The private contribution
Although nebulous uncertainty is still the name of the game in most areas, a group led by Minister of the Economy and Deputy Prime Minister Hausner is currently pushing through a set of principles for the introduction of complementary private health insurance. Currently being presented to other parliamentary groups, the plan is recognized as a political and social compromise, and criticized by some in its details. It could, nevertheless, provide private insurers with a legal framework they can work with, while offering a synergy boost to the failing public system.
Currently, there is no legal framework for co-operation between public and private healthcare institutions, which consequently work almost entirely independently of each other. Since there are only 70 or so private hospitals in the country, many of which are specialized, private healthcare, in the western sense of the term, is limited almost entirely to ambulatory care. Public hospitals, in the meantime, which have an oversupply of beds, suffer from a lack of funding.
"We have the paying clients but no facilities; they have under-exploited facilities but not enough funding," says one of the architects of the plan, Stanisław Borkowski, Director of Health Insurance at PZU Życie, the Life arm of Poland's largest insurance company, adding that, "It makes sense for us to co-operate."
Common sense, however, is not the main stimulus behind MPs' increasing interest in complementary health insurance. More influential is the Constitutional Tribunal's recent ruling that the current national health system denies citizens their constitutional right to know precisely what they are entitled to within the public health service. Since it is clear that the services the state can guarantee on its limited resources are somewhat restricted, inclusion of the private sector has begun to look more and more attractive.
Under the plan proposed by the group around Hausner, hospitals would be able to contract out services to insurance companies, and both hospitals and insurers would compete for such contracts. Citizens who opt for private insurance would be able to ensure for themselves additional care in the event of a hospital visit, such as extra nursing or a semi-private room.
In the case of citizens who opt for private insurance, insurers would take from the National Health Fund's successor a fixed percentage (70 percent is proposed) of the cost of the basket of services due to a person of his or her particular health profile (regarding age, sex, lifestyle and state of health.) The rest (proposed 30 percent) would have to be covered out of the insurers' commercial income. The plan calculates that the average insurance premium, on the basis of present realities, would be about zł.40 per month.
There are at least three influential groups currently working on health reform. But according to another member of the Hausner Group, Adam Kruszewski, Investment Director at Enterprise Investors, Central Europe's largest Private Equity Fund, what distinguishes the group around Hausner is that, We are less concerned with the details of the whole system than with finding a funding mechanism which works."
Stanisław Borkowski is more forthcoming. In his opinion, the financial problems of the current health system stem largely from the fact that it's a system of defined contributions but undefined benefits which, in his view, guarantees a chronic deficit since citizen demand for healthcare has no ceiling. The group's solution is to re-educate public opinion to accept that the services public money can provide are basic and limited and that, to ensure better treatment, some personal contribution is necessary.
In practice, the public has actually already learned this lesson. Under the present cash-strapped public system, better and faster (and sometimes even basic) services are already available only to those who pay extra fees - except that these fees are currently paid under the table. "To some extent we are only legalizing and regulating solutions that the market itself has already put into practice," says Kruszewski.
The same applies as regards commercial exchange between public hospitals and private insurers. Although the legal basis for such co-operation is currently a gray area, the group calculates that 30 percent of hospitals are in fact already selling services on a serious basis.
Quite apart from the problem of undefined benefits, and the issue of inefficient fund management by many hospitals, according to Borkowski it is also true that the money going in now, even if used to its full potential, isn't enough to provide for even the most basic demands.
"There is a real problem of underfunding," he says.
The state budget currently spends about zł.37 billion on healthcare according to official figures, while hospital debts are now reckoned at zł.9-10 billion.
Of the zł.17 billion currently spent on health by private entities, more than half goes on drugs. About 22 percent goes on the private market, 5 percent on above-board extra payments in the public system and, though estimates vary wildly, something between 5-15 percent goes into the gray market. It's mostly the money currently going into the gray sector that the group hopes, through their plan, will be re-channeled into insurance funds, bringing in an extra zł.1.8 - 2 billion into the legal market.
Admitting that zł.1.8 - 2 billion is not a very significant sum, considering the desperate situation of the health service, Borkowski emphasizes that additional funding represents only one of the benefits that the plan hopes to bring to the national health service, pointing to greater efficiency and potential synergies expected from public-private co-operation.
"Besides," he is anxious to stress, "complementary health insurance is only one limited part of what must be a general health reform."
Top on the professional agenda for insurers such as PZU is, after all, not to save the public health system, but to create a practical framework for private health insurance. Yet, according to Marcin Halicki, Managing Partner at venture capital fund Cornerstone Partners, the scheme is not ideal for insurers either.
"There is no plan for what will replace the National Health Fund, which affects the flow of funds to insurers," he says. "While the 70/30 proportions are politically driven and framed so as to be acceptable to the general public. Insurers should get more than 70 percent."
It's a view echoed, albeit in more optimistic terms, by Borkowski,
"It's a start. We've introduced the concept of individual contribution, which is politically and socially very sensitive," he says, going on to add that the 70/30 proportions are by no means carved in stone. "The mechanism itself is more important than the precise proportions" he says, "It may need some adjustment, but it's potentially a win-win situation."
Halicki agrees that the present terms, if not all that insurers could dream of, offer conditions good enough for the private insurance market to take off. Most essential for this industry which has long aroused impatient investor interest, is the access to hospital facilities, which the plan would guarantee. "Without coverage of hospital care, there can be no real health insurance," Halicki says.
