "planned markets", meaning that all such systems attempt to use market mechanisms within structures that are still entirely (or in the case of mixed markets, predominantly) publicly planned.⁽⁸⁾

It is widely recognized that expenditure on health (and a similar argument can be made for education) represents a form of investment in human capital that confers substantial benefits both on the individual and on society as a whole. The definition of health care implies a social good, i.e. that all members of society benefit when a single individual receives care. That is to say, there are large positive "externalities" associated with health which the free market does not take into account. Hence there are good reasons, on grounds of allocational efficiency, for governments to retain regulatory control over health sector finance and to take an active if not dominant part in the financing of the health sector. By the same reasoning, there is a case for collective provision in the area of (disease) prevention and eradication. If left to market forces alone, these services will be underprovided. The implication of this argument is that, in the context of economic recession and structural adjustment most typically accompanied by a fall in government expenditure, the proportion of government expenditure devoted to health should actually rise, rather than fall.

This all appears to make a strong case for planned markets rather than privatization. It also takes up the argument that privatization can be implemented as a "feature", rather than a wholesale concept. "Planned markets" imply the conversion of civil servants in the health system or health delivery personnel to commercially minded professionals, or recruiting new personnel with such professional characteristics. Since planned markets are somewhere halfway between private and public systems, they should, if properly implemented, be cost-effective. As already pointed out, there is no necessary connection between competitive mechanisms and private ownership.

As referred to above, there is now widespread use of market mechanisms in what were once wholly publicly capitalized and publicly operated health systems in northern European countries. When assessing allocation -- and production -- side competition,⁽⁹⁾ we note that, by contrast with the paucity of reform activity on the finance side in industrialized countries, there is an extraordinary amount of reform activity on the allocation and production sides of the same health care systems.

An important competitive mechanism is reliance upon patient choice. This means asking patients to make the logistical choice about which hospital and which physician they prefer within the publicly operated health system, while hospitals, and sometimes physicians, are paid -- from public funds -- in some proportional relation to the number of patients they attract. This patient-led form of competitive incentive reflects the role of consumer sovereignty in market economics. However, within this conceptual framework (i.e. planned markets) it applies only in publicly operated facilities, where patients bring with them a fixed fee set by public planning officials.⁽¹⁰⁾

The system allows for setting fees in a manner that keeps total expenditure within predetermined limits. This arrangement thus clearly goes beyond a standard fee-for-service system. In this patient-based system, providers typically compete for patients on the quality of their services. Indeed this type of patient-driven framework can be described as a quality-based rather than price-based competitive mechanism. In Sweden, patient choice can be regarded as the predominant competitive mechanism. The introduction of such mechanisms has been valuable and regarded as such in northern Europe, precisely when applied in publicly regulated, publicly accountable health systems. Far from blindly giving way to privatization initiatives, publicly operated health systems are in the process of redesigning and strengthening their ability to achieve public sector health objectives through publicly owned and operated institutions.⁽¹¹⁾

With regard to a common pattern of problems encountered in transition countries, it should be noted that a market-oriented health policy may well require almost as much state activity -- although different in focus and purpose -- as any approach based on central planning. In order to prevent decentralization from deteriorating into fragmentation, the same analytic orientation needs to be applied to employment-related issues, in order to control cost-cutting and provide all possible assistance in redeployment.

Closely connected with the previous subsection on competition and planned markets, many recent reform efforts⁽¹²⁾ concentrate on correcting imbalances between the public and private mechanisms applied in the area of health care. Those imbalances and dysfunctions occur when the balance between government and private sector roles shifts excessively in one direction or the other. It should be noted in this context that the balance of public and private involvement varies considerably between countries, being rooted in social and economic history and conditions. It also varies between the various elements of the health sector, such as finance, information and service delivery, and is not fixed and unchanging.

In countries where reform efforts have been successful, governments have generally focused on increasing their role in providing information and laying down regulations and mandates. Those are unquestionably areas which lend themselves to enhanced public sector involvement and where the State has a pivotal role to play. Governments in these countries also assume sectoral oversight responsibility for medical education, research and development, and for quality control.

