ROMANIA: HEALTHCARE REFORM ON THE AGENDA FOR 2009

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SUBJECT: ROMANIA: HEALTHCARE REFORM ON THE AGENDA FOR 2009

REF: 08 BUCHAREST 607 and previous

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1. (SBU) Summary: The Romanian healthcare system continues to
suffer from neglect two decades after the fall of communism. Health
statistics remain bleak, with the country occupying the worst
position in the EU in terms of the frequency of cardiovascular
disease, pulmonary diseases, diabetes, tuberculosis, mental illness,
cervical and other cancers, HIV/AIDS, and infant mortality. Still,
pockets of excellence exist and the current leadership at the
Ministry of Health (MOH) has laid out ambitious reform plans aimed
at introducing more market mechanisms into the health system. The
recently-concluded financial assistance package for Romania led by
the IMF will help in this regard, with the World Bank offering
technical assistance targeted at healthcare. EU funds will play a
role as well, but the real money will still have to come from
private enterprise; hence the Ministry's avowed goal of attracting
foreign investors and entrepreneurs. The proposed reforms will
include devolution of authority to localities, modest co-payments
for health services, and a "basic package" enumerating the health
services covered by the state insurance program. Despite a
professed commitment to market mechanisms, however, the MOH has yet
to show that it will entirely accept private enterprise profiting
from the provision of healthcare, or a complete transition from
Romania's universal coverage model.


2. (U) In reftels, post in a three-part series provided an overview
of healthcare in Romania. This cable updates post's prior reporting
to focus on the Government of Romania's (GOR) plans since the
government changeover in December 2008. One major commercial issue,
pharmaceutical pricing, will be covered septel. End Summary.


3. (SBU) The new Minister of Health, Ion Bazac (MD),has limited
experience in public health. Despite his medical degree he has
never worked as a physician. Instead he has operated a string of
successful businesses, including most recently a Ferrari dealership.
Two of his top lieutenants, State Secretaries (SS) Liviu Manaila
and Aurel Nechita (MD),do have relevant prior government and
healthcare experience. SS Manaila previously worked with the World
Bank implementing healthcare projects, while SS Nechita is reprising
the role he held in a previous PSD government. Minister Bazac's
business background appears to have helped make the Ministry more
willing to try to use market mechanisms to raise capital and push
through needed reforms.


4. (SBU) The latest catalyst for change was a tragic incident at the
beginning of the year that seemed to have been lifted directly from
the internationally recognized Romanian film "The Death of Mr.
Lazarescu." In the incident, as in the film, an elderly man was
brought to a public hospital emergency room (in this case in
Slatina),only to be left to suffer and die in the hallway, in part
due to his inability to offer a "gratuity payment" to the attending
physicians. This widely-reported incident appears to have helped
spur the Minister to action and encouraged him to recognize the need
for reform, beginning with emergency services. (Comment: According
to MOH official Raed Arafat, the lack of standardized medical
protocols for emergency room care is a key weakness in the Romanian
medical system, an indictment shared by other outside observers.
The lack of protocols likely contributed to this death. End
Comment.)


5. (SBU) The central part of the Minister's reform strategy is to
remove the MOH from direct supervision of hospitals, placing these
under the authority of local councils. The Minister and his
deputies believe that once local authorities are forced to bear the
cost of running hospitals, they will look to rationalize operations
and be motivated to invest the funds necessary to service the local
population. Under the current system, localities lobby the central
government to build and operate hospitals--currently 471 throughout
Romania-- meaning that they tend to be located close to the
politically connected, not where they are necessarily needed. The
fact that localities have no ownership stake in the hospitals also
means that they are unwilling to invest in improvements, preferring
to lobby for more resources from the national budget. The result is
predictable: hospitals and other healthcare facilities are
uniformly substandard and all receive fewer resources than
necessary.


6. (SBU) The cash-strapped MOH recognizes, at least in principle,
that the Government will not be able to invest sufficient resources
in the health system to significantly improve quality of care
without partnering with the private sector. Both in private
meetings and public statements, officials have highlighted the need
for public-private partnerships to operate hospitals and promote
investment. In the Ministry's strategic vision, it will encourage

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localities to partner with businesses and outsource the building and
management of healthcare facilities. What is missing from this
vision, however, is a transparent cost structure which would entice
private operators to put up the substantial investments needed to
yank communist-era healthcare facilities into the twenty-first
century.


