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4. February 2016
Vlasta Kovačič Mežek
Health System
Expenditure Review: Slovenia
Why Expenditure review in Slovenia?
• Impact of economic crisis
• Announced health reform in Slovenia
• Country specific recommendation
Working method
• Analysis of Health System in Slovenia
• Working group (among others)
• Data gathering
• Working meetings
• Analyzing
• Final report
• Workshops
• Policy dialogues
Key findings: preview
• Economic crisis revealed susceptibility of the health system to fluctuations in social security contributions – LESSON: Need to diversify revenues and develop
countercyclical approaches to financing
• Level of health-care programmes and accessibility of services were preserved through heavy reliance on CHI, price reductions and delayed payments – LESSON: CHI plays a key role in maintaining fiscal balance – LESSON: Delayed payments lead to provider debt that is
ultimately the responsibility of the MoF
• Only minor variations in distribution of HIIS spending over time but HIIS pays for too many non-health service items – LESSON: General revenues should cover non-health
service items
Public debt as a share of GDP has been increasing since 2008
-16
-14
-12
-10
-8
-6
-4
-2
0
0
10
20
30
40
50
60
70
80
90
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
De
fici
t/S
urp
lus
De
bt
to G
DP
Debt/GDP Deficit/Surplus
But public expenditure on health is not the driver of high public debt
12
00 02 04 06 08 10 12 14 16 18 20
SlovakiaNetherlands
Czech RepublicIreland
NorwayIceland
United KingdomLithuaniaGermany
AustriaDenmark
European Union (28 countries)Euro area (15 countries)
BelgiumFinlandCroatiaFrance
ItalySpainMalta
PortugalSwedenEstonia
BulgariaLuxembourg
SloveniaRomania
PolandHungary
LatviaGreeceCyprus
Switzerland
Health as a share of total government expenditure, 2013
HIIS expenditures are constrained to revenues and reserves
-4.00%
-2.00%
.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Growth in revenues Growth in expenditures
Contribution rates vary widely and make HIIS very dependent on the employed
0
50
100
150
200
250
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
employed in legalentities
persons performingindependent business
farmers
pensioners
unemployed
self insured
municipality coverage
other
Average per person monthly contributions to HIIS (in EUROS)
Contributions declining from
employment agency
Pensioners are increasing but
contributions on their behalf are low
Because a large share of public resources come from payroll contributions, HIIS revenues are very susceptible to labour market fluctuations
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Growth in Social Security Contributions to HIIS Rate of unemployment by ILO in %
Gross wage per employee - real growth in %
The labour market outlook for the future is somewhat more favourable, though not as good as in previous years
-10
-08
-06
-04
-02
00
02
04
06
08
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Real GDP Growth Unemployment rate Real growth in gross wages per employee
The share of HIIS enrollees with higher contribution rates has fallen during the crisis and is not expected to fully recover in the near term
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Active population (employed, self-employed, farmers)
Persons covered by national and local budget (retirees, eligible persons covered by nationalbudget, unemployed, persons without income-covered by local governments, others)
Family members in all categories
In most other countries with social insurance systems, tax revenues contribute a sizeable amount to public expenditure
.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
Net
her
lan
ds
1
Den
mar
k
Un
ited
Kin
gdo
m
Cze
ch R
epu
bli
c
Lu
xem
bo
urg
Swed
en
Ro
man
ia
Est
on
ia
Cro
atia
Fra
nce
Ital
y
Ger
man
y
Au
stri
a
Bel
giu
m
Fin
lan
d
EU
28
Slo
vak
Rep
ub
lic
Slo
ven
ia
Spai
n
Po
lan
d
Gre
ece
Irel
and
Lit
hu
ania
Mal
ta
Lat
via
Po
rtu
gal
Hu
nga
ry
Bu
lgar
ia
Cy
pru
s
Social security funds
The contribution to the health system from general revenues has been consistently low in Slovenia since long before the crisis
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Central government Local government
Social security funds Corporations (excluding health insurance)
Private health insurance Households
While HIIS revenues have been susceptible to fluctuations, CHI have generally had small annual profits
62,208,275 57,165,544 63,774,043
36,192,392 47,804,707 53,059,171 58,987,550 62,121,019
-100,000,000
0
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
600,000,000