At the same time, successful reform has also meant fostering more balanced participation by NGOs, local communities and the private sector, notably in service delivery systems. Overall, governments have shifted their attention and scarce resources to securing access by the whole population to services with large externalities such as preventive public health services. In developing countries, strong emphasis has been given to the provision of basic health, nutrition and birth control services, especially for the poor. Judging by the experience of other sectors that have gone through this process and the health sector in the OECD countries, greater non-governmental participation does not necessarily imply the sale of public assets. On the contrary, initiatives can be favoured that allow and actively provide for private sector participation, such as private co-financing, management contracts, out-contracting, and trusts. The concept of the public/private mix and divestiture of social assets requires an enhanced, rather than diminished, regulatory role to be exercised by governments in setting and enforcing standards and quality control, ensuring fair competition, and controlling and preventing abuses. This regulatory role further involves defining the appropriate package of services and/or benefits, and determining access criteria. State responsibility also extends to the monitoring of professional conduct and performance of providers and, where applicable, insurers. Furthermore, the State is also responsible to some extent for awarding professional qualifications, so that patients choose among professionals who meet certain minimum clinical and educational criteria.

Future health reform initiatives may be largely based on these concepts. In areas where large externalities are involved, by definition, not everything can be private. Emphasis will therefore be placed on optimizing the regulatory role of the State and letting private initiatives take the lead in the areas referred to above where they can contribute most.

Moreover, some recent health care reforms in developed countries are not entirely competition-oriented; there has also been an increase in the use of regulatory mechanisms, e.g. of state-based intervention. One example of the enhanced use of regulatory concepts is Germany, which in 1993 introduced reference pricing for pharmaceuticals (and/or "negative lists" of drugs that cannot be purchased with health insurance funds). In other industrialized countries, too, recent coordinated measures to constrain pharmaceutical expenditures have turned to regulation, rather than competition, as the primary mechanism of reform. This demonstrates the whole spectrum of public/private mix as part of recent reform moves in the direction of cost-containment.⁽¹³⁾

With regard to the issue of public versus private roles, the central aim of national health policy will be to ensure the enforcement of quality standards in both the public and the private sectors.

Overall, the aim of mixing of public and private elements is to harness the respective strengths of both concepts and thus achieve the optimal solution. But there are dissenting voices; some would say that this is not possible, that introducing market elements into the health system is a risky business and lets the genie out of the bottle.⁽¹⁴⁾ According to this view, once market elements are introduced they tend to require more space and it is not possible to reduce them again.

On the other hand, current developments in the United Kingdom, where the Labour Government is on its way to revising managed competition in the health care system, show that these market elements may be kept under control using the same means by which they have been introduced: by legislation. The example referred to previously of the German pharmaceuticals market also proves that it is possible to introduce regulation in traditional market areas.

Strategies and objectives of health sector reforms have been influenced by a number of international policy statements or major international initiatives bringing health, nutrition and population issues into the spotlight of public interest. This section will highlight the results of major international initiatives of relevance to health sector reforms which have taken place outside the ILO. Chapter 7 will provide some insight into standard setting and supervision and other ILO activities which have a bearing on health sector reforms.

The International Conference on Population and Development (ICPD) which took place in Cairo in 1995 established a decisively new emphasis by focusing particularly on the importance of empowering women, and this has also had an impact on the health sector.

At the World Summit for Social Development (WSSD) in Copenhagen in 1995,⁽¹⁵⁾ important commitments were made by governments for the first time to eradicate poverty, not merely to alleviate it: "We commit ourselves to the goal of eradicating poverty in the world, through decisive national actions and international cooperation, as an ethical, social, political and economic imperative of humankind." Governments in addition promised to ensure economic and social protection during illness. The Summit also committed itself to promoting universal and equitable access to "... the highest attainable standard of physical and mental health and the access of all to primary health care ...". Particular attention was paid to the provision of education and health programmes, including preventive health programmes, for women and children. Attended by representatives of the entire United Nations system, the Summit also gave new impetus to various ILO activities.

The emphasis on poverty alleviation and the endorsement by the Social Summit and by the 1996 International Labour Conference of the objective of full employment has been particularly heartening in view of the growing scepticism in academic and policy-making circles regarding the feasibility of attaining that objective.

At the same time, a critical examination of the empirical basis of that scepticism in the ILO World Employment Report 1996-97 found it to be seriously flawed. The report argued that, with sufficient political will and the sustained implementation of a comprehensive set of policies, full employment remains an attainable objective. Economic efficiency is not conceptually opposed to social justice. In this context, it is important to develop tripartite forms of social dialogue between workers' and employers' organizations in support of employment generation as a priority item on the national policy agenda and to promote cooperation between labour and management which contributes to productivity enhancement and job creation.⁽¹⁶⁾

Similarly, the Fourth World Conference on Women (FWCW) in Beijing in 1995, and the Second World Conference on Human Settlements (Habitat II) in Istanbul in 1996 provided international impetus which, adopting an intersectoral approach, touched upon matters of relevance to the subject of health care. All the initiatives mentioned inevitably raised the fundamental question of how to accommodate the choices invariably imposed by the setting of priorities with limited resources. Hence the convergence between the most important concerns of health sector reform.

