Health Insurance Coverage In Central And Eastern Europe : Trends And Anderson and Laura L . Morlock

Health insurance systems in Central and Eastern Europe have evolved in different ways from the centralized health systems inherited from the Soviet era, but there remain common trends and challenges in the region. Health spending is low in comparison to the spending of pre-2004 European Union members, but population aging, medical technology, economic growth, and heightened expectations will generate major spending pressures. Social health insurance is the dominant model in the region, but coverage is uneven. Key reform issues include identifying ways to encourage additional investment in the health sector; and defining formal benefit packages, copayments, and the role of private insurance. [Health Affairs 27, no. 2 (2008): 478–486; 10.1377/hlthaff.27.2.478] S i n c e th e ea r ly 19 9 0 s , extensive changes have taken place in the health sectors of ten countries in Central and Eastern Europe: Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia. Eight of the ten joined the European Union (EU) in May 2004; Bulgaria and Romania joined 1 January 2007. Health-sector changes have moved all ten countries away from centrally planned health systems and toward varying degrees of private-sector involvement in health care financing and coverage, in the context of social health insurance (SHI) systems. These ten countries are seeking to identify and use the right policy tools to expand health insurance coverage, contain costs, and improve the quality of services provided. Policy tools include defining a universal minimum benefit package; increased competition among providers to increase quality and efficiency; creation of technology assessment agencies to produce evidence for coverage and investment decisions; and the introduction of private insurance to supplement public coverage. Other priority areas for insurance reform in4 7 8 M a r c h / A p r i l 2 0 0 8 H e a l t h T r a c k i n g DOI 10.1377/hlthaff.27.2.478 ©2008 Project HOPE–The People-to-People Health Foundation, Inc. Hugh Waters ([email protected]) is an associate professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health in Baltimore, Maryland. Jessica Hobart is a master of public health candidate at the Bloomberg School. Christopher Forrest is an associate professor at Children’s Hospital of Philadelphia. Karen Siemens is director of ACG European Operations, Bloomberg School, in Nidderau, Denmark. Patricia Pittman is a vice president at AcademyHealth in Washington, D.C. Ananthram Murthy is a doctoral candidate in international health at the Bloomberg School. Glenn Vanderver is a research associate at the Bloomberg School. Gerard Anderson and Laura Morlock are professors of health policy and management at the Bloomberg School. on S etem er 6, 2017 by H W T am H ealth A fairs by http://conealthaffairs.org/ D ow nladed fom clude the improvement of health information technology (IT); and the use of copayments to rationalize service use, increase revenues for providers, and diminish informal payments. To varying degrees, all ten countries are still influenced by the legacy of centralized Soviet-era health systems. During the 1990s, hospital management and oversight was decentralized; responsibility for secondary and tertiary hospital care often became the province of municipalities and counties. The adoption of SHI models in the Central and Eastern European region has been attributed to the desire to depart from the centralized planning and state control of the health coverage system inherited from the Soviet period. However, hospital care continues to dominate health care provision budgets, a holdover from the hospital-centered, Soviet-inspired model. Our analysis is based on a one-year project, including extensive interviews with key people in all ten countries and reviews of official documents, published literature, and international data sources. Current Insurance Systems And Trends Funding mechanisms. In all but Latvia, an SHI system is funded through employment-related premiums. In many countries of the region, SHI programs had existed before 1945, influenced by the Bismarck social insurance system introduced in Germany in 1883.1 SHI was reintroduced in the region in the 1990s. Payroll collections began in Hungary and Lithuania in 1991; Romania and Bulgaria started these payments in 1999. In social insurance programs, funds are raised through employer and employee premiums; the percentage of earnings and the ratio of employer and employee contributions vary across the region (Exhibit 1). SHI plans can be regressive since they tax only earned income and not income from investments and savings, which are disproportionately held by the relatively well-off. In Latvia, premiums are paid from an earmarked income tax collected centrally, with additional funds from general revenues, patients, and private insurers. However, Latvia’s insurance funds share common features with other countries in the region in terms of contracting and purchasing health services. Risk-sharing strategies. Another potential issue with social insurance programs is that in the presence of multiple health insurance funds—as in Poland, Romania, and