TCS Daily

Save People, Not the System

By Kamila Pajer - March 14, 2005 12:00 AM

If Socialists took over the Sahara, the old joke goes, there would soon be a shortage of sand. This innate ability to produce shortages shows itself in Europe's present health care situation. More and more people go to see doctors, more and more use drugs and are knowledgeable about health care and yet - instead of clinics and hospitals thriving - national health insurance systems in the European Union are on the verge of financial collapse. They run big deficits, which grow along with the number of patients.

Last month nurses and doctors in many of the public healthcare institutions in Poland went on strike. Radiologists do not want to work longer, nurses want their salary raises paid at last and all protest against the government's new proposal to make hospitals and clinics part of the market economy. But they have already survived several such restructurings, even when they boiled down to putting people out of work without improving the system.

Under the new rule hospitals would not receive state help unless they start to reduce their debts or work out new deals with creditors. Still, since they would be allowed to issue bonds, and take on new debts, the system would not change much. The law, however, has just been rejected in parliament by the opposition. The leader of Civil Platform - one of the opposition parties - explained that the idea of transforming hospitals into companies is just another kind of experiment and the system cannot handle making hospitals comply with simple economic rules.

And the system is this: year after year ineffective public healthcare institutions are running into debts and year after year the state intervenes and with its magic wand makes the hospitals free of their liabilities. Translation: the state makes us all pay the debts of hospitals, preserving a chronically ill public healthcare system. The Ministry of Health explains that the main reason for the growing deficits was that the hospitals and services provided by them were underinvested, that the National Health Fund usually reimburses less than the services are worth. Consequently, the state is responsible for the underinvested services that made hospitals run into debts and left healthcare institutions facing bankruptcy and begging for help.

The Ministry of Health admits that directors of public hospitals usually lack managerial skills and that the public healthcare system is badly organized. The system was allowed to continue, however, leading this year to $2 billion of adjudged liabilities or 0.7 percent of country's GDP, and the adjudged liabilities constitute only about 66 per cent of total debt. The debt was increasing every year, in the period from 2001 to 2004, by about 125 percent on average in comparison with the preceding year. At the same time the number of healthcare institutions without debts was decreasing: at the end of 2001 there were about 44 percent of hospitals without debts, but at the end of 2003 there were only 36 percent. They are in debt mainly to social security, to the providers of drugs and medical equipment and then to their workers.

There are countries in Europe where healthcare debts are even larger. They could also have continued to grow in Poland were it not for the fact that this year bailiffs, acting in the name of creditors, started to block hospital accounts. Nurses and doctors demanded that the state intervene and change the law, apparently believing themselves to be more important creditors than others waiting for money.

The Ministry of Health explains that if people want better healthcare they should pay more for it. Operating costs are rising, and in the years 1999-2002 they went up by 9 percent. However, during the same period the amount of money spent by the state - or rather the taxpayers - on healthcare insurance increased by 16 percent. Yet, the healthcare situation is worse than ever.

"There is no country in the world where healthcare needs are met," claims a consoling Health Minister Marek Balicki. Well, he is right. Even defining such "needs" is difficult - people always have some necessities and the more have the more they want. The minister's good mood is also justified by the fact that even prosperous EU countries experience difficulties as far as public healthcare is concerned. British media have recently announced the UK National Health Service has a deficit of about $1 billion despite efforts to make savings. The NHS saves by closing wards, operating theatres or nurse-led units, by making redundancies and cutting beds (no wonder that every year the UK debates how to reform its waiting-list system to make patients queue for less than three months). Meanwhile the deficit still grows.

The situation in France also can give the Polish health minister some cold comfort. It is estimated that by the end of 2004, social health insurance accumulated a $42 billion deficit, about 2.5 percent of French GDP. To "remedy" the situation the French minister of health and social welfare proposes that the deficit be taken over by the National Reimbursement Fund for Social Debt and that future generations will pay off the debt. Furthermore, he proposes to raise social contribution rates, reimburse less per medical contact and make pharmaceutical companies contribute more to the system.

But no matter how much money the public healthcare system takes from the taxpayers and companies, it always has financial problems. The main idea of pre-paid health insurance is based on the false assumption that people will pay more than they use. But then, why should they? Quite on the contrary, they will - and they do - try to make as much "profit" as possible from compulsory insurance. In the brilliant essay "What Hunger Insurance Could Teach Us About Health Insurance", Joseph Bast proposes an intellectual exercise:

"What effect would hunger insurance have on you, a consumer of food? If you're like me, you will probably start to eat more . . . and eat better, more expensive foods. Why eat hamburger when you can have tenderloin? Why settle for beer when the finest wines cost you just as little? Why eat at McDonald's when you can eat, for nearly the same price, at Chez Paul?"

Consequently, pre-paid health insurance must end in debts for patients have to many incentives to use it excessively. The system promises to cover every treatment, so the more expensive it is, the greater the "profit" of the insured patient. With public healthcare the situation is even more dramatic since doctors and nurses, who are state employees, realize the state interest is to save money against the interest of patients. In Poland family doctors are paid more if they bar the patient access to specialist treatment. Thus, not only we do not get tenderloin, it's tough to get even a hamburger.

In a system of public healthcare combined with pre-paid health insurance, the less patients use it the better for the institutions. Then again it is obvious that patients, who are forced to pay health insurance, want to make use of their expenses and see the doctor or have tests - for free, as they were promised. One of the results of this policy is the dominance of expensive state-sponsored hospital care - which seems "free" even though patients have already paid for it - over preventive care that requires some private expenses.

No such conflict of interests can be observed in private healthcare, where clinics want exactly the same thing as patients- to serve patients and to have as many clients as possible. Private clinics operate with a profit, for no state would pay off their debts. Private clinics are happy to have patients whereas public ones are happier without them.

Today, public healthcare systems run up debts that our children and grandchildren will have to pay off. The debt is so high already that most of the state money spent on healthcare goes to service it. It is high time politicians stopped talking about saving this ineffective system and started to think about saving people.



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