The WHO Health for All strategy emphasizes the importance of the environment to human health and well-being. This strategy encourages the provision of health care for everybody. In this respect, governments and the public sector play a prominent and decisive role in providing the necessities needed by all people to achieve the goal of health for all. The strategy places particular emphasis on the provision of primary care -- a strategy which has influenced many reform initiatives in the transition countries of Central and Eastern Europe, and also in industrialized and developing countries.

The Ljubljana Charter on Reforming Health Care (under the auspices of the World Health Organization's Regional Office for Europe in Copenhagen) which sets out objectives for European health care reforms (the full text is appended as Annex 1 to this report), is currently perhaps the only explicit programmatic document on health care reforms. Although focusing on Europe, some of its principles, for example the appeal for intersectorality and the emphasis on "citizens' voice and choice", would lend themselves to universal application. According to the Preamble of the Charter, dated 19 June 1996:

The extent to which the experience of industrialized nations is relevant in the political, economic, social and institutional conditions prevailing in the developing world or in transition countries is a matter for debate, since it is thought that major health system components will not interact in structurally different contexts in the same manner as in the conditions of developed countries.

1. WHO: The Ljubljana Charter on Reforming Health Care (Copenhagen, WHO, Regional Office for Europe), 19 June 1996, p. 3.

2. World Bank: Financing health services in developing countries: An agenda for reform (Washington, DC, 1987).

3. WHO: Health economics: Poverty and health, an overview of the basic linkages and public policy measures, by Guy Carrin and Claudio Politi (Geneva, WHO Task Force on Home Economics, Jan. 1997), pp. 28ff.

5. See Jack D. McCue (ed.): The medical cost-containment crisis. Fears, opinions and facts (Ann Arbor, Michigan, Health Administration Press Perspectives, 1989), p. 155.

8. WHO: Applying planned market logic to developing countries' health systems: An initial exploration, by Richard Saltmann (Geneva, doc. WHO/SHS/NHP/95.7, Sep. 1998), p. 6.

12. This subsection draws mainly on conclusions given in the most recent study by the World Bank: Health, nutrition, and population sector strategy (Washington, DC, 1997), pp. 7-8.

14. ILO/PSI: Workshop on employment and labour practices in health care in Central and Eastern Europe, Prague, 15-17 May 1997 (Geneva, ILO, 1998), pp. 63ff.

15. UNDP: Human Development Report 1997 (New York, Oxford, Oxford University Press, 1997), p. 106.

16. United Nations Economic and Social Council: Follow-up to the World Summit for Social Development (New York, doc. E/CN.5/1997/3, 23 Jan. 1997), pp. 7ff.

The health sector is an important employer worldwide with an estimated workforce of 35 million people. Employment opportunities will most probably increase in this sector in the future as a result of epidemiological and demographic factors and growing demands on health services. Unemployment in the health sector is still low compared with other sectors. Where it exists, it affects mainly young people who have just graduated and have no work experience. Health sector unemployment is also often due to structural changes in the sector. In fact, within the overall context of cost-containment, many countries have witnessed far-reaching changes in the composition of the workforce and in changed work practices.

There have been significant increases in the numbers of people employed under more precarious forms of employment contract, such as fixed-term and temporary contracts. The reasons for the increasing reliance on such contracts vary from one country to another. Another form of flexibility arises from challenges to existing working practices and the breaking down of boundaries between occupational groups of health care providers.

The impacts of reforms on workers in the health sector have varied between countries and country groups. In this context, it should be noted that the impact of reforms has been especially hard in some Central and Eastern European countries. Many workers have lost their jobs and it has not been possible to maintain the previous job security and high levels of employment in the health and social sectors. In a number of transition and developing countries, salaries have not been paid for varying periods, as a result of budget constraints.

