Extending the Range of Financing Sources for Polish Health Care System :The Needs and the Potential
Maria Węgrzyn, Ph.D., Department of Finance, Wroclaw University of Economics, Poland
Abstract
Health care is an important and, at the same time, a challenging element of the State’s economic and social policy. This particular status of health care stems from the significance of health as one of the most essential qualities of personal life. Consequently, securing the access to health care services is of fundamental importance. Financial problems and the increase of health care service spending drastically hamper the realization of health care goals and objectives. This article focuses on the needs analysis of Polish health care system and the potential of supplementing it with additional funding sources.
Keywords: health care, liabilities of health care facilities, supplementary financing sources, co-financing, additional private health insurance
Introduction
The health care issues constitute an important element of state policy. This particular status of the health care system stems from the significance of health as one of the most essential qualities of personal life. In this context, health and well-being are of utmost, superior importance, and health loss bears serious financial consequences not only for individuals, but for the society as a whole. Hence, it is of utmost importance to initiate wide debates on health care organization that would warrant easy access to a broad range of health care services at the lowest possible cost to the individual and the society.
The increase of health care spending
Reforms of health care systems, initiated widely in most of the countries of the modern world – both those offering health care insurance systems and those using other funding sources, such as national health care system – typically focus on changes within the regulations of health care funding or on limiting the State responsibility of health care provision by increasing the financing responsibility of the beneficiaries, although in both scenarios the legislator usually justifies the efforts by pointing out the need to increase both accessibility and the effectiveness of the health care system. The reforms and legislative actions are undertaken in reaction to the steady increase of health care spending.
Table 1: The share of health service spending, in % GDP, in selected OECD countries, [
No. / Country / 2007 / 2008 / 20091. / Austria / 10.26 / 10.36 / 11.04
2. / Belgium / 9.65 / 10.07 / 10.87
3. / Canada / 10.03 / 10.27 / 11.42
4. / Czech Rep. / 6.75 / 7.11 / 8.24
5. / Estonia / 5.23 / 6.10 / 7.00
6. / France / 11.02 / 11.10 / 11.78
7. / Germany / 10.45 / 10.66 / 11.61
8. / Hungary / 7.46 / 7.22 / 7.44
9. / Ireland / 7.66 / 8.83 / 9.53
10. / Italy / 8.68 / 9.04 / 9.47
11. / Luxemburg / 7.13 / 6.77 / 7.76
12. / Mexico / 5.77 / 5.83 / 6.41
13. / New Zealand / 8.81 / 9.55 / 10.29
14. / Norway / 8.88 / 8.62 / 9.60
15. / Poland / 6.43 / 7.00 / 7.36
16. / Slovenia / 7.78 / 8.35 / 9.26
17. / Spain / 8.48 / 8.95 / 9.51
18. / Great Britain / 8.42 / 8.78 / 9.78
19. / The United States / 16.01 / 16.42 / 17.38
Table 1 clearly indicates a steady increasing trend in health service spending in the years 2007- 2009. It also shows wide differences in the amount of health care spending by country. This spread results not only from the differences in the percentage amount directed to health care funding, but also from the GDP values of individual countries. However, the data is of purely comparative value and cannot be used as basis for formulating the conclusions. It merely reflects the funding potential of the respective societies and their preferences in this respect. As such, it cannot be used to evaluate the effectiveness of the funding systems, the quality and efficiency of health care systems nor the equitable distribution of financial load[1].
Regardless of the adopted model of health care funding, the overall volume of financial resources directed to health care funding is typically insufficient, due to the steady increase of spending. This rising trend is a product of several factors. The first and probably the most important factor in this respect is the steady progress in medical sciences, offering treatment of conditions that – up to now – have been outside human influence from the medical perspective. It should be noted that the new methods of treatment typically generate very high cost. C. Jones [Jones C, 2002] estimates that, in the United States alone, the development of medical technologies brought the cost increase of over 50% in the years 1960- 1997, and over 75% in the following years. Since then, the scope of new diagnostic and therapeutic procedures has advanced considerably; hence, it may be expected that the technologies developed and introduced after the date of the cited publication have brought further increase of health service spending. Another important factor is closely related to demographic determinants. With the ageing of societies, the share of expenditure on ailments of aging and multiple morbidity typical for the aging patients, together with increased demand for stationary health care, is growing [Polsenior, 2012].
