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The Romanian

Healthcare System:
Between Bismark
and Semashko
Cristian Vldescu
Silviu Radulescu
Sorin Cace

The Romanian Healthcare System:


Between Bismark and Semashko
Cristian Vldescu, Silviu Radulescu, Sorin Cace

1.

EXECUTIVE SUMMARY

The objective of this report is to review the formulation and implementation of health
sector reform in Romania from the 1989 revolution to 2003. The study was conducted
through three-person eldwork in Romania, using interviews and documentary analysis.
The analysis covers main aspects of the health policy process in Romania. First, in the
historical review section, the structural context of health sector reform is identied. The
deteriorating health conditions in Romania are referred to, in addition to the problems
of healthcare delivery. It is particularly important that these latter problems are understood within the context of nancing the public sector. Health sector reform should
be seen as part of the broader transition to a market economy and political pluralism.
Second, in Section 3, the principal and potential actors in health sector reform are
identied and described. The analysis focuses on the distribution of power within the
health system and on the important positions and roles of the medical profession, the
World Bank, and public servants; in this context, the content of the proposals and agreed
reforms to the health sector since 1989 are described; these include the decentralization of government, the primary healthcare project, and the development of the health
insurance system Third, in a section devoted to country-specic experience, we focus
on the implementation of the health insurance system in Romania and make specic
comments/suggestions related to health policy in this area.
These reforms are consistent with similar changes in both Western Europe and FSE.
Also, the decision-making process on health sector reform is examined. This incorporates
the way in which health sector reform issues arrive on the political agenda, the process
by which actual decisions are made, and the process of implementation. The following
characteristics of the process are highlighted: the international character of the reform
process and the prominent role of the World Bank, inter-ministerial relations, the lack
of community and user participation, the form of consultation with group interests,

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D E C E N T R A L I Z A T I O N I N H E A LT H C A R E

political coalitions for health sector reform, the lack of policy debate, the pace of reform,
and conditions and contradictions in policy.

2.

INTRODUCTION

2.1 General Information on Romania


Romania is situated in the southeastern part of Central Europe and covers an area of
237,500 km2. It is bordered by the Black Sea and the Republic of Moldova to the east,
Ukraine to the north, Hungary and the Serbia to the west, and Bulgaria to the south.
As of 2002, Romania was home to 21.68 million inhabitants, down from 22.81 million
in 1992 (according to that years census); 54 percent live in urban areas. The capital
Bucharest concentrates about 10 percent of the population. According to the last census
the ethnic composition was 89.5 percent Romanian, 7.1 percent Hungarian, 1.8 percent
Roma, and 1.65 percent other nationalities. The ocial language is Romanian, but
minorities are entitled to use their native language. 86.8 percent of Romanian citizens
professed to be Romanian Orthodox, 5.1 percent Roman-Catholic, 3.5 percent Protestant, 1 percent Greek-Orthodox, and 3.6 percent belonged to other religions.
The district (judet) is the basic administrative unit of the country. There are 42
districts, with an average population of about 0.5 million inhabitants each. The lowest
administrative level is the local council, whose mayor holds executive power. Both the
local council and the mayor are directly elected for a four-year period. Above the local
council level is the district council, which coordinates the activity of the local councils.
Relations between them are based on the principle that there should be local autonomy,
and that public services should be decentralized. They work together to address common
problems and neither level is subordinate to the other. Central government is represented
at local level by the prefect, who is appointed by the government and whose role is to
coordinate and supervise public services. Romania is a republic, led by a president and
governed by a two-chamber Parliament: the Senate and the Chamber of Deputies.
These are directly elected for a four-year term. Former communists dominated the
government until 1996 when they were swept from power by a fractious coalition of
center-right parties. Currently, the Social Democratic Party forms a nominally minority
government, which governs with the support of the opposition Democratic Union of
Hungarians in Romania.