Generally speaking, the reduction of jobs through structural adjustment has affected women more than men, especially women with a lower level of training than men. These findings have been confirmed in the countries of the Central and Eastern European region. It is anticipated that women in occupations that are financed from the central budget, such as social services (including health care) and public administration, will be at particular risk from the stabilization programme. The concentration of women in community and social services, especially health and education, has made them particularly vulnerable to the spending cuts imposed on these sectors, often in the overall context of structural adjustment programmes. In order to further substantiate these facts on a country-by-country basis, one needs only to note the scale of these cuts, which provides an indication of personnel cuts in sectors which are important employers of women.⁽¹⁾

The factors providing an impetus to the introduction of more flexible employment practices seen overall are considerable. Managers are in general seeking to convert high fixed labour costs into variable costs. For example, the Conservative Government in the United Kingdom implemented a system of managed competition earlier than other Western European countries. The system is, however, being reviewed at present by the Labour Government. Attempts by employers in that country to develop more flexible employment practices to cope with contract uncertainty and budgetary constraints are perhaps more marked and advanced than elsewhere. In hiring temporary staff, managers seek to link the length of the employment contract to the period of guaranteed funding by the purchaser. This situation is not new for certain groups of staff. It already existed for groups such as ancillary staff, who were subject to a process of compulsory competitive tendering (for cleaning, catering and laundry, for example). For some time, these staff have faced the risk that their jobs could be contracted out, and such services have indeed witnessed drastic reductions in staffing levels as a result of austerity measures. The novelty of managed competition is that such "contracting out" arrangements potentially extend more precarious forms of employment to professional staff as well. As a result, physicians are faced with situations where they fear that their professional autonomy is being undermined as budgetary logic overrides the particular demands of patient care.⁽²⁾ "It is probably no exaggeration to claim that flexibility in the use of labour, and in payment systems, is one of the most sought after effects of the entire health reform process."⁽³⁾

All these tendencies in combination have resulted in a situation where traditionally high levels of job security in the health sector have changed. In a labour-intensive sector in which the bulk of health care expenditure is accounted for by wages and salaries, privatization initiatives -- implying increasing flexibility in the use of human resources -- have "challenged existing patterns of industrial relations".⁽⁴⁾

However, it would be too simplistic to consider health workers as no more than an important cost factor. Health sector workers are also a major resource to the community and their knowledge and skills are vital to reform. Competitive and satisfactory working conditions are essential to ensure efficient and high-quality services.

The choice and sequencing of policies can have an immense impact on the welfare of workers involved in health care reforms. The key policy concern in managing reform is how to facilitate the change of workers from positions that have become redundant to new ones as smoothly as possible without raising the short-term costs of adjustment.

Important considerations that might provide direction and have a significant bearing on the shaping of health sector reform derive from an analysis of general public sector reform, particularly in transition countries and developing countries. A number of publications⁽⁵⁾ stress the importance of improving the performance of the civil service and thereby reducing the constraints within which the health sector functions.

"Wholesale" public sector reform -- reform that is substantial in content, widespread across sectors and concentrated in time -- is a rare experience outside situations of profound political change, war or revolution.⁽⁶⁾ When the notion of "public sector reform" came up in the 1980s, the initial emphasis in aid donor circles was on wholesale reform shaped by three key objectives, namely:

While public sector reform in developed countries has been based on the idea of competition and material incentives (in accordance with the "New Public Management" model), the standard public sector reform package for most developing countries is associated above all with the "traditional bureaucracy" model, the intention being to restore some elements of hierarchy, authority and accountability within the public sector. It is because these basic conditions are often not met in low-income countries that recreating them has been the main immediate objective of many externally assisted public sector reform programmes.

With due regard to these unquestionable typological differences and some serious drawbacks, we note that there has been an increasing emphasis on adjusting public sector reform programmes to particular circumstances, and programmes that are currently being advocated and introduced in developing countries take account of this trend. An important element in the argument here is that there is no single desirable direction or strategy for public sector reform.

Public service⁽⁷⁾ has the unique responsibility for redesigning and implementing a range of adjustment measures throughout the economy while being itself the subject of restructuring. The challenge facing governments and intergovernmental agencies -- planners and politicians -- is to ensure that the reform and restructuring of the public service will enhance its ability to plan and implement adjustment measures which promote economic growth and social and human development. To this end, the working conditions of public servants, the efficiency of their performance and the quality of the service they deliver all have a crucial role to play.⁽⁸⁾

There may be disagreement over which services the State should provide, and on what terms, and over the relationship between politics and the public service: one approach emphasizes the political nature of the civil service as the instrument of government policy, and the other its neutral advisory and managerial capacity.

However, the importance of the public service as an employer remains undisputed, hence the interest in examining its operational principles, and the scope for improving its efficiency and accountability. The f

	INTERNATIONAL LABOUR ORGANIZATION
	Sectoral Activities Programme

INTERNATIONAL LABOUR ORGANIZATION

Sectoral Activities Programme