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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