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2.2 Trends in Socio-economic and Health Indicators

2.2.1. Socio-economic Indicators


Following World Bank classications of GDP, Romania is seen as a lower-middle-income
country. Romanias GDP was 1,585 USD per capita in 1999, almost three times smaller
than the CEE average, and about 15 times smaller than that of the EU.
Romania, one of the poorest countries in CEE, began the transition from communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited
to the countrys needs. Over the past decade economic restructuring has lagged behind
most other countries in the region. Consequently, living standards have continued to
fallreal wages are down perhaps 40 percent. Many major businesses remain under
state control and have yet to address the fundamental issues which enable business to
survive and ourish in a competitive environment. After a spurt of growth up to and
including 1996, the GDP contracted annually between 1997 and 1999 and started to
grow from 2000; in 2001 the GDP growth was around 5.3 percent and for 2003 the
estimations are around ve percent (see Table 1). With industrial output declining,
services contracting, and investment plummeting, unemployment has been rising. The
trade gap has widened appreciably for a number of years, and the current account decit
stood at 5.4 percent of GDP in 1998 but improved to 3.0 percent in 2002. The working population dropped by over 20 percent between 1989 and 2002 and the number
of wage earners fell by over 27 percent. This decline in employment was largely due to
layos or retirements from large, state-owned textile, metal, and machinery industries.
Unemployment in 2002 was ocially reported to be 9.0 percent (in 1991, 3.0 percent),
with female unemployment about one-sixth greater than male, and longer lasting, but
with short-term male unemployment uctuating severely. Unemployment is expected
to continue to climb in 20032005 as a result of the closures or restructuring of major
enterprises. Thus, the structure of the economy is changing. The contribution of agriculture to the GDP has constantly decreased since 1990, arriving by 2001 at a value
of 15 percent (21 percent by 1993). The contribution of industry has also decreased to
30 percent by 2000, compared with 43.1 percent in 1992, having the same negative
impact on industrial workers income. Another factor contributing to the deterioration
of living standards was the high rate of ination, 45.7 percent by 2000 (the rate in 1997
was 154.8 percent), decreasing to 19 percent in 2002, with an estimation of 1314
percent for 2003 (see Table 1).
The long transition period in Romania has seen an enormous increase in poverty.
In 1989 an estimated seven percent of the population was living below the poverty line.
According to the National Institute of Statistics, this share had risen to 38.3 percent of the
population by 2001. After 1989, a deep social stratication became visible in Romania.
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D E C E N T R A L I Z A T I O N I N H E A LT H C A R E

Table 1.
Selected Economic Indicators, 19972001
Indicator

Real GDP growth


Unemployment rate
(end of period, %)
Consolidated public sector deficit
(% of GDP)
Consumer Price Index (1995=100)
Labor force as % of population

1997

1998

1999

2000

2001

2002

6.1
8.9

4.8
10.4

1.2
11.8

1.8
10.5

5.3
8.6

4.5
9.0

5.3

5.4

3.6

4.0

3.3

3,0

820.3

1,194.9

1,606.8

1,968.9

51.4

50.2

50.6

51.0

Annual average rate of inflation %

154.8

59.1

45.8

45.7

34.5

19.1

Government revenue as % of GDP

26.7

28.2

31.4

27.2

na

na

Source: World Bank (2002) and the National Institute of Statistics.

Considering the poverty line to be a disposable income of less than 60 percent of average
household expenditure, the categories of population most aected by poverty are: a)
employees with low income and dependent children (39 percent of the total population
below the poverty line in 1998); b) pensioners, whose average pension is below 50 USD
(25.9 percent of the total population below the poverty line); c) farmers living in rural
areas; and d) unemployed persons (11.1 percent of the population below the poverty
line). Given these data and other reports, a majority of researchers agreed that much
economic restructuring remains to be carried out before Romania can achieve its hope
of joining the European Union.

2.2.2. Health and Healthcare Indicators


From the 1960s to the 1990s health status in Romania steadily declined. At the beginning of this period Romania was comparable in many important respects to Western
European countries. Since then a tendency of relative and absolute decline prevailed.
Table 2 synthesizes the main demographic indicators since 1980.
Mortality trends over the past three decades in Romania, like many other countries
in Eastern Europe and the NIS, suggest a new pattern of the epidemiological transition,
distinct from the experience of other developed and middle-income countries in Asia
and Latin America (World Bank 1998). The principal distinguishing feature of this
new pattern is a sustained increase in mortality among adult males, with a duration
and order of magnitude that has never been observed previously. In an industrialized
region noted for numerous improvements in child health, explanations for the rise in
440

69.4

66.3

16.0

10.1

24.9

1989

69.5

56.2

13.6

10.3

24.6

1990

MoH, Statistical Yearbooks, 19902002.