The third factor to augment the rate of health care spending is the so-called medical inflation. The increase of prices in the medical services sector is markedly higher than in any other sectors of the economy. This is, in part, attributed to the Baumol Effect. It is assumed that the labor productivity increase in medical sector is markedly lower than that of other sectors of the economy, due to natural limitations. For example, it is unreasonable to expect the increase of productivity in such tasks as bathing the patients in hospitals and nursing homes [H. Maarse, 2004]. The increase of health care spending can also be related to political determinants, since the health care issues – especially improvements in the accessibility and the effectiveness of the health care system – are voiced in pre-election campaigns by politicians of any affiliation. Taking into account the constant rise of voters’ expectations in such areas as the wide access to health care services, improvement of quality and the sense of ‘health security’, the subsequent realization of solemn political pledges can be problematic. The more so that the needs reported as ‘health-related’ belong to the category of unlimited needs.
The limited funding capabilities of health care systems enforce the cost reduction and cost control, coupled with the activities aimed at expanding the financial resources that can be directed to health-related objectives. Without going into detailed evaluation of measures aimed at improving the effectiveness of health care organization [A. Frączkiewicz -Wronka, A. Austen, 2008]and individual actors involved in health care provision and medical services [M. Węgrzyn, 2011], this article focuses on the needs analysis and the potential of expanding the sources of health service funding in Poland.
Financial obligations of Polish health care system
Polish health care system faces all the aforementioned problems. Those problems are clearly manifested in the ever-increasing level of financial liabilities, including the liabilities due, reported by public health care institutions [The Act of April 15, 2011] that provide medical services. The greatest share of liabilities overall is reported in hospital care, with main service providers belonging to the public sphere (spzoz – independent health maintenance organizations of public status). The specificity of spzoz organizations lies in their dependence on specific organs of public administration on regional, district or parish level, which act in the capacity of founding organizations for the spzoz.
At present, the health care system in Poland operates under the principle of universal (obligatory) health care insurance, which serves to collect and manage the financial resources for funding medical services for the public. The sole provider of public health insurance, appointed by the force of the Parliament act [The Act of August 27, 2004], is the NFZ (NarodowyFunduszZdrowia – the National Health Fund) – a public entity. The National Health Fund operates under the principles of social equity and solidarity, free access of the insured to health care services, as well as the freedom of selecting a health care provider. The Act clearly defines the rights and duties of the insured, the principles, procedures and terms of applying for health care services, the principles of funding and fee settlements, as well as the organization and operation of the National Health Fund. Polish legislature is based on the principle of social solidarity; in this context, the amount of health insurance fee paid by an individual shall have no effect on the number, quality and type of health care services provided to the insured. In effect, the cost of services provided for patients is founded by those insured who hardly ever apply for public health care services. The principle of free choice of the service provider, on the other hand, has introduced a fundamental change in the system of public health care organization, by allowing the insured to freely select a provider[2] from the pool of all health maintenance organizations contracted with the National Health Fund. By the force of individual agreements with the National Health Fund, health care providers are guaranteed coverage of the cost incurred in the provision of medical services to the insured. Despite this form of system organization, the providers of medical services report a steady escalation of liabilities.
