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Tuesday, January 15, 2013

A level playing field for the health care system, please !

Last Saturday - on 12 January 2013 -  the new Minister of Health announced, in front of the media, that the State budget will no longer pay for medical assistance services provided to patients in privately-owned hospitals.  According to the Minister, the 10% from the Health Fund which is granted currently for compensation of medical assistance in private hospitals shall be redirected to the public hospitals, which need this money, in the absence of any alternative financing for them.  
For those not familiar with the Romanian health care system, I have to tell that the public system has an overwhelming market presence, - there are approximately 430 public hospitals and almost 30 private hospitals, so less that 10% are private - see here (in Romanian only). The rate is the lowest in the entire European Union. In most EU countries the number of private hospitals is almost equal with the number of public hospitals or it even exceed the public hospitals. Perhaps there is no coincidence that Romania ranks almost the last countries in Europe (not just EU) for the quality of its health-care services.  Even countries outside EU, such as FYR Macedonia and Albania are outperforming Romania!-   A connection might be established between the large number of the public hospitals and the quality of the health care if we take into account that only 7 (seven) Romanian hospitals are ranked in the 1st category and more than half of them are ranked in the IV-th and the V-th category ("junk"). 
The public hospitals in Romania are famous for their waste of resources - although the financing for the system had a solid increase over the last 7 years , the results are barely visible.  The public hospitals became, plagued by poor management and lack of proper supervision from the authorities, "black holes" which drained large resources without delivering the much needed quality medical assistance.  Faced with this reality, the previous governments made plans for a significant overhaul of the system, which was based on a two-tier privatization - that of the health funds and that of the hospitals.  The State  even started to clean the place by closing several hospitals, considered not to be a real necessity.  Later on, some were re-opened.    
The private clinics and hospitals developed relatively recently and tried to growth and to strengthen their foothold in the market by exploring niche markets, such as dialysis for people with diabetes or special treatments. 
The declaration of intent from the highest public official in charge with the health care policy, obviously resulted in vivid debates in the press and in the political world.  Most of the comments highlighted the fact that the decision is unlikely to solve any of the problems of the public health care system and that certain patients (even the ones who contribute the most to the public system) are going to pay more for their health-care if they will prefer to choose a better quality private hospital - see here -, here -, and here -  
These opinions are correct.
However, there is one aspect which is worth discussing in this context: should the State be allowed to give preference to its own hospitals in a market which has been liberalized or should ensure a level playing field for all the operators? 
The public health (i.e. the health of all and each of the Romanian citizens) is guaranteed by the Romanian Constitution.  
The Constitution provides in article 31 that:
”(1)The right to the health protection is guaranteed.
(2)          The State is obliged to take measures in order to ensure the public hygiene and health.”
The Constitution does not provide how the State is supposed to fulfill the above mentioned goals. It may do this by maintaining and extensive - and expensive - public health care system, by creating the conditions for the development of private hospitals, alongside public hospitals, or even by promoting a purely private health-care system (the Dutch model, the best but singular in Europe, so far). 
Due to historical reasons, the public health system in Romania is dominated by public hospitals. The first clinics appeared in the 1990’s and the first private hospitals after 2000 without benefiting from incentives and in the absence of a clear public policy aimed at private health care.  The new medical units had to fight to consolidate their position in a market where patients were used from decades to receive rather poor but, supposedly, free services (in reality paid, sometimes at exorbitant prices, on the black market).  
Once an activity is open to the private initiative, the State is obliged to ensure a level playing field for all the operators, notwithstanding if they are in public or in private ownership.  
The move announced on 12 January 2013 by the Ministry of Health is unlikely to have direct serious effects on the private hospitals but it may have negative consequences on these.  Due to the cost of their services – even for those services partially covered from the public health fund – the private hospitals seem to appeal to different customers than public hospitals – those benefiting from higher-than-average incomes.  On this basis, the Romanian Competition Council considered so far, in the merger decisions regarding this sector that the private hospitals function in a separated relevant market, different from the market of the public hospitals.  Hence, the private hospitals are not yet competitors of the public hospitals.  This is a sad reality, and the State and the Ministry of Health should make efforts to change it as soon as possible. 
What is wrong in the statement made by the Minister of Health is that it sends a negative signal regarding the perspectives of the private health-care in Romania. The minister noticed, correctly, in his statement, that private hospitals are made from private investments but he seems to overlook the fact that investors and financers are very sensitive to negative signals from high-ranking policy-makers, such as the Minister of Health.  The economic context is already bleak and any such declaration of intent may result in much necessary investments in health-case being put on hold or even chased out of Romania.  In any case, the cost for financing could increase in order to compensate any additional political risk. As a result, the development of the private hospitals may be slowed down, to the detriment of the (hopefully, more numerous), Romanian patients.  
Equally important, the patients should be allowed to direct their health contributions to the health care providers of their choice, to the maximum extent possible.  These contributions cannot be considered as "public money", as the minister put it, but rather private money in public hands and people must have a say on how they are used.  
Public officials can do little to support a business and, in fact, it is not even the duty of the State to raise the private business.  But the State can easily harm by interfering in the mechanism of the market and on the freedom of the patients t choose their health care provider. Such actions would be regrettable and they must be avoided!

By the way, using the logic of the Minister of Health (”any compulsory contribution is a tax”), the compulsory motor (third-party liability) and real estate insurance should also be treated as public money, similar with the taxes. Hence, the repairs to the damaged cars or to the houses affected by floods should, in this logic, be made only by public companies!  
I hope this is not going to happen, ever!

Worst of all, by following the same logic, the State might want at a certain moment to transfer to its budget the private pension funds. After all, this already happened in a neighboring country (with disastrous effects on the credibility of the country) and the Romanian public pension fund is also in need of additional money! God forbid!

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