The recently launched government reform has opened the gateway for private investment in Hungary’s health insurance system. Contrary to expectations, and despite strong opposition from professional associations and trade unions in the healthcare sector, the reform, which was proposed by the junior coalition partner, the Alliance of Free Democrats, was passed by the parliament.
Provisions of health insurance reform
The reform of Hungary’s health insurance system was originally proposed by the junior coalition partner, the Alliance of Free Democrats (Szabad Demokraták Szövetsége, SZDSZ), in 2006. Although its negotiation was put on hold due to the general elections in May of that year, and later on due to the launch of the re-elected government’s austerity programme, it remained high on SZDSZ’s agenda. The original proposal envisaged a complete liberalisation of the country’s state-run universal health insurance system, allowing for a full-scale participation of private insurance companies. SZDSZ obviously had to attain the consent of the larger coalition partner, the Hungarian Socialist Party (Magyar Szocialista Párt, MSZP).
However, MSZP was concerned about introducing a system of private insurance funds similar to the model found in the United States (US). Inter-party talks resulted in a compromise in the form of a mixed system, which allows for the partial privatisation of the healthcare insurance management funds and a competition among the management funds for customers. The government envisaged that competition and better management control would rationalise the country’s ostensibly inefficient and costly healthcare system, as well as leading to improved services.
Mixed financing
The proposal put forward by SZDSZ includes a mixed financing option, which maintains the involvement of the central budget and relies on contributions paid by employees and employers. The contributions of the central budget represent the first pillar of a solidarity-based healthcare insurance system to cover all citizens for a minimum of risks. Under the old scheme, two main institutions co-existed: the Health Insurance Fund (Egészségbiztositási Alap) and the National Health Insurance Management Fund (Országos Egeszségbiztositási Pénztár, OEP). The former will continue to operate as the main funding body and is responsible for ensuring that all insured people are covered by the same terms and conditions. The state will continue to pay contributions for young people, pensioners, those who are unemployed and homeless people.
Establishment of regional health insurance funds
The OEP will be partly replaced by the National Health Insurance Centre (Nemzeti Egészségbiztosítási Központ), performing multiple responsibilities, such as issuing social security numbers, deciding on the value of drug subsidies and managing the state health insurance fund. A core element of the health insurance reform is that the OEP’s fund management responsibilities will be initially taken over by 22 regional health insurance management funds: one for each county in Hungary and four for the country’s capital city of Budapest and its surrounding areas. These funds will be subject to privatisation and competition.
Private investors will be able to acquire up to 49% of the shares, but they will have management rights over the new funds. The funds aim to guarantee the efficiency of the system by contracting the various healthcare service providers, such as general practitioners and hospitals, and guaranteeing quality of services for patients through the necessary healthcare options. The management funds will be given a per head contribution for each insured person, based on a complex formula. Pursuant to the provisions of healthcare legislation, all insured persons are entitled to receive health services of the same professional content and standard, without any kind of discrimination. The law prescribes that only those funds which were successful in acquiring at least 500,000 customers within a certain period of time would be able to function. The Ministry of Health (Egészségügyi Minisztérium, EÜM) estimates that there will eventually be between six and seven funds approximately.
Measures to increase healthcare efficiency
The health insurance reform is part of a series of measures with the aim oft developing a more effective healthcare system. Such efforts include the following measures:
- the cancellation of obligatory chamber membership in the healthcare sector, a measure which seeks to weaken doctors’ and nurses’ opposition capacity (HU0702049I);
- the adoption of a law on pharmaceutics to optimise drug use and permit the sale of non-prescription drugs in supermarkets and other stores – a measure which has been opposed by pharmacists;
- the introduction of fees for the use of medical services (‘visit fee’) and for hospitalisation (daily hospital fee), both established at HUF 300 (about €1.16 as at 13 March 2008), as co-payment;
- the reorganisation of Hungary’s hospitals through hospital closures;
- the separation of ambulance and patient transfer services;
- the elimination of ‘free rides’, whereby health services are used without appropriate record of the individual paying a health insurance contribution. The number of ‘free riders’ reached over one million and people in this category received the opportunity to settle their situation by 2008.
The government aims to make healthcare financing more effective and transparent, thus establishing the conditions for a long-term secure financing of statutory health insurance. The reform also fits into broader efforts to meet the strict conditions of the country’s convergence programme, which will enable it to join the eurozone (HU0609029I).
