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Monday, April 14, 2008

Hungary Faces Another Referendum

Another motion has been put forward to Hungary's National Election Office for a second referendum on the healthcare reforms. The Liga Union Federation, the Workers Council and other NGOs have collected 491,958 signatures in support of a new referendum against the multi-player healthcare insurance model - a major component of the health care reform approved last year.

The National Election Office (OVI) will have 45 days to verify the signatures and file a report to the National Election Commission. If agreed to the referendum will probably take place in the autumn or early next year.

Hungary's Prime Minister, Ferenc Gyurcsány, has pledged on Tuesday to continue the overhaul of the health care system despite the rift between the Socialist Party (MSZP) and its junior ally, the liberal Free Democrats (SZDSZ), and added that government spending would not be raised before elections only to boost party popularity. He also said the budget remained the highest priority for the cabinet, and that extra revenues should be spent on tax reductions.

The Socialist faction decided last Tuesday that the party (MSZP) would table a new bill to overhaul the health insurance act, according to which private capital would not be allowed in the would-be five to seven state-owned health insurance funds. The new bill will be introduced to Parliament only if the liberal Free Democrats (SZDSZ) break up the coalition at the end of April, as looks likely.

The MSZP faction plans to nullify the sections on the involvement of private capital in health insurance fund, a feature promoted heavily by SZDSZ. Until the end-April “deadline" the execution of the related parts of the act passed in February will be suspended. It was the ousting of Hungarian health minister and SZDSZ member Agnes Horvath two weeks ago that triggered the collapse of the governing coalition and increased the risk to investors of participating in Eastern Europe's health-care providers. Agnes Horvath, 34, was fired on March 31 after pushing through a law allowing companies to buy minority stakes in Hungary's state health-insurance system. She argued outside investment would increase funding and improve clinics.

The opposition to Horvath's plan reflects a certain ambivalence in a number of East European countries towards free market solutions in areas like health care. While eager to improve public health care, both politicians and citizens alike are wary of allowing private operators to enter a domain that is still seen as being the responsibility of the state.

``Companies have to know that they're treading on very risky territory,'' said former Hungarian Prime Minister Viktor Orban, one of Horvath's main opponents, in a press conference March 12. ``If the people don't want them, businesses shouldn't be allowed in.''

Horvath lost her job after Fidesz opposition leaders threatened a referendum to halt the law. Prime Minister Ferenc Gyurcsany's Socialists are now drafting a bill banning private capital from health insurance.

Hungary is not alone in its unwillingness to open the health-insurance market to commercial enterprises. Slovakia last year passed a law prohibiting health insurers from keeping profits, forcing them instead to put excess funds back into the system. In the Czech Republic, Health Minister Tomas Julinek is working against opponents in his own government to a plan to transform health insurers into for-profit corporations. Hungary, Slovakia and the Czech Republic all finance health insurance through mandatory payroll taxes. The state funds basic health care for all, although individuals may take out additional coverage from private companies.

OECD data show that the three eastern European countries devote an average of 7.5 percent of gross domestic product to health care, compared with an average 9 percent for OECD countries as a whole. Since increasing taxes to improve health care is effectively impossible in the country's present economic circumstances Horvath wanted to try to find extra funds to inject by breaking-up the country's state insurer into several health-management companies in which corporations could buy up to 49 percent. Under her proposal, the companies would compete with each other for patient premiums, devising insurance packages that would be more attractive than what the state can offer. An investor's profit would have been capped at 0.98 percent of annual revenue. Horvath said hospitals would improve their facilities with outside investment in order to attract more business from the companies.

``We set in motion a process, the likes of which has rarely been seen since the fall of communism,'' Horvath said at an April 1 press conference. ``I think it's perfectly natural that this kind of transformation should come with difficulties.''

The failure of Horvath's law means the state will continue to manage the entirety of the estimated 1.69 trillion forint that Hungarians contribute annually to the health system through payroll taxes.

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