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The Czech Health Care System and lessons from its reform The health care system in the Czech Republic is a contractual system with a clear separation between financing and provision of health care that is based on public health insurance. Until 1992 health care provision was financed solely by the state budget. Since 1992 health insurance system was introduced with clear transition period in 1992 when income of the insurance system was based on the state budget nevertheless since 1993 the insurance system has got majority of income from health insurance contributions. Health Insurance System The public health insurance system administered by health insurance agencies (currently there are 9 health insurance agencies) that are to some extent independent from the state. It means that they have self-government, their economy is detached from the state budget, nevertheless the state approves fundamental documents governing activities of the health insurance agencies (business plan, annual reports) and has the right to undertake an audit in the health insurance agencies if necessary. Providers- represented by a mix of state and private owned health facilities - enter into contractual relations with health insurance agencies and are reimbursed for health care rendered to patients (third party payments). The contracts are negotiated under a limited state supervision.. One of the guiding principles of the public health insurance is universal access. All citizens permanently residing in the Czech Republic must participate in the public health insurance. Foreign nationals employed by organizations domiciled in the Czech Republic are also eligible. Family members must obtain coverage through own employment, be eligible for premiums from the state budget or pay premiums out-of-pocket. The state budget is responsible for paying premiums for the following groups:
Other groups of persons have to pay health insurance premiums monthly. Employers deduct health insurance premiums from salaries of their employees and pay health insurance premiums on behalf of their employees. Other persons (self-employed, persons without earnings and not entitled to the state budget subsidy) pay on behalf of themselves directly on the account of the relevant health insurance agency. Health insurance contributions are set up as defined percentage of an assessment base. The law on health insurance contributions determines the assessment base and the percentage. For employees the assessment base is total rough salary and health insurance contributions amount for 13.5 % of the assessment base. One third of this is paid by an employee as a deduction from gross salary and two thirds are paid by an employer. Health insurance contributions are tax deductible for both employees and employers. The assessment base is defined for self-employed persons in a bit different way. It is one third of gross profit and the contribution rate is 13.5 % again but paid totally by a self- employed person. Health insurance contributions are tax deductible also in this case. There was quite a long a discrepancy between average income of public health insurance scheme for employees and self-employed persons. Due to the contribution of an employer the average income on behalf of an employee is approximately two times higher than on behalf of a self-employed person, although average consumption of health care is the same. Recent law amendments aim to eliminate this discrepancy between income on behalf of self-employed and employed persons. Health Insurance Agencies All health insurance agencies are not-for-profit corporations fulfilling legally regulated obligations. They have their own self-government bodies organised on the tripartite principle - one third of the membership is nominated by the state, one third nominated by employers’ associations and one third is nominated by the insured community. Management of health insurance agencies is appointed by the self –government. The primary insurer is the General Health Insurance Agency of the Czech Republic (VZP). It covers now nearly 65 percent of the population (approximately 6.5 millions of inhabitants) and a special law governs its operations. There are some peculiarities in case of the VZP, e.g. the representatives of insured persons in self-government bodies are elected by the Parliament and the managing director of the VZP is elected by the Parliament as well). There are eight other so-called sector and enterprise insurance agencies that are governed by a distinct law and licensed by the Ministry of Health. An entitled person has the right to choose any insurance agency once in twelve months. Persons on basic military duty are exempt from this right; they are insured obligatorily during their service by the Military Health Insurance Agency. By law, the VZP has some additional fiduciary responsibilities. It runs the central register of insured, the so-called information centre of health insurance that collects data on utilisation of health services used subsequently for capping of reimbursement of providers and administers redistribution of revenues among health insurance agencies. This redistribution of funds aims at balancing revenue of a health insurance agency to its portfolio of insured with special emphasis to the number of people eligible for the state budget premium payments. The state budget pays premiums much lower than it is necessary to cover health care expenses for this segment of insured. Therefore, health care expenses for this segment must be subsidised by revenue out of active premium payers. The balancing mechanism incorporates 60 percent of monthly revenue out of active payers and revenue out of the state budget. This fund is redistributed among health insurance agencies according to the number of persons eligible for the state subsidy. Persons above 60 years are counted three times in this risk adjustment mechanism (the fundamental parameters of the balancing mechanism are based on approximation of results of actuarial calculations). As with 60 percent redistribution there is still a remarkable misbalance in economy of health insurance agencies a new 100 percent redistribution mechanism based on age groups of insurees has been adopted quite recently by the Czech Parliament with sound goal to equalize financial position of all insurance agencies. Outstanding debts of health insurance agencies (except for the VZP) are backed by a special reinsurance fund made of regular annual contributions of relevant insurance agencies. In case of bankruptcy of a health insurance agency (except for the VZP), debts towards health care providers are covered by this fund. In case of bankruptcy of his/her insurance agency an insured person can decide to enter any other health