69.2

Life expectancy at birth

Source:

18.0

74.8

10.4

% age 65+

Total fertility rate

26.6

% age 014

Live births % population

1980

Indicator

69.8

48.7

11.9

10.7

24.7

1991

69.8

46.6

11.4

11.1

24.2

1992

69.5

44.3

11.0

11.4

23.5

1993

69.5

43.3

10.9

11.7

22.8

1994

Table 2.
Demographic Indicators

69.4

41.1

10.4

12.0

22.2

1995

69.1

39.9

10.2

12.2

21.5

1996

69.0

40.6

10.5

12.6

20.9

1997

69.2

40.6

10.5

12.8

20.5

1998

69.7

40.2

10.4

13.0

18.8

1999

70.5

40.3

10.5

13.3

18.3

2000

71.1

37.8

9.8

13.6

17.8

2001

T H E R O M A N I A N H E A LT H C A R E S Y S T E M : B E T W E E N B I S M A R K A N D S E M A S H K O

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D E C E N T R A L I Z A T I O N I N H E A LT H C A R E

mortality of adult males include factors such as smoking, alcohol consumption, diet,
and pollution. Some lifestyle indicators are presented below:
Table 3.
Lifestyles Indicators
Year

% of Regular Daily Smokers


(Men Aged 1524, Women Aged 1544)

Liters of Pure Alcohol Consumed


per Year per Capita, Age 15+

1991

8.0

1992

9.0

1993

Women:

15

Men:

40

8.6

1994

8.7

1995

9.0

1996

8.9

1997

9.3

1998

8.1

1999
2000
Source:

Women:

26

Men:

45.4

7.3
7.3

1. Reproductive health survey, 1993, 1999; 2. Health for All database, WHO.

The health data attest to a general decline over the past three decades in the lifespan
of males, in contrast with a steady increase, since mid-1960, in the average life span
of females.
The 1990 life expectancy at birth for males and females in Romania was estimated
by World Bank studies to be 69.0 and 72.3 years, respectively. The World Banks 1995
estimate of life expectancy for the total population is 70 years, compared to 77 in the
United States. Between 1980 and 1995, life expectancy at birth remained constant
(World Bank 1998). Thus, the statistics on life expectancy at birth for males provides
an illustrative example of trends in health in Romania, especially if compared with
other countries. Male life expectancy in Romania, at 67.8 years in 2000, is the lowest in
Central and Eastern Europe (not including the newly independent states of the former
Soviet Union). There are positive developments, however. In 1998, life expectancy for
males began rising in a pattern similar to other Central European countries such as the
Czech Republic, Poland, Bulgaria, and Hungary.
The crude death rate for the total population hovered around ten per 1,000 between 1980 and 1990 jumped to 12.0 in 1995. In part, this rise in the death rate may
be explained by the decrease in birth rates and growing proportion of the population
aged 50 years and older. Between 1980 and 1995 the general fertility rate plummeted
roughly 40 percent. The annual rate of natural growth in Romania was estimated at
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T H E R O M A N I A N H E A LT H C A R E S Y S T E M : B E T W E E N B I S M A R K A N D S E M A S H K O

