Parliament Nods On Key Health Insurance Reform Bill

Investors kept a very close eye on the outcome of the vote - the law will allow private business into the country's health insurance system - to see how well the ruling Socialist Party (MSZP) is supported for measures which are essential but can hardly be called popular.

The outcome of the vote means a relief for both Socialist Prime Minister Ferenc Gyurcsány and the junior governing coalition party, the liberal Free Democrats (SZDSZ), as the PM said on Friday today's vote could be regarded as a confidence vote.

The new law will bring about considerable changes to the financing system of the current health care regime, but patients will not feel much of the modifications on their own skin, so to speak.

Those insured will be able to choose a health fund for themselves as of 2008, but even those who do not pick one will remain insured. The new system will kick off in 2009.

Behind the scenes

The Hungarian health insurance system will be different from the one in the Untied States, where the insurers first look deep into the would-be-insured life to dig up all possible risk factors, calculate the expected costs and set the fee accordingly. While in the USA you can choose not to be insured and only pay when you need to be treated in the system, there is a social security system in force in Hungary. This means that you need to pay insurance no matter what, but the size of social security contributions are set according to your earnings rather than health risks.

The Hungarian system is based on solidarity, since even those will get the same basic services who do not pay (those under 18, retirees, disabled or homeless people). The treatments, medication, medical appliances, etc. are paid for by the state from social security contributions.

A risk lying ahead is that the circle of services available for everyone - irrespective of whether they pay social security or not, whether they are top managers or homeless people - will be curtailed, in which case the needy will get the short end of the stick.

Under the current regime, the costs of medical treatments are paid by the National Health Insurance Fund (OEP) from the Health Insurance Fund to doctors, general practitioners and hospitals.

In the new system Health Insurance Fund will remain, but several health funds will be set up.

The OEP will be replaced by a new body, the National Health Insurance Centre from 2009. It will not be controlled by the Health Ministry, but will: 1) manage the state health insurance fund, its revenues and expenditures, 2) keep a register of existing and issue new Social Security Numbers (TAJ szám), 3) disburse financing for the new health funds, 4) decide on the size of drug subsidies. The institution is to be headed by a director appointed for six years by the Prime Minister.

In the first half of 2008, a total of 22 new health funds will be set up nationwide (18 in the country and 4 in the central region comprising Budapest).

Each of these private limited companies, which will be established with HUF 20 m registered capital, will offer 49% of their shares to private investors over the course of next year.

The minimum price of the shares in the new funds will be HUF 12,000 per customer.

It is unlikely that Hungary will manage to make 22 private investors interested. By January 2009 the government expects that following the partial privatisation and mergers a total of 8-10 health funds will remain, with some of them responsible for two or three (not neighbouring) counties at once.

Each of new health funds must have at least 500,000 but no more than 2 million members. (Hungary's population is around 10 m.) If the sales are successful, they would generate about HUF 120 bn in revenue for the state.

The cabinet said the OEP was operating inefficiently and lavishly. The privatisation is expected to make health care more patient-friendly and more economical. The private investors and the state could also benefit if the fund saves on actually curing the sick. Some fear that contributions will need to be raised at a later date or the circle of available services (for the social security contributions paid) will be smaller. The government argues that the health funds can only provide more services than today, not less.

Health funds may start client seeking in April 2008. If one does not choose any of the funds available he/she will automatically be a member of the fund responsible for the county/area he/she lives in.

The funds do not have the option to cherry-pick members, while members can opt to switch to another fund once a year between October 15 and November 15.

Social security contributions will not be payable to these funds. These will remain deducted from everyone's salary.

The funds will sign contracts with the hospitals and GPs.

As a general rule, the funds cannot touch their profits for three years, and when they are allowed to do so, reserves must be accumulated and they cannot have long waiting lists.

Health funds will get financing from the state health fund based on a per capita quota system and their dividend will be capped at maximum 2% of net domestic sales revenues. This, however, will be shared by the state and the private investors.

Total revenues of National Health Insurance Fund are expected to reach HUF 1,438 bn next year."

Source: Portfolio Online Financial Journal