Defeat of Health Care Bill Prompts Health Minister

UNCLAS WARSAW 000959

SIPDIS


Sensitive

STATE FOR EUR/NCE TARA ERATH AND MICHAEL SESSUMS
USDOC FOR 4232/ITA/MAC/EUR/JBURGESS AND MWILSON
TREASURY FOR OASIA ERIC MEYER AND MATTHEW GAERTNER
FRANKFURT FOR TREASURY JIM WALLAR

E.O. 12958: N/A
TAGS: EFIN ECON ELAB PREL PL
SUBJECT: Defeat of Health Care Bill Prompts Health Minister
to Offer Resignation

Ref: (A) 2004 Warsaw 4285 (B) 2004 Warsaw 2683 (C) 2004

Warsaw 865

(U) This cable is sensitive - but unclassified, and NOT for
Internet distribution.


1. (SBU) Summary: On 17 February, the Sejm rejected a long
awaited bill on restructuring of public health care units.
The bill, prepared as part of the government's public
finance reform package, was designed to write off up to $3
billion in local hospital debts in exchange for reforms,
including preparing a debt restructuring program to return
to profitability within two years. The bill's defeat
resulted from a combination of worker protests (including
hunger strikes) and objections by local government and by
opposition parties in parliament. The government undermined
its own efforts by offering a confusing bill, supported by a
tepid public affairs effort. The defeat of the bill was a
major blow to the government's fiscal reform plan, and
prompted the Minister of Health to offer his resignation.
PM Belka rejected the resignation, and instead asked Balicki
to submit a revised version of the bill in the coming days.
It is not clear how the GOP will amend the bill, but it may
opt to offer a short-term financial fix and leave the
problem for the next government to address. End Summary.

Hospitals restructuring Bill
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2. (U) The Sejm rejected a bill (208-196) which would have
restructured local hospital debt. The bill proposed that
hospitals which prepare debt-restructuring programs would
get loans from the government and would receive protection
from debt collectors while implementing the restructuring
program. The bill also contained a number of controversial
provisions, including one requiring hospitals to forego
claims against the central government, such as the flawed
pay increases passed by the Sejm in 2000, (ref c). Health
sector debt remains a serious problem, despite wholesale
reforms in 1999, done in coordination with large World Bank
loans. Local hospitals have wracked up as much as $3
billion in new debts which they are having trouble paying.
The GOP believes part of the problem is that local
governments are reluctant to rationalize health services to
meet realistic demand and cut costs. The GOP identified
health care financial reform as one of its top priorities
(reftels),and set aside 2.2 billion Zloty ($800 million) in
the 2005 budget to fund the loans to entice the hospitals to
accept these reforms. The GOP is also concerned that
hospitals are taking advantage of a legal loophole which
means they are not subject to debt collection provisions
applicable to commercial companies. Under this bill, the
GOP proposed amending the commercial and civil codes to make
it applicable to the health sector.


3. (U) The bill attracted opposition from a number of
sources. One of the proximate causes of its defeat was the
opposition of health care workers, who, led by the
Solidarity trade union, staged a hunger strike in Warsaw and
other cities (which proved once again to be a very effective
political weapon as it did in the 2003 rail strike). Health
sector workers are (correctly) concerned that restructuring
could lead to hospital bankruptcies and job losses. Local
government organizations joined the unions in opposition to
the bill in part out of a concern that they would be stuck
paying back wages stemming from a flawed law passed in 2000
(ref c). Many regional government executives opposed the
bill because they were not convinced the measures would stem
the tide of hospital debt. Some opponents of the bill also
objected to the notion that the bill would lead to the
privatization of the health sector.


4. (U) At the last minute, Balicki almost won over local
government representatives with the withdrawal of the
requirement of hospitals to forego debts owed by the central
government, but found himself undercut when Deputy PM
Hausner refused to accept this provision. This cemented
parliamentary opposition against the bill, and, coupled with
the absence of 17 of the 152 SLD MP's, sealed the bill's
fate. This was the second important vote SLD lost to the
opposition this week (the first was on abortion).

Health Minister Offers Resignation, Plans Further Fight


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5. (U) The Minister of Health. Marek Balicki, first offered
his resignation on February 17 in reaction to the defeat of
the bill. After PM Belka refused to accept it, Balicki
declared on February 18 that he would present an amended
draft to the Sejm before the weekend. Balicki indicated
this revised draft would take into account a proposed
compromise with some of the bill's opponents which would
better explain the terms of the debt writeoff and loan
provisions. He also suggested that the GOP may back off one
of the central provisions of the planned reform under which
hospitals applying for the state loans would be required to
implement fiscal reforms, including implementing
restructuring plans under which the hospitals would return
to solvency over two years.

President Pledges Support
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6. (U) Immediately after the bill's defeat, President
Kwasniewsjki received Sejm Speaker Cimoszewicz and PM Belka,
and declared he is willing to use his constitutional powers
to introduce the new Balicki bill in the Sejm a presidential
bill if necessary. He also expressed support for the key
elements of the GOP's health reform plan.

Comment:
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7. (SBU) As in many countries, health care is a very
sensitive issue in Poland. On the one hand, the public does
not want to lose access to health care at low prices,
particularly since access (not further defined) to health
care is guaranteed by the constitution. On the other hand,
the public also wants improvements to medical services, and
but is unwilling to pay the higher taxes required to fund
it. The central government is determined to break the cycle
of debt dependency of local hospitals by forcing local
governments to be more responsible with costs and service
levels. While the GOP has rightly identified this as an
important priority, it did itself no favors by presenting a
confusing bill the first time around, under which it was
hard to determine which hospitals would have access to the
program, and exactly what reforms they would be required to
implement. It is unclear how much of its original reform
plan the government can be salvaged with this revised bill,
even if it passes. It seems increasingly likely that the
government may end up offering a short-term fix to bail out
the most pressing debt, while leaving this complicated issue
for the next government. We expect that health sector
unions will be emboldened by their success in defeating this
bill to continue to resist job or salary cuts in the sector,
as well as privatization of the sector.

Ashe


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2005WARSAW00959 - Classification: UNCLASSIFIED