negative 0.2 percent in 1997 and negative 0.27 in 2000. Reecting improvements in
infant and child health, MoH data document a marked decrease since 1980 in deaths
among the 0-4 year age group, with almost a 50 percent reduction between 1990 and
1995. A drop in the infant mortality rate was reported, from almost 30 per 1,000 live
births in 1980 to 21.2 in 1995, and less than 20 in 2001 and 2002; however this is still
one of the highest in Europe. There are also considerable regional dierences: in 2000,
infant mortality rates ranged from 12.2 to 28.3 per 1000 live births in dierent districts.
The post-neonatal mortality (9.5 per 1000 live births in 2000) is also high, being 1.9
times the CEE average and 5.8 times the EU average. Post-neonatal mortality was two
times higher in rural areas compared with urban areas (13.0 vs. 6.6 deaths per 1000 live
births) indicating that access to eective medical care is poorer in rural areas.
In contrast, Romanias maternal death rate of 66 per 100,000 live births is more than
three times the average for Eastern Europe and over six times the average for Western
Europe, despite a huge decline since 1990 (from 83.6 deaths per 100,000 live births
in 1990 to 33 per 100,000 live births in 2000), which were a result of new national
abortion policies and their implementation. Abortion is still the most frequent method
used for avoiding unwanted pregnancies. Though this indicator value has decreased very
much, it is still at a high level of 1,107.8 abortions for 1,000 live births in year 1999,
respectively 1.1 abortions to one born child in comparison with 3.1 abortions to one
born child in 1991. There is an increase in the number of children born outside marriage and a decrease in the number of children born within marriage.
The increase in communicable diseases could also be associated with the fall in
socio-economic conditions of the population. Trends in the incidence of tuberculosis
conrm the pattern indicated by mortality statistics. The incidence rates increased steadily in the 1990s, from 61 cases per 100,000 in 1991 to 105.5 cases in 2000. Even more
disturbing is the doubling of tuberculosis incidence rates in children (from 13 cases
per 100,000 inhabitants in 1990 to 32 cases in 1999). The incidence rates for syphilis
increased steadily from 19.8 cases per 100,000 inhabitants in 1989 to 45.17 cases in
2000. The total numbers of AIDS patients registered by the Ministry of Health and
Family beginning in December 1998 were 5,040 AIDS children and 690 adults. There
were another 3,257 registered HIV positive children and 642 adults. The proportion
of children under nine years old was 86.9. However, there has been a reduction in new
cases in recent years, due to the improvements in blood testing and ending a number
of unsafe medical practices in childrens foster homes. Table 4 presents some trends in
main morbidity indicators.
The World Bank has analyzed the health status of the Romanian population by
estimating the burden of disease (BOD), or the loss of healthy life due to premature
mortality and disability. The aggregate unit of measurement for the BOD is the disability-adjusted life year (DALY). DALYs are calculated with Romanian mortality data,
but disability calculations apply a ratio method of total DALYs to death DALYs from
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444

10.90

1991

11.60

1992

11.60

1993

11.70

1994

12.00

1995

12.70

1996

12.40

1997

12.00

1998

11.80

1999

11.40

2000

11.60

2001

53.5

26.90
83.00

74.70

9.84

26.90

67.10

29.30

133.00 170.00

European Health for All Database, WHO.

Source:

SDR per 100,000 individualsall ages.

19.53

76.50

97.30
12.52

12.12

34.60

50.30

10.84

36.24

136.70 105.70

32.70

45.40

66.50

22.70

16.81

72.80

12.07

91.30

36.10

50.80

60.30

23.30

15.37

74.30

13.54

94.00

40.03

57.90

53.20

23.30

13.94

73.80

15.08

79.70

44.69

62.50

60.40

23.90

76.10

15.06

80.60

47.67

65.60

47.80

21.20

78.60

15.21

75.80

50.64

68.20

41.10

22.30

12.57

78.70

15.91

86.20

53.93

71.70

41.40

22.00

12.56

76.80

16.04

77.60

57.12

75.50

40.50

20.50

12.22

72.20

14.39

70.80

53.72

71.70

41.80

18.60

11.52

64.40

14.98

74.40

46.00

65.50

32.80

18.60

12.81

64.20

14.55

66.10

44.47

64.00

34.03

18.40

13.31

63.70

15.80

62.90

49.43

70.60

141.6 142.10 144.70 153.00 158.90 162.20 165.50 170.30 173.60 174.60 176.70 184.00 190.80

182.20 191.80 185.40 188.40 189.80 244.20 241.30 243.40 253.20 246.79 238.82 231.03 215.51 214.54

Note:

Motor-vehicle traffic
accidents*
Infant deaths per
1,000 live births
Maternal mortality
rate per 100,000
live births

Infectious
and parasitic diseases*
Accidents*

Respiratory disease

Chronic liver disease*

Digestive disease

10.60

1990

152.30 199.80 202.20 209.50 221.80 251.60 247.10 248.40 261.50 256.01 248.45 249.73 230.57 228.36

Malignant neoplasms* 135.00

Cerebro-vascular

Heart disease

10.70

1989

588.00 617.60 627.00 658.20 707.80 712.30 709.90 736.10 785.90 761.50 738.60 737.00 701.80 710.60