Table 2: Dynamics of total liabilities and liabilities due, as reported by independent health maintenance organizations in the years 2003 – 2012
[own research based on data published by the Ministry of Health
2003 / 7 327.7 / - / 4 543.7 / -
2004 / 9 450.1 / 128.9 / 5 872.3 / 129.2
2005 / 10 273.6 / 108.7 / 4 933.6 / 84.0
2006 / 10 384.2 / 101.0 / 3 723.8 / 75.4
2007 / 9 563.3 / 92.1 / 2 666.2 / 71.5
2008 / 9 979.7 / 104.3 / 2 357.9 / 88.4
2009 / 9 627.6 / 96.4 / 2 241.8 / 95.0
2010 / 9 963.1 / 103.4 / 2 140.0 / 95.4
2011 / 10 383.9 / 104.2 / 2 316.6 / 100.8
1st quarter of 2012 / 10 556.6 / 101.7 / 2 470.8 / 106.6
Total liabilities of Polish health maintenance organizations in the first quarter of 2012 have increased by over 2 percent compared to the previous year, and reached the alarming sum of over 10.5 bil PLN. In other words, the present total volume of liabilities of Polish hospitals is unprecedented in the history of records kept by the Ministry of Health, i.e. since the year 2003.
Liabilities due constitute the most important part of the debt, overall, amounting to over 2.3 bil PLN as reported for the end of 2011. The volume of liabilities due rose significantly in the first quarter of 2012, reaching the sum of nearly 2.5 bil PLN.
The above figures seem to corroborate the negative trend of economic and financial decline in the sector under study. The attempts to level the liabilities of spzoz sector up to date have proven effective only in short perspective[3]. With the conclusion of aid programs, the growing trend reappears. This means that the operation of public health maintenance organizations requires further analyses, in order to verify the cost of operation and the rationality of decisions made, particularly in relation to the funding capabilities of the National Health Fund.
Table 3: Gross receipts and cost reported by the NFZ in the years 2007 -2010 (in thousand PLN)
[own research based on the NFZ financial reports for the years 2007, 2008, 2009, 2010]
2007 / 2008 / 2009 / 2010Gross receipts / 43602 326 / 52448 578 / 56811 491 / 57816 389
Planned receipts / 41505 057 / 48943 784 / 56543 994 / 57456 879
Real cost / 44311 271 / 55181 824 / 58480 490 / 60032 753
Planned cost / 41505 057 / 48943 784 / 56543 994 / 57456 879
Profit/loss (real) / - 708 945 / - 2733 246 / -1668 999 / -2216 364
The above data shows that the NFZ budget lacks sufficient resources to cover the cost of medical services provided by contracted organizations. It also confirms the steady negative trend in this respect.
Real cost reported in Table 3 does not reflect the real cost of public health system in Poland. The level of expenditure reported by the National Health Fund should be supplemented by other expenses, such as the cost of medical services exceeding the quota, i.e. services provided to the patients and deemed valid, but not covered by the Fund and effectively paid from the provider’s own budget.
Thus, it may safely be assumed that public providers of medical services are unable to cover their operational cost, while the principle of social solidarity effectively excludes them from collecting additional fees for service provision. At the same time, the National Health Fund, as the public paymaster, transfers the whole sum of resources gathered through the public health care insurance to reimburse the cost of services provided by the contractors. Consequently, the need for supplementing the existing funding sources has been voiced for some time now. Unfortunately, the idea of raising the present health insurance fees faces strong opposition. The public health system reform of 1996 was based on the assumption that health insurance fees will amount to 10% of personal income tax. In 1999, i.e. with the reform coming into force, the fee was established at 7.5%. The difference of 2.5% of personal income tax base value was compensated by means of extending the range of income categories covered by the tax duty. In effect, the real value in the first year of the reform was even higher than the anticipated value. At present, the fee is calculated at 9% of the tax base.
In the face of the highly dynamic changes in the sector and the problem of insufficient coverage of the cost incurred, there is a strong tendency to diversify the funding sources. Consequently, the share of private resources in covering the cost of medical services grows steadily.
