Health Policy Monitor
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Incremental increase in healthcare financing

Country: 
Estland
Partner Institute: 
PRAXIS Center for Policy Studies, Tallinn
Survey no: 
(11)2008
Author(s): 
Läänelaid, Siret and Ain Aaviksoo
Health Policy Issues: 
Finanzierung
Current Process Stages
Idee Pilotprojekt Strategiepapier Gesetzgebung Umsetzung Evaluation Veränderung/Richtungswechsel
Implemented in this survey? nein nein nein ja ja nein ja

Abstract

Estonia has a relatively low share of healthcare costs as percentage of GDP, which is being tested for its sustainability. The cornerstone of Estonian health financing has been a single public purchaser using clear standardized non-political mechanism of cost-based pricing of healthcare services. Looming strike of health workers before last elections resulted in additional funding stream from state budget for capital investments of hospitals. EU structural funds money is used to build hospitals.

Neue Entwicklungen

Estonia's health care costs are rather low compared to most developed countries: Healthcare costs made up for 5.0% of the Estonian GDP in 2006 compared to 8.8% EU average in 2006, which leaves us approximately 20th among the EU(27) member states. This ratio is now being put on test through constant and growing dissent by all major stakeholders: citizens, service providers and health professionals. So far political response to the complaints has been relatively slow and conservative.

Yet, several piecemeal changes have been introduced:

  • Depreciation of the costs of health care premises is compensated to providers out of the state budget since 2007;
  • The Minister of Social Affairs has passed a regulation (19 March 2008), which makes EU Regional Development Fund (ERDF) support (total 137.8 Million Euro) available for health care investment applicants during a six-year period (2008-2013). Additionally from EU funds approximately 10 Million Euro is planned for public health activities and ca. 6 Million Euro for developing the health information system.
  • The national minimum wage (agreed upon annually) went up to 278 Euro in 2008, and the social tax amount paid from it increased accordingly (but it only contributes for 2,52% of insured people).
  • An agreement "Health Care Financing 2009-2012" negotiated between the National Government and many representative unions, umbrella and administrative organizations from the healthcare sector is in the final stage of negotiations.

A new policy, which has been written in the government coalition agreement, foresees a compensation of primary care costs for uninsured people (there are still about 5% of uninsured). Such compensation has actually been offered by local governments already before (City of Tartu [1]).

Interestingly, all this will only allow the proportion of health care costs remain unchanged, but not increase significantly. The Minister of Social Affairs together with her colleague from the Ministry of Finance recently projected that healthcare costs will rise up to 6,5% of the GDP only by the year 2050. This proportion has been a specific demand by the Estonian Medical association for the last few years. The prediction was based on the assumption that only public funds will influence national spending on healthcare. Yet, contribution of individuals into total health costs has been increasing ever since the beginning of the 21st century.

The compensation of capital costs (depreciation) of hospitals from the state budget was introduced directly under political pressure. It is a separate measure to get additional money into the healthcare system, which introduces daily political bargaining into Estonian healthcare financing principles. So far the social tax on the payroll is the main source of revenues for the Estonian Health Insurance Fund, for whom it is automatically earmarked to purchase healthcare services for the insured people. The exception is only emergency medical care for uninsured, which is financed separately from the national budget.

The financing construction of hospitals from the EU structural funds is facing similar political challenges. Due to a dramatic rise of construction costs, the actual need for capital investments is 5-6 times higher than has been predicted a few years ago. At the same time there is no final (or publicly stated) decision whether the money will be split between many different hospitals who claim for it or only a few strategic investments will be made to gear the health system.

[1] http://tartu.ee/?lang_id=1&menu_id=2&page_id=2364

 Suchhilfe

Characteristics of this policy

Innovationsgrad traditionell traditionell innovativ
Kontroversität unumstritten recht kontrovers kontrovers
Strukturelle Wirkung marginal neutral fundamental
Medienpräsenz sehr gering recht hoch sehr hoch
Übertragbarkeit sehr systemabhängig recht systemabhängig systemneutral
current current   previous previous

The compensation of capital costs (depreciation) of hospitals from state budget has been introduced under political pressure to involve additional resources to the health care system. It is the first obvious instance of significant political intervention into Estonian healthcare financing principles. So far the earmarked social tax on payroll is the main source of revenues for the Estonian Health Insurance Fund. Such instance expresses the weaknesses of the state-financed healthcare system and is weakening the position of social insurance as being protected from daily politics.

 Financing construction of hospitals from EU structural funds is facing similar political challenges due to the dramatic rise of construction costs over the recent years. There is no final (or publicly stated) decision whether the money will be split between many different hospitals who will apply for it or just a few strategic investments will be made to gear the health system.