insurance agency or he/she is overtaken by the VZP. The VZP itself can ask for a financial loan from the state budget in case of a lack of its financial means. Health care facilities There is a mix of state and private provision of health care in the Czech Republic. Nearly all health facilities are financed by the public health insurance scheme or to a much smaller extent by the state budget. Some of them get subsidies or donations (from specific private enterprises as a reimbursement for health care provided for employees above standard provision within the framework of the public health insurance scheme. Volumes and details of these subsidies are usually not publicly accessible. In 1992 the Czech Parliament approved a law on non-state health facilities. Since that time a remarkable share of out-patient care has been privatised. For example some 99 percent of dental care are rendered in private out-patient care facilities. The network of general practitioners and specialists was also privatised with the exception of specialized outpatient care provided by hospitals. In-patient care is provided mostly by facilities in public ownership.. University hospitals and the majority of district hospitals are owned by the state. Smaller hospitals are either municipal or private hospitals. The volume of health care provided by private hospitals is small. (There were approximately only 10% beds in private hospitals in the year 2002) A program for privatisation of hospitals was launched in earlier nineties but it has been abandoned very soon afterwards because of the loss of political support. Inhabitants have free choice of health facility and there is no referral of a GP to a specialist necessary. Reimbursement of health care Until 1992, health facilities were financed solely by budgets based on consumption of inputs-salaries, materials etc.. This budgetary system was replaced universally by fee-for-service system (FFS). For in-patient care fee-for-service was used in combination with lump-sum payments for drugs and with payment for one treatment day that covers hotel expenses and basic health care. These payments were dependent on type of the department and type of the hospital. The universal fee-for-service mechanism has been modified for different sectors of health care provision remarkably in 1997. The reason for the modification was overproduction of services in all sectors and inability of health insurance agencies to cover claimed services. A mixed capitation/fee-for-services system has been introduced for general practitioners in that time. Capitation payments provide for approximately 80 percent of income of general practitioners. Capitation fee depends on age of an insuree and there is a defined discount for capitation fee with increasing number of insurees covered by a general practitioner. Fee-for–service payments are used mainly for preventive services to motivate general practitioners to render such services. Fixed lump-sum payments were introduced for specialised out-patient services and in patient services. These lump-sum payments were derived from earlier fee-for-service income of a health facility. Later on this system was modified and specialists are paid again by fee-for-service with strict limits based on standardized time consumption of services claimed by each specialist. A modification of the lump-sum payments based on average claims per one unique patient has been introduced for in-patient care to address the problem of patient?s migration among health insurance agencies. A change to DRG reimbursement has been in preparation since 1996, originally based on AP-DRGs (All Patient Diagnosis Related Groups) and nowadays based on IR DRG (International Refined DRGs). Several pilot projects with DRGs payments took place in the past but still there is a visible hesitation mainly on the side of health care providers to accept such reimbursement mechanism. Dental care was reimbursed by the cost of materials plus the point value in the fee-for-service schema till 1997. Since July 1997 individual service items have been substantially aggregated and paid in fixed prices. If a patient wishes extra material, the entire service is not covered by health insurance but is paid in cash according to the dentist’s price list. The deep changes in reimbursement mechanisms caused that utilisation went down by some 25 percent within a very short time span. This decrease was partly due to stopping of former bad practices in reporting services to health insurance agencies, partly due to real decrease of utilisation. The latter was reason for forming of waiting queues. This rapid change in financing showed a dramatict on utilisation of health services. Out-of-pocket payments There are charges for some services; nevertheless the share of out-of-pocket payments is generally small. GP visits, hospital treatment and even specialised care are usually free of charge. The level of out-of-pocket payments in dental care is a bit higher, approximately 25 percent on average. User charges are also used for medication. A medicine is reimbursed within the public health insurance up to the specified limit derived from content of active substance in the medicine. It means that medicines with comparable chemical composition are reimbursed at the same level by the health insurance system irrespective of the commercial price. The difference is covered by the patient. The adjustments of this mechanism and fluctuations of commercial prices of medicines explain the slight annual increase of out-of –pocket payments. Unofficial out-of-pocket payments are difficult to be estimated. There are no problems in outpatient care in this sense, nevertheless in in-patient care, they can play a role. There are used often to ensure skipping in a wait list or as an incentive for more care or more attention obtained from hospital staff. Generally speaking one of most important achievements of the Czech health care reform has been preserving of citizen’s right on free of charge health care under conditions determined by specific laws during the whole transitional period. This right has been stipulated in Czech constitution. Contracting and negotiating Relation between insurance agencies and health care providers is based on firm contractual base. There have been individual contracts between an insurance agency and a provider since 1992. Even there was contractual freedom on both sides (with exception of VZP in 1992-1993, in these years VZP was obliged to contract any health facility that was interested to and vice versa), however this freedom was not utilized for selective contracting to the desired extent. The reason was competition among health insurance agencies. The consequence was massive growth of network of health care providers that still contributes to steady financial