Tensions between coalition parties
As the health insurance reform was initially proposed by SZDSZ, gaining support from certain factions of MSZP proved difficult. The slow and lengthy process of negotiations began with seeking harmonisation within the coalition government, in preparation for the parliamentary debate. However, the parliamentary sessions were equally heated, because socialist members of parliament (MPs) were reluctant to accept the bill, despite concessions made by SZDSZ. At this point, SZDSZ made it clear that their continued participation in the government was dependent on the fate of the bill. Finally, the coalition government reached agreement on 5 December 2007, allowing for the possibility to vote during the last parliamentary session on 17 December. Only a few days before the voting, the President of the Parliament, Katalin Szili, a socialist MP, suggested postponing the reform. A petition issued by the Social Policy Section of MSZP also put forward the same idea.
However, during the last days prior to the voting, certain external factors helped to unify the socialist MPs’ position in favour of the reform. As part of an alleged propaganda offensive of the Democratic League of Independent Trade Unions (Független Szakszervezetek Demokratikus Ligája, LIGA), its President, István Gaskó, offered to pay fines amounting up to HUF 100,000 (about €385), using strike fund resources, to socialist MPs who declined to approve the bill (HU0802029I). In another development, the houses of four socialist MPs were attacked with Molotov bombs, which also urged unity.
Employee opposition to reform
Although the reform received extensive publicity and was widely debated, the government failed to convey the necessity and viability of the project to the general public.
Among the most vociferous opponents of the reform were doctors. The President of the Hungarian Chamber of Physicians (Magyar Orvosi Kamara, MOK) even declared that doctors would block the reform. Only recently, the views of doctors who welcomed certain elements of the reform were heard – mainly regarding the income from the co-payment (visit fee, daily hospital fee) from patients. Trade unions and other civil organisations also expressed their opposition to the proposed reform, organising an unprecedented wave of demonstrations and strikes (HU0802029I).
Parliamentary process
Political opposition parties used every possible move to block the reform. In November 2006, the Alliance of Young Democrats – Hungarian Civic Party (Fiatal Demokraták Szövetsége – Magyar Polgári Szövetség, FIDESZ-MPSZ) and the Christian Democratic Peoples’ Party (Kereszténydemokrata Néppárt, KDNP) proposed a referendum on cancelling the visit and hospitalisation fees, along with the higher education tuition fee that the government proposed to introduce. The collection of signatures for another referendum – which will decide on the fate of the new health insurance system involving partial privatisation – has also begun. FIDESZ has promised to re-nationalise the health insurance system and to reinstate the previous system if it returned to power. In its last move before the final approval of the law, FIDESZ called for a named voting, registering each MP’s vote. Eventually, on 17 December 2007, the bill was passed by the parliament.
However, the Hungarian President, László Sólyom, refused to sign it, instead returning it to parliament for reconsideration. Although the president supported a reform of the healthcare system, he argued that the bill lacked social and political consensus and that its long-term effects were unpredictable. On 11 February 2008, the parliament finally adopted the new health insurance law, following only minor changes. A spokesperson for President Sólyom outlined that these changes only partly addressed the president’s concerns but that he had no choice but to sign the bill.
However, the battle over the health insurance reform is not yet over, as many government and ministerial decrees will be necessary to regulate the details of operation before the new system will be launched in 2009.
Commentary
The healthcare reform is one of the core reforms of the government. Until now, no previous government has had the courage to deal with this daunting task. The reform attempts of the present government have met with major resistance. Among the reasons for this resistance was the government’s failure to communicate properly with the general public and make them understand the necessity and nature of the reform. The internal conflict over the nature of the reform, which was concluded at the very end of the parliamentary process, certainly did not help the government to devise an appropriate campaign and pursue proper social dialogue. Nevertheless, the widespread rejection of plans by the opposition parties, the chambers of healthcare professionals and trade unions have intensified tensions at an unknown level in Hungary over this reform.
Although the law on health insurance reform was finally passed on 18 February, the possibility of major conflict still lies ahead. Firstly, it is likely that the government will have to face a referendum about allowing private investors into the healthcare insurance system. In the long run, rationalisation of the healthcare sector is also likely to provoke new conflict, at local and possibly also national level.
Márk Edelényi, László Neumann and András Tóth, Institute for Political Science, Hungarian Academy of Sciences