 The whole process is far from being innovative, but it is an example how different financing systems are being blended.

Purpose and process analysis

Current Process Stages

Idee Pilotprojekt Strategiepapier Gesetzgebung Umsetzung Evaluation Veränderung/Richtungswechsel
Implemented in this survey? nein nein nein ja ja nein ja

Initiators of idea/main actors

  • Regierung: As the current system in Estonia functions relatively well, politicians and other decision-makers are not willing to make radical changes. Dissatisfaction among service providers, health care workers and also citizens is growing, though. 
  • Bürgergesellschaft: People start to feel that the input they give in the form of national tax (13%) is not nearly what they get back when they need it. The argument goes that higher healthcare expenditure is required to improve quality and accessibility of health care. The main concern of these organizations is the minimum salary of doctors and nurses, which the government is reluctant to raise at the requested pace since 2006. 

Stakeholder positions

The "political principles of healthcare financing 2008-2011 agreement" has been negotiated between just some stakeholders during 2007, involving more organizations at the later stage. The Ministry of Social Affairs has been forced (by the Ministry of Finance) to keep the increase of the healthcare cost ratio of the GDP below 6.5% until 2050, compared to the earlier planned 2010. This policy also falls into the overall changed macroeconomic environment of decreased economy growth rate in Estonia. The document elaborates on clear planning of salary cost increase of medical doctors and nurses. The Trade Union Association of Health Officers of Estonia, Estonian Medical Association and Estonian Nurses union fight for higher investment into health care and public health.

As the demand for health care services grows and the government is trying to maintain the conservative public spending on health care, the proportion of individual/private investment/spending on health care have been growing steadily.

Actors and positions

Description of actors and their positions
Regierung
Ministry of Social Affairs sehr unterstützendunterstützend stark dagegen
Ministry of Finance sehr unterstützenddagegen stark dagegen
Estonian Medical Association sehr unterstützendsehr unterstützend stark dagegen
Estonian Employerssehr unterstützendsehr unterstützend stark dagegen
Bürgergesellschaft
Estonian Medical Association sehr unterstützendsehr unterstützend stark dagegen
Trade Union Association of Health Officers of Estonia sehr unterstützendsehr unterstützend stark dagegen
current current   previous previous

Influences in policy making and legislation

Increasing the minimum wage on the national level by 20% also increases the employer-paid social insurance (including health insurance). According to latest available (2005) statistics, however, only ca 5% of full time employees (22 000 people) were worling for minimum wage in Estonia.

137.8 Million Euro of ERDF money will be directly invested into healthcare infrastructure. As usual, the ERDF support is complemented by a compulsory 25% self-financing, which leads us to 34.5 Million Euro more for heath investments. Another question is whether the self-financing comes at the expense of some other sphere of life or from the regular budget of the health institutions, which is more likely.

A recent development is the Agreement on Political Principles of Health Care Financing for 2009-2012. It was initiated by the Estonian Medical Association, Trade Union Association of Health Officers of Estonia and allied by several other representative and administrative organizations in the course of negotiations. The document has not been adopted, but forms the basis for negotiations between professional interest groups and the Ministry of Social Affairs. This document (April 2008 version) is listing a governmental obligation to raise national healthcare funding to 6.5% of GDP by 2011 and implementation of a real cost model in health care services financing.

A major policy change is the reduction in the planned increase in health investments: from a rise to 6.5% of the GDP by 2010 as promised in the national budget strategy, to 6.5% in 2013 as was predicted in 2007, to 6.5% of GDP only by 2050 as it was projected recently. This is explained by the Ministry of Social Affairs as a result of the national financial situation and directions received from the Ministry of Finance. This indication in the national budget strategy predicts the Estonian health sector to remain to be the least funded in the EU.

Recently most liberal (i.e. market-oriented) party spokespersons have responded to declining public sector revenues with suggestions that it is time to introduce more vigorously private insurance for health and education. A policy that is trying to keep public health care cost stable in an environment of slight inflation and economic growth (so far) in conditions of decreasing economic growth and national tax reduction (income tax) leads to higher individual responsibility and contribution; maybe to a private insurance scheme implementation.