tension in the health insurance system. During the time individual contracts were prepared according to the so called pattern contracts that were negotiated between central management of health insurance agencies and representative bodies of health care providers. Such practice has been legally regulated since 1997 when framework contracts, tendering and price negotiations have been introduced on legal basis. Associations of providers and associations of health insurance agencies negotiate framework contracts for each segment of health care. These framework contracts are long-term contracts (3-5 years) that specify basic principles of individual contracts between an insurance agency and a provider. Prices are negotiated between all insurance agencies on one side and representatives of providers on the other side each half of a year. Price negotiations are anchored in the insurance law as well as negotiations on list of medical services with point evaluation. In case of disagreement in price negotiations the Ministry of Health serves as an arbiter and it is allowed to set up prices for next period. Such arrangement results in a direct influence of the Ministry of Health on economy of the health insurance agencies that makes a bit mess in responsibilities inside the Czech health insurance system. There is a tendering processed anchored in the insurance law that takes place in case that a new provider asks for contract with one or several health insurance agencies. A provider has usually contracts with several health insurance agencies. The tender evaluation committee is composed of representatives of insurance agencies, representatives of incident health care sector and representatives of the state administration. The tender process for in-patient care facilities is managed by the Ministry of Health and for out-patient care facilities is managed by local state authorities. Originally objectives of the tendering process were to make the whole process more transparent and to regulate development of the network of health care providers. Meeting of these objectives is a bit questionable as conclusions of the tender commission are not binding for the health insurance agencies. Role of the State Administration The Ministry of Health provides strategic leadership for the health system. It is responsible for the legal framework of the system as well as for health and medical research, licensing of pharmaceuticals and medical technology. Ministry of Health has no direct financial responsibility for health insurance system; nevertheless it plays an important role in price negotiation between health insurance agencies and providers. In case of disagreement it has to decide on prices of health care. The Ministry of Health performs also some administrative and supervisory functions towards health insurance agencies such as licensing of health insurance agencies, participation in self-government bodies of health insurance agencies, approval of annual reports and of insurance plans and auditing. The Ministry of Health manages directly university hospitals and some specialized facilities. At district level the state administration has limited responsibilities: registering health facilities on the territory of the district and financing health care services not included in the public health insurance system (e.g. hygienic services, long-term nursing homes). Another part of state administration - the Institute for Health Statistics -reports directly to the Ministry of Health and collects statistical data related to the health sector. Public acceptance of the health insurance system The public health insurance system generally meets acceptance in the population regarding coverage and benefits. The Czech population has been accustomed to a high level of health care coverage from public funds nearly the whole twentieth century. Voices demanding restrictions of benefits from the public health insurance in favour for supplementary forms of insurance or out-of-pocket payments can be heard - nevertheless this seems to be rather a political weapon than the prevailing public opinion. Administrative efficiency and transparency is generally considered to be low, although administrative costs of the public health insurance system form only 3.9 percent (year 2000) of total returns of the public health insurance system. A critic focuses on the number of health insurance agencies (currently 9). The argument is that the existence of several insurance agencies causes extra administrative burden and complications. On the other hand, this argument might be overvalued if one consider the potential of competition to a full extent. However the legal framework of the Czech health insurance system doesn’t allow for the full development of competition among health insurance agencies. The public can evaluate efficiency and transparency of health financing namely through of view of providers and the corresponding picture made by the media. Financial mechanisms applied towards providers of health care are rather sophisticated in the last years and easily create an impression of weak transparency. Lessons from the Czech Health Care Reform and challenges for future Several lessons can be derived from the Czech health care reform. The Czech reform had following peculiarities:
Evaluation of quasi competition among health insurance agencies is a matter of the point of view. On one side it brought better client orientation of insurance agencies, on the other side it has complicated life of employers asking them to withdraw health insurance contributions on behalf of several collecting places, it has narrowed space for efficient financing mechanisms towards health care providers, it has contributed to unfair distribution of resources and it has consumed more resources for internal operations of the whole insurance system then necessary. Potential of competition among health insurance agencies in the Czech health insurance system hasn’t been harnessed yet. Quick privatization brought about rapid consumption of extra resources for health care in earlier ninetieth and it was one of drivers for expansion of the network of health care providers. Evaluation of impact of privatization on quality and effectiveness of health care has not been done, nevertheless the population generally appreciates approach of private doctors. Usage of fee-for-service financing mechanism showed to be advantageous for privatization process but it hasn’t contributed to better allocation of resources too much and it proved to be (without additional measures) financially unsustainable. The main challenges of the current health care system in the Czech Republic can be summarized as follows:
Annex I Basic indicators of the Czech health care sector (2002)
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