Dr Pia Schneider

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Dr Pia Schneider

• World Bank

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Issues affecting the sustainability
of health financing in several countries
of South East Europe
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(No Transcript)
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Issues Affecting the Sustainability of Health
Financing in South East Europe Bulgaria,
Croatia, FYR Macedonia, Romania, Turkey

• Pia Schneider
• The World Bank
• Financing Sustainable Healthcare in Europe
• Helsinki, February 8, 2007

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Outline

• Macro-economic issues
• Overall health sector issues
• Country specific challenges
• Reforms

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Average GDP growth rate was 5 in 2005, mainly
driven by remittances, strong domestic demand,
higher wages and low interest rates
Source IMF Country Reports
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Inflation has come down, averaging 5.5 percent in
2005
Maastricht inflation criterion
Source IMF Country Reports
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Unemployment rates are high in Macedonia and
increasing in Croatia, affecting revenues from
payroll and creating high dependency ratios
Source IMF Country Reports Rates for 2002 and
2005
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Despite important fiscal consolidation efforts,
fiscal deficits restrict public funding for
health as Governments aim to generate fiscal space
Maastricht deficit criterion
Source IMF Country Reports
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High income inequality within countries makes it
difficult to reach adequate financing for health
Source World Bank World Development Indicators
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Health Spending and Outcome
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Total health spending is comparable to other
European countries
Source WB SIMA IMF World Economic Outlook
database
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Total health spending ranges between 6 and 8 of
GDP, with Bulgaria reporting highest share of
private spending
Source WHO National Health Accounts, Years 2003/4
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High insurance contribution rates put pressure on
labor markets and result in low collection rates
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With the exception of Bulgaria, the proportion of
Government spending on health is growing - and
mostly so in Macedonia
Source WHO National Health Accounts, Years
2002-2003
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The revenue potential of voluntary health
insurance is modest as results show from
countries with highest enrolment rates (Croatia,
France, Switzerland)
Source WHO National Health Accounts, Years
2002-2003
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Turkey and Romania report highest infant
mortality rates, indicating barriers in access to
care particularly among the poor
Source World Bank World Development Indicators,
2003
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Inpatient care consumes the largest share, though
Turkey spends relatively more on pharmaceuticals,
mainly in form of out-of-pocket by patients
Source WHO National Health Accounts, Years
2002-2003
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Aging populations create new demand for health
care
Source World Bank, ECSHD
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Key challenges on revenue and expenditure side
by country
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Bulgaria

• Revenue constraints
• Relatively low (6) payroll contributions for SHI
  due to economic situation
• Households spend about 20 of income on health
• Expenditures
• Overcapacity in hospital beds
• Inefficient pharmaceutical procurement
• No active purchasing to rationalize hospital care

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Croatia

• Revenue constraints
• Relatively high insurance payroll tax (15)
  favors evasion
• Arrears are regularly shifted to central budget,
  putting pressure on efforts to reduce fiscal
  deficit
• Expenditures
• Complementary insurance to cover SHI co-payment
  promotes costly moral hazard behavior
• Growing pharmaceutical expenditures
• Cost containment strategies without success

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FYR Macedonia

• Revenue constraints
• High unemployment rate limits SHI revenue base
• Increasing fiscal pressure to subsidize care for
  non-contributing population
• Expenditures
• Insurance benefit package not clearly defined
• Inefficient hospital sector
• non-transparent pharmaceutical procurement /
  pricing
• HIF accumulated arrears 1.5 of GDP

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Romania

• Revenue constraints
• Low collection due to fragmented insurance
  collection and pooling in 42 district insurers
• Expenditures
• Insurance lacks purchasing power due to
  fragmented purchasing by 42 district insurers
• Service provision biased towards higher cost
  hospital care
• Unclear benefit package

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Turkey

• Revenue constraints
• High SHI payroll tax (12.5), fragmented
  collection
• Lack of transparency in revenue management
• Relatively high out-of-pocket payment
• Premium increase in private insurance slowed
  enrolment
• Expenditures
• Overcapacity in hospital sector
• Price distortion for specialist care leading to
  more high-cost services
• Inefficient drug prescription
• Fragmented risk-pooling

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Common challenges in all five countries include

• Financial sustainability
• High dependency ratio (paying vs non-paying
  beneficiaries)
• Revenue collection evasion
• Fiscal pressure caused by health sector
  indebtedness
• Efficiency
• No strategic contracting to improve provider
  performance
• Overcapacities and low productivity in hospital
  sector
• Advances in medical technology, inter alia, will
  generate pressures for higher spending
• Equity
• Inequity in utilization and financing caused by
  OOP

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Reforms have already started .

• Financial sustainability
• Strengthen revenue collection and management
• Centralize collection, risk-pooling and
  purchasing
• Formalize informal payments
• Set co-payments to limit moral hazard behavior
• Efficiency
• Address oversupply in hospital sector and health
  workforce
• Improve investment planning and pharmaceutical
  governance
• Rationalize benefit package
• Equity
• Protect the poor from impact of cost-sharing
  strategies

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and efforts need to be sustained in a broader
policy context

• Continue health sector reform to contain cost
  increases and to create fiscal space for
  government spending to support a growing economy
  (e.g. capital investment)
• Reduce labor tax wedge by funding healthcare
  through general taxes instead of social
  contributions on payroll
• Consider policy options to contain the dependency
  ratio at current levels given an aging
  population, including an increase in immigration
  and raising the rate of labor force participation