10.40

Crude death rate per


1,000 individuals
Circulatory disease*

1980

Year

Table 4.
Mortality-based Indicators

D E C E N T R A L I Z A T I O N I N H E A LT H C A R E

T H E R O M A N I A N H E A LT H C A R E S Y S T E M : B E T W E E N B I S M A R K A N D S E M A S H K O

the former socialist economy region as a whole. In contrast with standard mortality
measures, the BOD methodology, constitutes a policy-making tool that establishes
close links between the economy and health by measuring future loss of productive
life that includes disability. The highest proportion of all DALYs, 30 percent, is lost to
heart-related conditions. Cerebro-vascular diseases claim 14 percent of all DALYs. Third
in order of importance are tumors or cancer of various kinds, especially of the lung,
stomach, colon, breast, and prostate. Fourth, is the DALY loss (ten percent) associated
with alcohol-related mental disorders. Trauma and respiratory diseases have the same
share of DALY loss, at six percent each. The DALYs lost to trauma are less in Romania
than in other Eastern European countries with higher rates of vehicle accidents. Diabetes
falls in the nutritional/hematological classication which contributes three percent to
total DALY loss. Infections and parasite diseases contribute two percent to all DALYs
lost. Table 5 presents the trends of some morbidity-based indicators.
To conclude, in the last decade, the health status of the population continued to
decline. There are signicant dierences in health indicators between Romania and
Western European countries. Even comparisons with countries in the accession process
to the EU are not favorablenot only in terms of health indicators, also in terms of
both access to basic sanitation services and essential medical services. The distribution of
diseases associated with high and low levels of income (like circulatory system diseases,
typically associated with higher income countries or tuberculosis, usually associated with
poor socio-economic conditions) shows a west-east divide, having a similar pattern as the
resource distribution of primary healthcare providers, hospital beds, and medical professionals, all of which having more resources per capita in the west of the country (the
region of Transylvania) than the east (the region of Moldova). There is also a signicant
urbanrural divide in terms of distribution of physicians, with a shortage of physicians
in rural areas. A more detailed description of trends in major health indicators is given
in the Annex (see Tables 5 and 6).

445

446

Source:

0.56

0.05

0.03

31.80

34.02

European Health for All Database, WHO.

Acute poliomyelitis

48.20

43.12
0.13

32.50

29.38

182.60

0.08

35.60

24.09

87.21

69.90

34.84

73.40

Diphtheria

61.60

Hepatitis B

64.60

1992

191.60 307.00

58.30

1991

Hepatitis A

54.50

1990

227.20 351.40 322.10 218.60 117.90

Tuberculosis incidence

1989

Viral hepatitis

1980

Year

87.30

1994

95.00

1995

98.60

1996

38.20

21.31

65.48

51.30

23.76
0

36.60

24.43

84.84 106.80

24.10

20.92

81.30

89.50 118.70 139.40 104.30

82.50

1993

1998

1999

2000

2001

24.70

17.14

68.26

88.00

17.40

13.73

52.08

74.00

15.30

12.27

77.99

12.10

12.01

97.81

11.60

11.95

94.24

99.70 117.90 115.30

95.80 101.20 104.10 105.50 115.30

1997

Table 5.
Morbidity Indicators (All Data Expressed in Incidence per 100,000 individuals)

D E C E N T R A L I Z A T I O N I N H E A LT H C A R E

11.1

11.1

77.5

Bed occupancy rate

Private hospital beds


as % of total hospital beds

European Health for All Database, WHO.

Source:

Percent of total health expenditure.

67.6

11.4

100

1990

Note:

72.8

100

1989

1980

Beds per 100,000


individuals
Physicians per 100,000
individuals
Average length of stay (days)

Total pharmaceutical expenditure*


Salaries*

Total inpatient expenditure

Total health expenditure


per capita US $ (PPP $)
Public health expenditure*

Indicator

66.3

11.7

551

890

100

1991

0.01

78.3

11.7

536

790

11

57

100

1992

0.01

78.3

11.4

565

790

14

58

100

1993

0.01

79.1

10.3

567

770

54

18

59

100

1994

Table 6.
Health System Indicators

0.01

77.5

10.9

565

760

50

17

59

100

176

1995

0.01

77.8

10.4

552

760

48

19

58

100

299

1996

0.01

78.6

10.1

546

740

38

17

63

100

257

1997

0.02

78.0

10.0

530

730

20

100

215

1998

0.02

75.6

9.5

486

730

100

203

1999

0.03

75.3

8.9

490

740

190

2000

79.4

8.6

53

2001

T H E R O M A N I A N H E A LT H C A R E S Y S T E M : B E T W E E N B I S M A R K A N D S E M A S H K O

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D E C E N T R A L I Z A T I O N I N H E A LT H C A R E

