RADICAL HEALTH CARE REFORMS? MAYBE NOT

C O N F I D E N T I A L BRATISLAVA 000319

SIPDIS


E.O. 12958: DECL: 04/21/2015
TAGS: ECON KCOR LO
SUBJECT: RADICAL HEALTH CARE REFORMS? MAYBE NOT

Classified By: By CDA Scott Thayer for reasons 1.4 (b) and (d)


1. (C) Summary. In October 2004, the Slovak Parliament
passed six health care reform laws that the World Bank called
some of the "most radical reforms in the world." The laws
seek to reduce the GOS's role in health care and make Slovaks
pay for medical services that were once free as a way of
helping keep the highly-indebted Slovak health care sector
solvent. However, six months and two rounds of amendments
later, many of the details of these reforms remain unclear.
Upon inspection, many of the reforms are only potential
changes. The GOS is still primarily responsible for health
care. A shadowy financial group appears ready to profit from
the system and is suspected of buying MPs' votes to make sure
parts of the reform legislation passed. The Slovak health
care system has abundant room for improvement, and these
reforms are an important step, but they are not as radical as
they are billed to be and could take years to be implemented.
End summary.


2. (U) Slovakia's health care reform movement really began in
2003 with the adoption of laws requiring citizens to start
paying, although modestly, for medical services that
previously had been free. The charges of approximately USD
0.65 to visit a doctor, USD 1.65 per night to stay in a
hospital, and USD 0.65 to fill a prescription represented the
first ever out-of-pocket health care costs to Slovaks. They
were not warmly received by the public, many of whom failed
to understand the severity of the sector's financial
problems. However, these changes appear to have achieved the
desired effect by reducing the over-use of the system and
cutting the sector's financial shortfall. This was truly the
first step in saving the Slovak health care sector.

WHAT REFORMS?
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3. (SBU) The October 2004 reforms attempt to formalize the
idea that Slovaks need to take responsibility for their own
health, share an even greater portion of medical care
expenses, and accept the idea that profitable health
insurance companies do not necessarily take money away from
public health needs. The six laws give a general outline of
health care rights and responsibilities, procedures and
medicines that will be covered by insurance, the
privatization of hospitals, responsibilities of emergency
health care services, the division of public and private
insurance spheres, and conditions governing health insurance
companies. Unfortunately, many of the details of the six new
laws remain unclear, such as the percentage of costs covered
by insurance, despite two rounds of amendments. The World
Bank has backed off its claim that these reforms represent
the most radical health care reforms in the world, though
agrees that the 2003 change of simply making people pay for
health care services represents a great step.


4. (SBU) According to media reports, many of the decisions
about which medical procedures will be covered by insurance
and to what degree will likely not be decided until after the
2006 Parliamentary elections. This leaves a huge hole in the
middle of the GOS's ambitious set of reforms. Slovakia's
ruling minority coalition government has made a name for
itself with successful reforms in banking, foreign
investment, privatization, taxes, pensions, and initial steps
in health care. Possibly they are holding something back for
a potential third term in office to go along with expected
reforms to the education system. On the other hand,
reforming a heretofore free health care system will be
comparatively expensive for all Slovaks and is maybe not
something the GOS wants to undertake before an election (in
September 2006). However, if the opposition wins the next
election, it would be highly doubtful that many of the health
care changes would be finalized. Regardless, the
introduction of fee for services that was passed in 2003 has
already significantly changed the Slovak health care sector.

PENTA GROUP
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5. (C) Despite its great budget difficulties, the amount of
money flowing through the health care system make it a
potentially very lucrative sector. Though many issues
remain, one that was clarified is that owning franchises of
pharmacies will become legal. Because the GOS was able to
pass the six reform laws fairly easily due to support from
independent MPs, there were rumors that votes had been
purchased. A suspected source of vote-buying was the Penta
Financial Group. Known for its predatory business practices,
Penta has grown from a small start-up company in 1995 to
having USD 350 million in assets today. Penta and its
network of companies already control three of Slovakia's five
health insurance companies (the other two are state-owned),
have plans to purchase 100 pharmacies, and have also been
trying to buy hospitals. (Comment: Having a vertically
integrated health care company could be beneficial in

developing the new Slovak health care sector, but many
Slovaks question Penta's suitability.) A reliable contact
with ties to Penta told econoff that the company paid SKK 2
million (USD 67,000) each for an undisclosed number of
independent MPs' votes to assure that the reform legalizing
the franchising of pharmacies passed. According to the same
contact, Penta wants to use franchising agreements and the
ownership of insurance companies to steer customers to its
pharmacies and squeeze competing pharmacies out of business.
Currently, pharmacy ownership is decentralized, but Penta
recently bought 20 pharmacies and is in the process of
closing a deal for 17 more.


6. (C) Managing the cash flow of the only three private
health insurance companies gives Penta sizable profit
potential in addition to using these companies to feed its
down-stream operations in pharmacies and (selected)
hospitals. The powerful office of the Supervisor of Health
Insurance Companies will be charged with monitoring and
interpreting the actions of insurance companies and enforcing
regulations. This position has yet to be filled. Many
Slovaks believe that it is bad for health insurance companies
to make a profit because those profits represent money that
should be going to health care.

COMMENT
--------------


7. (C) The Slovak health care sector is truly being
transformed from an inefficient, indebted and corrupt
(according to Minister of Health Rudolf Zajac) system into
one that is closer to sustainability. Zajac's lobbying
efforts with the public and MPs to win support for reform
appear to be bearing fruit. Despite accusations of vote
buying for one of the reforms, it is important to remember
that all six reforms passed. Although the GOS has not yet
been able to significantly diminish its role in the system,
patients are now sharing the burden of paying for medical
care. This has had the beneficial effects of reducing waste,
over-use of the system, and red ink. Unfortunately, it will
likely be left for a future Slovak government to take the
next bold moves in shoring up the health care sector, but at
least the beginnings of the reforms have been placed in
motion. Post will continue to monitor progress in health
care reform and potential impediments to establishing a
transparent and sustainable system.
THAYER


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