7. (SBU) One criticism of the current "universal care" system in
Romania is that it fails to capture or track costs associated with
providing medical services. The MOH and National Insurance House
have no standards showing how much a given procedure should cost or
how that cost varies from facility to facility. For a business
contemplating a major investment, writing a business plan becomes
exceedingly difficult as long as there is no transparent guarantee
from the Government as to reimbursement rates or any reflection of
historical operating costs. In fact, the Minister recently used one
of the only numbers available, the average cost per patient, as a
pretense to dismiss 73 "underperforming" hospital directors who
presided over hospitals with higher than average costs. Focusing on
blunt measures such as this one could actually worsen patient
outcomes by incentivizing hospitals to turn away complex cases or
discharge patients before they have fully recovered.


8. (SBU) Misallocation of resources is pervasive throughout the
system. High quality care and good physicians do exist, as
demonstrated by some recent cases of emergency cardiac treatment
provided to USG personnel, but availability is typically limited to
the wealthy or well-connected. Medical equipment suffers the same
fate, with anecdotal reports of expensive machines, such as MRI
scanners, having usage rates well below those of western hospitals.
Some of the equipment is poorly maintained, while in many other
cases, hospital staff either were never properly trained to operate
the high-tech devices or do not know how to interpret the data they
provide, and so cannot use them as a guide to prescribe treatment.
According to one World Bank study, estimated "gratuity payments"
(meaning bribes) in the Romanian healthcare system total almost 500
million USD per year, the equivalent of more than two-thirds of the
2009 MOH budget of 2.25 billion RON (701.2 million USD). Given the
very low official salaries for medical personnel and the theoretical
absence of any limits on health services, "gratuity payments" become
the method for rationing the limited care available in an otherwise
overburdened system.


9. (SBU) In order to allocate resources effectively and attract
private investment, the MOH must determine how much care costs. As
an initial step, the Minister has promised to codify a "basic
package" of health services and introduce co-payments to help
rationalize care. This long-anticipated basic package will finally
clarify which procedures are actually covered by the national
insurance system, and will be an important first step for opening up
the healthcare market to complementary insurance products and
private providers. (With help from the World Bank, MOH is promising
that this will be done by July 1.) The basic package will enumerate
the health services provided at no cost (or with a nominal
co-payment) to all individuals insured under the government system.
Services outside of the basic package will be offered on a market
basis.


10. (SBU) While a welcome improvement, setting up a basic package
will only address half of the market at best--the services not
covered by the national system. It will do nothing to force
existing public facilities to compete with private providers for
patients on the full spectrum of health services. Establishing a
basic package of services together with published reimbursement
rates would be a more useful reform, but is not being seriously
considered. Reform along these lines would allow patients to shop
around for the best possible care and interject competition into the
system. Instead, thanks to Romania's EU obligations to provide
portable medical insurance, patient care at public hospitals in
other EU countries (Vienna is a popular destination) is subsidized,
but care at private hospitals at home is not, leading to continued
underinvestment in the local market.


11. (SBU) In terms of other public health initiatives, the
Ministry's main priorities for this year include introducing
mandatory cervical cancer screening (in response to the failure of
the HPV vaccination campaign in the fall of 2008),as well as
continuing the national programs on cardio-vascular diseases,
diabetes, tuberculosis, HIV/AIDS, and mental health. Recruiting new
physicians, especially epidemiologists, represents an immediate need
as there are hundreds of vacant positions in the country. As EU
members with a transferable medical license, young Romanian
physicians continue to exit the country in droves, threatening
public health. The MOH is also updating the National Plan for
Pandemic Influenza, especially relevant in light of the recent world
H1N1 outbreak.

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12. (SBU) Former Ambassador Taubman set the tone for Embassy
involvement prior to his departure from post in December. His
interest spurred a U.S. Trade and Development Agency (USTDA)
definitional mission to Romania, as well as a real push into
healthcare policy by the American Chamber of Commerce (AmCham). The
new Romanian Government's (and the Embassy's) focus on the issue
have helped energize AmCham's healthcare taskforce, which has seen
its membership triple since January. The difficult task of
coordinating the interests of so many stakeholders has led post to
host a day-long healthcare strategy session for AmCham on May 13th.
This session will focus business participants on identifying the top
problem areas and should result in better targeting for our joint
lobbying efforts.


13. (SBU) Comment. The dismal state of healthcare in Romania may
finally see some improvement this year. Stakeholders are energized
and it appears that the Government finally has a mandate to move
forward on a reform plan. Decentralization has proceeded quickly,
and World Bank pressure associated with Romania's IMF standby
agreement has forced officials to pay attention to the problem.
Even the usually-reluctant MOH is saying the right things about
wanting to engage private investors. What is unclear is how deeply
officials understand that investors need certainty, consistency, and
a predictable return on capital. Until politicians signal that they
are willing to accept companies profiting from providing healthcare
to Romanians, investment in the system will remain low and chronic
problems will go unsolved. End Comment.

GUTHRIE-CORN