Legislative outcome

Enactment

Actors and influence

Description of actors and their influence

Regierung
Ministry of Social Affairs sehr großgroß kein
Ministry of Finance sehr großsehr groß kein
Estonian Medical Association sehr großneutral kein
Estonian Employerssehr großgroß kein
Bürgergesellschaft
Estonian Medical Association sehr großneutral kein
Trade Union Association of Health Officers of Estonia sehr großneutral kein
current current   previous previous
Estonian Medical Association , Estonian Medical Association , Trade Union Association of Health Officers of Estonia Estonian EmployersMinistry of Social Affairs Ministry of Finance 

Positions and Influences at a glance

Graphical actors vs. influence map representing the above actors vs. influences table.

Adoption and implementation

In 2005 already the report by PRAXIS (commissioned by parliament) showed that the current health care financing model is not sustainable in the long run. However, the political response has been relatively slow. In a recent survey (December 2007 by PRAXIS, unpublished data) among political parties represented in parliament the general understanding was that the health system and its financing is in good shape and no big changes are necessary. Recent data show growing cost to individuals and a decreasing contribution from EHIF.

  • The depreciation of the health care premises (infrastructure) is compensated to providers from the state budget.
  • The Minister of Social Affairs has passed a regulation (18. March 2008), which makes European Regional Development Fund support (137,8 MEUR) available for health care investment applicants 2008-2013. Additionally from EU funds approximately 10 M EUR is planned for public health activities and ca 6 M EUR for health information system development.
  • The national minimum wage (agreed upon annually) went up to 278 EUR in 2008, and the social tax amount paid from it increased accordingly (but it only contributes for 2,52% of insured people).

A new policy, which has been written in the government coalition agreement, foresees compensation of primary care costs for uninsured people (there are still about 5% of uninsured). However, currently no actual policy has been introduced or proposed nor is the financial contribution clear.

As public discussion in Estonia on health care financing is not as intensive and broad as it could be, it is difficult to define possible winners and losers at this point. The direct winners of the ERDF financing, the additional 3,4 Miliion Euro financing and the negotiations over policy principles are people involved in medical practice both on the institutional and individual level. Indirectly these activities shall also improve the accessibility and quality of health care for patients/clients, as the Chancellor of the Ministry of Social Affairs is convinced that "Healthcare expenditure does not indicate anything of the quality or the healthiness of the people in any country".

Monitoring and evaluation

The cornerstone of Estonian HC financing has been statutory social health insurance. Public financing contributes ca 80% of healthcare expenditure in Estonia (2005). The share of Estonian Health Insurance Fund has been very stable (around 67% of total health expenditure), but in 2006 the proportion fell to 65%.

During the 21st century the main sources of financing for health care have grown respectively. Total health expenditure has gone up by 95%, including health expenditure made through the Ministry of Social Affairs (by 116%). EHIF total expenditure has gone up by 82% and private sector family level health care expenditure has gone up by remarkable 147% (2006 vs 2001).  

The policy seems to be heading towards more and more indirect financing of health care instead of only the 13% of the national social tax of 33% paid by the employers. The reduction (or may we say expansion of time-frame) of the initially planned % of GDP to health care financing indicator might decrease the speed of increase in health care financing, which in turn has to be financed from other sources either as indirect taxation, contributions or service fees, etc

Expected outcome

The burden of responsibility for healthcare financing is shifting slowly but consistently from the state to the people. The state has frozen the increase of health care expenditure and declined the initial growth plan, which forces the unions to fight for their rights with extreme means (i.e. strike).

The state has declared that the healthcare financing ratio compared to a nations GDP has no proven relation to healthcare quality, which, they think, eliminates that argument from further discussion.

Impact of this policy

Qualität kaum Einfluss neutral starker Einfluss
Gerechtigkeit System weniger gerecht neutral System gerechter
Kosteneffizienz sehr gering neutral sehr hoch
current current   previous previous

Most probably the current solutions are not sustainable. The biggest threat is if the government ignores the pressure from all major stakeholders to increase health care financing and will not offer well-elaborated alternatives. Such a policy will probably develop naturally towards an increased financial contribution by individuals, but without a government mitigation of possible negative side-effects of such a development. So far private health insurance has played a dismal role in the Estonian healthcare system, but it is to be expected that opportunities for them will grow in next few years.

The opinion of the authors of this report is that introducing more private money into the healthcare system may be the hidden agenda of some liberal politicians, who are currently shaping social policies in Estonia.

References

Sources of Information

  • Ministry of Social Affairs
  • Health Care Board

Author/s and/or contributors to this survey

Läänelaid, Siret and Ain Aaviksoo

Empfohlene Zitierweise für diesen Online-Artikel:

Läänelaid, Siret and Ain Aaviksoo. "Incremental increase in healthcare financing". Health Policy Monitor, April 2008. Available at http://www.hpm.org/survey/ee/a11/2