Additional sources for public health care funding
The most affluent of the OECD countries also show a marginal increase of private resources in public health service funding[4]. However, the ratio of public to private funding is varied and does not necessarily correspond to economic calculations. In fact, it results from particular historical and ideological determinants, as well as the level of institutional development in the sector. In effect, reaching for existing solutions adopted in other countries should be based on the principle of ‘limited trust’, due to the compatibility issues (one may not disregard the principle of social solidarity in Polish legislature, and the rule of equal access to medical services) and the specificity of domestic economy.
This is why the attempts at increasing the share of private resources in funding health care services in Poland have been marginal, at best. The constitutional provisions, namely: “Everyone shall have the right to have his health protected”, and „Equal access to health care services, financed from public funds, shall be ensured by public authorities to citizens, irrespective of their material situation”[5] have been quoted as reasons for rejecting most of the postulated legal solutions.
It is important that the acceptance for increased financial participation of the patients in the cost of medical services be guarded by several fundamental rules. These include:
1)guarantees for system transparency,
2)low cost of administration and limitation of bureaucratic procedures,
3)providing the means for effective use of the existing resources,
4)limitation of the ‘grey economy’ in the sector,
5)compatibility with Polish realities [ChristophSowada, 2004].
The frequently voiced problems with access to medical services and the low quality of services rendered by public health maintenance organizations make the general public more inclined to reach for the paid services of private health care organizations [Centrum BadańOpiniiSpołecznej, 2012]. Taking into consideration the fact that, despite constitutional declarations, the health care system in Poland is inherently unable to bear the full extent of financial obligations incurred as a result of health services provided to the public, other solutions are sought to effectively limit the financial load. Potential solutions include the following:
- one-time fees, i.e. medical services provided for a fee in non-public health maintenance facilities, to alleviate the problem of limited access to services guaranteed and covered by the National Health Fund,
- co-financing, i.e. individual participation in the cost of operations, procedures and other medical services not covered by the full reimbursement plan of the public health care service system, such as fees for specialist consultation,
- supplementary private health insurance programs, with fees paid voluntarily by the insured to the benefit of health insurance organizations providing medical services,
- prepaid medical care packages offered directly by service provider, e.g. covered by the employer,
- other postulates, such as health care vouchers.
The potential for employing some of the above solutions in Polish health care system is subject to political determination, since they can only be introduced by the power of statutory acts or changes within the existing legal framework. First and foremost, legislative provisions should be made to allow for incorporation of private funding sources into the national health care system[6]. Such activities will inevitably be burdened with certain limitations, but they form a viable approach to building a more effective system for funding medical services in Poland. Diversification of funding sources will make it possible to plan further changes within the public health system, while at the same time minimizing the risk involved.
At the same time, it may be useful to revisit the legal construct of a ‘health benefit basket’ as a basis for funding the basic operations of the polish public health care system [J. Sobiech, 2006]. The present ‘basket’ covers, in principle, all medical procedures save for few exceptions, such as plastic surgery on demand. Re-evaluation of the package would allow for reliable and diligent construction of packages for private health insurance organizations, thus limiting the risk of redoubled financing of services rendered[7]. The content of the ‘basket’ should be adjusted to the financial resources directed for the coverage of basic health care procedures. Hence, the operation may prove difficult. As the bulk of medical services may, under the current provisions, be financed by the National Health Fund (in due time), then the additional fees collected for such services bear the risk of redoubling the cost of the service. A well-designed basket of guaranteed services would surely bring some order in this particular area of the public health system.
Another issue open to discussion is the question of fiscal stimuli needed for the design of such services as supplementary health insurance programs. Tax relief of any kind, however, is detrimental to the state budget revenues – a risk that, under the present condition of public finance in Poland, may not be viewed as favorable. On the other hand, supplementary health insurance packages are typically designed for the most affluent of the taxpayers, who demand top quality services. In this context, it seems viable to question the validity of tax relief as an instrument to support the consumption of luxurious health services in the form of top quality medical care.