AUSTRIAN HEALTH CARE REFORM: SMALL STEP TOWARDS

UNCLAS SECTION 01 OF 02 VIENNA 000335

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: EIND ETRD ECON BEXP AU
SUBJECT: AUSTRIAN HEALTH CARE REFORM: SMALL STEP TOWARDS
"SUSTAINIBILITY"

REF: 04 VIENNA 4451


SUMMARY
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1. (SBU) On January 1, the GoA launched the first steps of
a comprehensive health care reform. The reform aims to slow
exploding costs, which now represent 9% of GDP. The reform
includes the establishment of centralized Health Care
Agencies, which should reduce the complex regional
bureaucratic health care system. The GoA hopes the reform
will guarantee the sector's financial sustainability through
anticipated savings of Euro 300 million annually and an
increase of another Euro 300 million annually in individual
contributions. One independent analyst opined that while
the GoA reforms aim to reduce spiraling costs, an equally
important aim of the center-right government is to limit the
influence of states and labor unions in the health care
sector. End Summary.


RISING COSTS WITHIN A COMPLEX, BUREAUCRATIC SYSTEM
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2. (U) The Austrian health care system is facing increasing
financial pressures. Since the end of World War II, a
complex system has evolved with a multitude of stakeholders,
including all nine state governments and various
governmental social security companies based on professional
affiliations (e.g., farmers, civil servants, private sector
employees, and self-employed). Health care expenditures
greatly exceed revenues. According to figures from the
Social Security Fund (umbrella organization for the pension
fund and health care funds),the health care "deficit"
amounted to Euro 320 million in 2003, and will almost double
to Euro 580 million by 2006. Experts maintain that the GoA
must reduce spending by at least Euro 300 million per year
to guarantee the system will not collapse in the near
future.


3. (U) Virtually all occupational associations have to pay
a percentage of their income into the mandatory Austrian
social insurance system for health care funds. These funds
cover ambulatory care and drugs. State governments are
responsible for financing inpatient care. The current
system does not contain incentives for cost containment and
costs are therefore exploding. Health care costs have risen
from 7.5% of GDP in 2000 to 9% (Euro 21 billion) of GDP in

2003. However, this figure is still only slightly above the
EU-15 average. Social insurance payments from the various
occupational associations provide for 70% of the system,
state budgets for 20%, and individual contributions account
for the remaining 10%.


REDUCING COSTS THROUGH CENTRALIZATION AND SAVINGS
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4. (U) In December 2004, the Austrian Parliament
unanimously voted to move forward with health care reform.
However, the opposition parties -- Social Democrats and
Greens - opposed the GoA's provisions on funding the
reforms. The centerpiece of the reform is the introduction
of a federal "Health Care Agency" and state "Health Care
Platforms" to coordinate the fragmented financing system
between the health care funds and the federal and state
governments. The Ministry of Health aims to centrally
organize all health agendas in these agencies by creating a
single financial pool. This centralization should also
enhance integration of inpatient and outpatient/ambulatory
care, and the creation of an IT-based health management, two
key issues to achieve cost reduction. As part of this
effort, by the end of 2005 every Austrian will have an e-
card that contains personal medical data to facilitate
medical services.


5. (U) The GoA recognizes that structural reform alone does
not lead to sufficient cost reduction. To guarantee state-
of-the-art medical care for all patients, the federal
government and the states agreed to raise overall health
care contributions by another Euro 300 million. This
includes a general increase of employer and individual
health care contributions, a rise in hospital fees, an
additional payment increase for high-income individuals, and
a higher tobacco tax.


EXPERTS: AUSTRIANS LIKE "SOLIDARITY", NO "AMERICAN APROACH"
-------------- --------------

6. (SBU) Maria Hofmarcher from the independent Institute
for Advanced Studies told post that "solidarity" is still a
high priority for Austrian health policy. People are still
willing to finance state-of-the-art medical treatment for
all Austrians through higher public expenditures and
progressively higher individual contributions, primarily
affecting high-income earners. Suggestions for across-the-
board increases in individual contributions for health care
are extremely unpopular. Hofmarcher emphasized the
importance of pooling hospital financing in central agencies
to ensure efficiency and improve allocation in inpatient
care. The main objectives of the reform, she opined, are to
limit the power of the states and the health care funds, and
to reduce the influence of labor unions within the social
security institutions.


7. (SBU) Christian Koeck, a Health Management Professor and
owner of a private hospital management firm, told post he
was not optimistic about the outcome of the reform. Koeck
said he did not advocate "privatizing health care on the
American model", but he criticized Austria for having the
"second most bureaucratic health care system in the EU." In
Koeck's opinion, the steady increase in health care
expenditures as a percentage of GDP is worrisome. According
to Koeck, the government's reform is a step in the right
direction, but not far enough. The problem of "quality
control" remains a concern despite the introduction of the
health care agencies. Particularly in the hospital sector,
Koeck claimed there were potential savings of around Euro
two billion.


COMMENT
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8. (SBU) The GoA health care reform is well directed, but
do not go far enough. There is still potential for more
market access in the pharmaceutical sector (reftel),and we
see room for a more streamlined effort reform in the other
areas of health care reform, particularly in rationalization
of hospitals. It will be difficult to reduce permanently
and effectively the influence of stakeholders, particularly
the bureaucratic maze of various health care associations
based on occupational and regional affiliations.
Nevertheless, health care reform is another step forward in
the Schuessel Government's promised structural reforms. The
limits to reform at this stage reflect political realities,
rather than faulty economics.

BROWN