PZU itself is already putting its money where its mouth is, having just last month introduced new premium packages to a sector in which the company makes an on-going loss. This country's largest insurer, for one, clearly believes that when it comes to the market for health insurance, its high time to book your seat.
Currently, there is no legal framework for co-operation between public and private healthcare institutions, which consequently work almost entirely independently of each other. Since there are only 70 or so private hospitals in the country, many of which are specialized, private healthcare, in the western sense of the term, is limited almost entirely to ambulatory care. Public hospitals, in the meantime, which have an oversupply of beds, suffer from a lack of funding.
"We have the paying clients but no facilities; they have under-exploited facilities but not enough funding," says one of the architects of the plan, Stanisław Borkowski, Director of Health Insurance at PZU Życie, the Life arm of Poland's largest insurance company, adding that, "It makes sense for us to co-operate."
Common sense, however, is not the main stimulus behind MPs' increasing interest in complementary health insurance. More influential is the Constitutional Tribunal's recent ruling that the current national health system denies citizens their constitutional right to know precisely what they are entitled to within the public health service. Since it is clear that the services the state can guarantee on its limited resources are somewhat restricted, inclusion of the private sector has begun to look more and more attractive.
Under the plan proposed by the group around Hausner, hospitals would be able to contract out services to insurance companies, and both hospitals and insurers would compete for such contracts. Citizens who opt for private insurance would be able to ensure for themselves additional care in the event of a hospital visit, such as extra nursing or a semi-private room.
In the case of citizens who opt for private insurance, insurers would take from the National Health Fund's successor a fixed percentage (70 percent is proposed) of the cost of the basket of services due to a person of his or her particular health profile (regarding age, sex, lifestyle and state of health.) The rest (proposed 30 percent) would have to be covered out of the insurers' commercial income. The plan calculates that the average insurance premium, on the basis of present realities, would be about zł.40 per month.
There are at least three influential groups currently working on health reform. But according to another member of the Hausner Group, Adam Kruszewski, Investment Director at Enterprise Investors, Central Europe's largest Private Equity Fund, what distinguishes the group around Hausner is that, We are less concerned with the details of the whole system than with finding a funding mechanism which works."
Stanisław Borkowski is more forthcoming. In his opinion, the financial problems of the current health system stem largely from the fact that it's a system of defined contributions but undefined benefits which, in his view, guarantees a chronic deficit since citizen demand for healthcare has no ceiling. The group's solution is to re-educate public opinion to accept that the services public money can provide are basic and limited and that, to ensure better treatment, some personal contribution is necessary.
In practice, the public has actually already learned this lesson. Under the present cash-strapped public system, better and faster (and sometimes even basic) services are already available only to those who pay extra fees - except that these fees are currently paid under the table. "To some extent we are only legalizing and regulating solutions that the market itself has already put into practice," says Kruszewski.
The same applies as regards commercial exchange between public hospitals and private insurers. Although the legal basis for such co-operation is currently a gray area, the group calculates that 30 percent of hospitals are in fact already selling services on a serious basis.
Quite apart from the problem of undefined benefits, and the issue of inefficient fund management by many hospitals, according to Borkowski it is also true that the money going in now, even if used to its full potential, isn't enough to provide for even the most basic demands.
"There is a real problem of underfunding," he says.
The state budget currently spends about zł.37 billion on healthcare according to official figures, while hospital debts are now reckoned at zł.9-10 billion.
Of the zł.17 billion currently spent on health by private entities, more than half goes on drugs. About 22 percent goes on the private market, 5 percent on above-board extra payments in the public system and, though estimates vary wildly, something between 5-15 percent goes into the gray market. It's mostly the money currently going into the gray sector that the group hopes, through their plan, will be re-channeled into insurance funds, bringing in an extra zł.1.8 - 2 billion into the legal market.
Admitting that zł.1.8 - 2 billion is not a very significant sum, considering the desperate situation of the health service, Borkowski emphasizes that additional funding represents only one of the benefits that the plan hopes to bring to the national health service, pointing to greater efficiency and potential synergies expected from public-private co-operation.
"Besides," he is anxious to stress, "complementary health insurance is only one limited part of what must be a general health reform."
Top on the professional agenda for insurers such as PZU is, after all, not to save the public health system, but to create a practical framework for private health insurance. Yet, according to Marcin Halicki, Managing Partner at venture capital fund Cornerstone Partners, the scheme is not ideal for insurers either.
"There is no plan for what will replace the National Health Fund, which affects the flow of funds to insurers," he says. "While the 70/30 proportions are politically driven and framed so as to be acceptable to the general public. Insurers should get more than 70 percent."
It's a view echoed, albeit in more optimistic terms, by Borkowski,
"It's a start. We've introduced the concept of individual contribution, which is politically and socially very sensitive," he says, going on to add that the 70/30 proportions are by no means carved in stone. "The mechanism itself is more important than the precise proportions" he says, "It may need some adjustment, but it's potentially a win-win situation."
Halicki agrees that the present terms, if not all that insurers could dream of, offer conditions good enough for the private insurance market to take off. Most essential for this industry which has long aroused impatient investor interest, is the access to hospital facilities, which the plan would guarantee. "Without coverage of hospital care, there can be no real health insurance," Halicki says.
PZU itself is already putting its money where its mouth is, having just last month introduced new premium packages to a sector in which the company makes an on-going loss. This country's largest insurer, for one, clearly believes that when it comes to the market for health insurance, its high time to book your seat.