2.3 Structural Background to Health Sector Reform


In this section of the report the principal contextual issues of health sector reform in
Romania will be analyzed. This should provide an understanding of the key issues to
which the reforms of the health sector, as outlined in section 2 and 3, respond to.

2.3.1 Health and Healthcare in Romania


The previous section indicated that, although health indicators in Romania are in many
respects typical of its position as a middle-income country, the comparisons with established market economies of Western Europe highlight the health problems facing
Romania. There is also a current concern that health indicators show a recognizable
downturn in recent years. In many respects these follow from the legacy of social and
economic problems from the Ceausescu regime and the social and economic dislocations
experienced during the transition to a market economy. To Adeyi (1996) this transitional
deterioration in health status comes as little surprise due to the i) reduction in real
income and widening income disparities; ii) stress and stress-related behavior, iii) lax
regulation of environmental and occupational risks; and iv) breakdown in basic health
services. To these we may add the increase in crime and violent deaths.
Healthcare services are also confronting major problems. First, the economic recession, according to a London School report (1994: 9) has led to a reduction of resources
available for health services, leading to decreased immunization rates, lack of availability
of drugs, and decreasing ability to provide treatment for certain conditions. Second,
the legacy of the Semashko model and the identication of critical organization and
management problems will be indicated in the next section. These problems are frequently cited in Romania as the critical targets of reform. Table 6 presents some of the
major healthcare indicators in Romania.

2.3.2 Financing the Public Sector


All researchers are mentioning the low level of resources dedicated to healthcare in
Romania as shown in Table 7, in comparison with both CEE, with an average of 5
percent of GDP and with UE with an average of 8.5 percent of GDP (see Table 7).
It is not surprising therefore that health sector reform has shown concern for increasing the resources dedicated to the healthcare system. However, any attempt to increase
this sum has to be viewed within the context of policy constraints facing government.
The economic recession of the 1990s, high ination, and the upheaval of the transition
process hardly represent a solid basis for increased allocations to the health sector. There
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Table 7.
Total Expenditures for Health, 19902000
Year

Total expenditure
as percent of GDP
Source:

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

3.7

3.6

3.3

3.3

3.1

3.7

3.7

3.5

3.9

4.6

4.6

Ministry of Health, Statistical Yearbooks, 19912001.

are clear dilemmas in determining where additional resources would be collected from.
The government is under pressure to reduce the size of the public sector and the tax
burden as part of the transition to a market economy. In order to increase the ow of
resources to the health sectors, nearly all FSE countries have opted for schemes of social
insurance, and this was also the political option of the Romanian Government, as will
be described in the following sections. There are however, denite concerns over their
appropriateness to the social and economic conditions in FSE. Resource constraints can
clearly limit the options for health sector reform. Taking these constraints into account,
dierent researchers suggested the need to focus health sector reform within existing
resource constraints: the maximum possible value needs to be obtained from the limited
sums available (and) the healthcare services provided need to relate to the existing and
foreseeable patterns of disease in Romania(Jenkins et al. 1995).
In this context, one further point is important to mention regarding Romanialack
of transparency. This refers to the process of resource allocation and raises important
questions about issues like equity in the delivery of healthcare services.