2007 2008 2009 2010 2011 2012 2013 2014
Premiums minus claims
Premiums minus claims and operatingcosts
Net earned premium
Net claims incurred
Net operating costs
Pros and cons of CHI
• Cons – Flat premium is somewhat regressive – Administrative costs are significant
• But low compared to CHI in other countries
• Pros – Households pay for a relatively small share of
health care OOP despite high coinsurance rates
– CHI allows for cost-shifting from public to private
– CHI pays for care even after HIIS-contracted volumes are met
Financial protection is very good and unmet need is low as a result of CHI
.071% .994%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2012
No OOP
No risk of impoverishment
At-risk of impoverishment (within 20%of poverty line)
Impoverished
More impoverished
Catastrophic expenditure (>40% ofcapacity to pay
Public expenditure on health has slowed overall, but the distribution is relatively stable
0
500
1000
1500
2000
2500
3000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Mill
ion
s o
f EU
R
Capital formation of health care provider institutionsHealth administration and health insurancePrevention and public health servicesMedical goods dispensed to out-patientsAncillary services to health careServices of long-term nursing careServices of curative home and rehabilitative home care
Some of the small shifts have been positive, while others less so
00
00
02
00
01
00
-01
00
00
-01
-2 -1.5 -1 -0.5 0 0.5 1 1.5 2
In-patient curative and rehabilitative care
Day cases of curative and rehabilitative care
Out-patient curative and rehabilitative care
Services of curative home and rehabilitative homecare
Services of long-term nursing care
Ancillary services to health care
Medical goods dispensed to out-patients
Prevention and public health services
Health administration and health insurance
Capital formation of health care provider institutions
Changes in distribution of public health care expenditure, 2008 to 2013
Good!
Good!
Not so good!
HIIS currently pays for some items that are not in their mandate
• Expenditures for specializations funded by HIIS amounted to 45,821,329 EUR and for trainees 16,919,965 EUR (2014)
• Increased general VAT rate from 20 to 22% and the reduced VAT rate from 8.5 to 9.5 %
– estimated that the VAT rate increase contributes about 3.5 million EUR to annual HIIS expenditure
These expenditures are of a comparable magnitude to CHI annual operating costs + profits!
Methods currently used to reduce HIIS annual expenditure
1) Changes in prices
– Volumes are maintained while revenues decline
2) Changes in coinsurance
– Costs shifted onto CHI without damaging access to services
3) Delaying payments to providers
– ~150 million EUR in liabilities (2010-2013)
Can incentivize providers;
Profitable for CHI
Bad for providers and bad for fiscal
policy
CHI increases premiums; May support providers
Providers are burdened by delayed payments, though providers who suffer losses may have poor management
And then the Ministry of Finance provides loans to support providers…
Health sector salaries have not kept pace with other sectors
90
100
110
120
130
140
1502
00
5M
01
20
05
M0
5
20
05
M0
9
20
06
M0
1
20
06
M0
5
20
06
M0
9
20
07
M0
1
20
07
M0
5
20
07
M0
9
20
08
M0
1
20
08
M0
5
20
08
M0
9
20
09
M0
1
20
09
M0
5
20
09
M0
9
20
10
M0
1
20
10
M0
5
20
10
M0
9
20
11
M0
1
20
11
M0
5
20
11
M0
9
20
12
M0
1
20
12
M0
5
20
12
M0
9
20
13
M0
1
20
13
M0
5
20
13
M0
9
20
14
M0
1
20
14
M0
5
20
14
M0
9
20
15
M0
1
All monthlyearnings (base2008)
Human health grossactivities (base2008)
All monthlyearnings (base2005)
Overtime payments can be high, but have a negligible effect on aggregate labor costs
-20.00%
-10.00%
.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
2007 2008 2009 2010 2011 2012 2013 2014
Total wages Total wages minus overtime Overtime
What are the key issues?
• Reliability of public resources is a greater concern than the level of public expenditure
• HIIS is susceptible to labour market fluctuations and the ageing population (WP3) – Without increasing the tax funding component of the
health financing system or significant gains in employment and wage growth to counterbalance the growing older population, this will put downwards pressures on revenue
• CHI provides an important function to maintain access to care without increasing the public or OOP burden but its efficiency can still be improved (WP3)
• Delayed payments to providers lead to retrospective funding from MoF (WP4)
• HIIS should not pay for unfunded mandates like specialization training and other non-health service functions
And what now...?
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