Slovakia—it is important to share financial and health status–related risks across the funds for the system to maintain solvency.2 T r e n d s H E A L T H A F F A I R S ~ V o l u m e 2 7 , N u m b e r 2 4 7 9 EXHIBIT 1 Social Health Insurance (SHI) Financing Mechanisms In Ten Eastern And Central European Countries Country Source of funds Size of contribution (percent of earnings) Percent of payroll tax paid by employee Bulgaria Czech Republic Estonia Hungary Latvia SHI premiums SHI premiums SHI premiums SHI premiums Income tax and general revenues 6 13.5 13 23.5 –a 35 33 0 25 –a Lithuania Poland Romania Slovakia Slovenia SHI premiums and income tax SHI premiums SHI premiums SHI premiums and income tax SHI premiums 6 7.75 14 14 13.25 0 100 50 28 47.3 SOURCES: E. Mossialos et al., “Study on the Social Protection Systems in the Thirteen Applicant Countries: Synthesis Report” (Brussels: European Union, 2002); and Ilko Semerdjiev, International Healthcare and Health Insurance Institute, Republic of Bulgaria, personal communication, 27 April 2006. a Not applicable. on S etem er 6, 2017 by H W T am H ealth A fairs by http://conealthaffairs.org/ D ow nladed fom Various strategies are used for sharing risk across regions. In Poland and Slovakia, all revenues from the SHI funds are subject to a geographic equalization process. In Romania, a formula is used to reallocate 25 percent of SHI revenues to relatively poor regions.3 Universal coverage. Universal coverage is written into the constitution in a number of countries in the region, but resources are limited, and real universal coverage is not yet a reality. In principle, central governments pay into SHI on behalf of groups such as pensioners, children, disabled people, and dependent spouses. Evidence suggests that in most countries in the region, those lacking SHI—typically nonworking adults—have to pay out of pocket for most of their nonemergency care.4 In Romania, after twenty-seven months of unemployment, people are no longer maintained on the unemployment registers. Private insurance. Private health insurance in the region has thus far been of the supplementary type, rather than the comprehensive “substitutive” type, where patients are permitted to opt out of the public system. Only in Slovakia have for-profit, publicly traded, and foreign companies been allowed to compete with the public-sector funds to provide insurance. In Slovakia, where official copayments were introduced in 2003, private insurance to cover those payments has become common. In Bulgaria, where the share of the population with private health insurance is growing and is estimated to be 12 percent, insurance premiums (below a cap) are not subject to corporate income tax, which provides an incentive to employers to purchase insurance for their employees. Benefit package. Until recently, countries in the region defined the benefits included in the SHI package only in broad terms.5 Latvia, Slovenia, Estonia, and Slovakia have made clear progress toward defining a benefit package. In 2002, Slovakia specified priority diseases for coverage. In Estonia, explicit rules have been introduced for adding new services to the benefit package and establishing the appropriate level of patient cost sharing.6 Health spending. The level of health care financing available through insurance has increased in the region, despite economic challenges. Slovenia, for example, has seen a fivefold increase in per capita health spending, in purchasing power parity (PPP), since 1990. Lithuania and Romania have increased spending by more than threefold in the same period.7 However, overall levels of health spending in the ten countries—measured both in absolute terms and as a percentage of gross domestic product (GDP)—fall below, and in most cases considerably below, spending levels for the fifteen pre-2004 members of the EU. In 2004, total health spending ranged from $508 per capita (measured in PPP) in Romania to more than $1,300 per person in the Czech Republic, Slovenia, and Hungary (Exhibit 2). In 2004, the average level of per capita health spending for the fifteen core EU members was $2,510. In all of the countries except for Latvia and Bulgaria, the majority of health financing comes from payroll taxes, routed through social insurance programs (Exhibit 3). Funding shortfalls and informal payments. Raising sufficient funds through employment-based premiums or income taxes is a particular challenge in a region with widespread informal employment. Estimates of the percentage of economic activity that is outside of the formal (taxable) sector range from 19 percent in the Czech Republic to 36.9 percent in Bulgaria.8 As a result, it can be difficult for social insurance funds to fully fund health care services. In Bulgaria in 2000, SHI provided just 13 percent of the health care budget, with national and municipal budgets and private spending making up the difference.9 In Romania there has been substantial effort to im4 8 0 M a r c h / A p r i l 2 0 0 8 H e a l t h T r a c k i n g “The level of health care financing available through insurance has increased in the region, despite economic challenges.” on S etem er 6, 2017 by H W T am H ealth A fairs by http://conealthaffairs.org/ D ow nladed fom