2.3.3 Social and Political Transition and the Health Sector


The revolution of December 1989 is leading to important changes in the structure of
Romanian society. Health sector reform should be seen as part of this broader change in
society. Deacon (1992) suggests that these may be seen as part of a broader change from
a bureaucratic state collectivist system of welfare to capitalism. Important structures
of the previous regime have disappeared, and new social structures and processes are
being formed. The partial introduction of capitalist relations, market systems, and liberal
democracy are expressed through the emergence of a multiparty system, national and
local political elections, a measure of land reform, the development of free enterprise,
and the formation of trade unions. A particular feature of this new conguration of
social and political power is the absence of an active and developed civil society. There are
indications that the overall structure of social and political power in Romania has not
been conducive to rapid and possibly major changes through health sector reform
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Noting the importance of the transition is not to suggest that there is a clear idea
within Romania as to the type of society that will emerge from this process. Platforms
for change range from free market neoliberalism to social democracy and variations on
state collectivism, even if now Romania is a candidate for accession to the EU. Certainly
the overall direction of the change is towards the introduction of market systems and
political pluralism and implementation of the acquis communitaire in order to become
a full member of the EU. There are however many imponderables around the way in
which the economy will face up to international pressures, the impact of a market
economy, and the moment when Romania will join the European Union. It should be
mentioned here that the healthcare system, along with other branches of social protection, are generally not yet developed to a level consistent with that which is found in
the EU. Romania continues to strive to secure economic viability and modern planning
and managementnot least for the healthcare system, its eective management, and
planning of resource allocation. There is a growing gap between professionally possible
and aordable health services. The pre-accession strategy stresses the importance of institution building, especially related to public accountability and budgetary control. The
health sector is an important user of public funds and institution building is particularly
important. It seems clear that the governing elite are facing a number of pressures in
developing new policies on social welfare, to accommodate both internal demands and
external constraints.

2.3.4 External Features of Health Sector Reform


Three points should be mentioned here. First, the issue of health sector reform is on
the agenda, albeit in diering degrees, in all the CEEC. One can notice two major
trends in this respect. There is a shift from a taxation-based system based on citizenship
to a system of earmarked taxation of the payroll leading to individual entitlement to
healthcare provision. This is seen as a way of increasing the ow of funds to the health
sector. The other trend is designed to improve the systems eciency and involves the
adoption of a pluralistic approach involving internal market mechanisms. While other
countries are at the forefront of these changes, reform in Romania is more gradual and
incremental. Second, the role and position of the World Bank (WB) has to be taken
into account. This will be developed in the next sections this report. Third, we should
be aware of the connections with the process of health sector reform in Western Europe.
This will be seen to be of some importance when we refer to the primary healthcare
project and the health insurance system in the next sections.
To conclude, this section has referred to the deteriorating health conditions in
Romania and the problems of healthcare delivery. It is particularly important that

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these latter problems are understood within the context of nancing the public
sector. Health sector reform should be seen as part of the broader transition to a market
economy and political pluralism. The structural issues outlined in this section cannot
be understood in isolation. There are links between them, as one issue is reinforced
and/or reinterpreted by another. At the same time, the structural issues constitute
contradictory pressures for policy makers. For example, we saw how policy makers face
contradictory pressures to both restrict and expand the amount of resources dedicated
to the health sector.

3.

AN OVERVIEW OF REFORM: POLICIES, PROCESS


AND OUTCOMES

The Romanian health system has been passing through radical structural changes since
1989. In some aspects, the present situation can be compared with what occurred after
the Second World War. Then, the change of the health system was similar to that of
the whole society, for the health system being imported was a model that had very few
connections with the tradition or with the real situation in Romania at that time, the
so-called Semashko model. After 1989, we are witnesses to a reverse process, of passing
from a model that had been in place for ve decades to another model with foreign roots,
which is closer to what existed in Romania prior to the Second World War. In spite of
this general tendency to reform the healthcare sector, nding the optimal structure of
the health system has proven to be a very dicult task for at least three reasons. First
of all it should be underlined that the health system should have certain objectives.
Theoretically, most countries dene three major objectives for their health system: a)
universal and fair access to a reasonable package of health services; b) control of costs
of health services, and c) ecient utilization of resources.
In spite of the relative concord about the objectives of a functioning health system,
to establish their relative weight and prioritize them became very dicult for most
countries that want to reform their health sector. This aspect can be discussed only
after the socio-economic objectives and priorities of a country have been established.
Another important factor for the development of health systems is ideologicalthe
debates between supporters of free initiative versus the supporters of government planning. Another major issue has been the relative lack of information concerning the
functioning and performance of dierent health systems. The remaining two section
of this report will try to show how these questions were answered.

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3.1 Health Policy Reform Since 1989


In the developments of the health policy after 1989 two main periods can be identied:
one between 1990 and 1996, and the second from 1997 until today, the threshold being the general election of November 1996, after which major new health legislation
enacted. Even if the government changed again in 2000, it adopted most elements of the
previous governments health strategy. This section will describe the principal reforms in
the health sector from the revolution in 1989 up to 1996; the later period from 1997
until today will be described in the last section of this report, as it basically covers the
period in which the HIL was implemented and the new HIS started to function. In
this section, particular attention will be paid to:

the initial policies and demands for change after December 1989

general government decentralization and the health sector

the primary healthcare reform

key actors in health policy and the decision-making process

multilateral and bilateral external agencies, with a focus on World Bank involvement in the reform process.
All the changes that occurred in health policy after 1989 were inuenced by the
pre-1989 health system. The Semashko healthcare system was common in Central and
Eastern European countries. Central to this system was the state provision of services
for all members of society, leaving little or no choice to the user but seeking to achieve
a high level of equity. The highly regulated, standardized, and centralized system was
operated through the MoH. The legacy of this system can be felt in the current operation
of healthcare: a) the relatively small proportion of the GDP dedicated to healthcare; b)
the centralized and inequitable allocation of resources (with under-the-table payments
and privileges for the nomenclature); c) physicians usually lacking adequate motivation,
as they were poorly paid and underemployed; they had a narrow clinical orientation
and lacked broader knowledge of public health issues and health management, including cost containment in modern health systems; d) the system was vertically integrated
and required less regulation as it relied on a rigid hierarchical command and control
structure, and the nancial ows were independent of outcome; e) lack of response to
local needs; f ) poor quality of rst level services, inadequate referral and overemphasis
on hospital-based curative services with a lack of good equipment and drugs; g) the
supply of beds and personnel not matched by the provision of equipment and drugs;
h) alienation from responsibility for ones own health; lack of associations of interested
citizens, at both the national and local level, and lack of an autonomous civil society
(still a challenge at present) was both a cause and a symptom of a situation characterized
by a passive attitude towards issues which the state was supposed to take complete care

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of; i) growing inequity in healthcare provision between regions and between dierent
social groups.

3.1.1 Initial Policies and Demands for Change


after December 1989 to 1996
Following the political changes of December 1989, the overall approach of the new
government was to make preparations for the process of change but not to dismantle
the existing system until a new health policy had been adopted. Between 1990 and 1992
the healthcare crisis grew steadily worse, and the dialogue between the unions of health
professionals and the national and sub-national administration became increasingly
more dicult. Faced with severe and complex problems, the main diculty for health
authorities did not consist in identifying needs, but in establishing their hierarchy. Under
these circumstances, the major decisions made by the Ministry of Health immediately
after the December 1989 events were the following: to avoid the de-structuring of the
healthcare system prior to adoption of a new health policy; to inform both the government and the population on the dicult conditions of the system; to consider the HIV
and Hepatitis B epidemics as a top priority; to lower maternal mortality by providing
free access to safe abortion; to initiate competitions for admitting doctors to specialty
training, and thereby reduce the strain in the ranks of health professionals (such competitions had been prohibited for 810 years); to provide free movement of doctors in
a decentralized mannerat the level of district authorities; to create the specialty of
general practitioner, and to re-introduce post-high school health education for training
nurses, initiation of a managerial training process for the new directors of healthcare
units, those who had been elected after the political events of December 1989, and who
had to manage the crisis and lead the change. It can be noticed that in the competition for priority, the emergency criteria were the uppermost, and those with a possible
immediate impact, also favored by short-term conjuncture and political interests. The
winner was, in fact, the preoccupation with reform of the healthcare services, and not
for the reform of the health system.
Between 1992 and 1993 Romanian specialists, with the support of foreign experts
and nancing from a loan from the World Bank, produced a project for the rehabilitation of the health system in Romania, called A Healthy Romania. In fact the project
proposed the framework of a new strategy for the reform of health services. The more or
less explicit major aims of the new strategy were the following: a) reduction of the state
monopoly and its ownership role, which enabled it, at the same time, to nance and
acquire, to provide and to manage health services; b) to introduce social health insurance and improve the nancing of the system; c) to decentralize the system, increasing
the political and strategic roles of the Ministry of Health; d) to ensure management
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autonomy for the hospital, and the development of independent medical practice; e) to
develop primary medical care and free choice of family doctor; f ) to develop mechanisms
for accreditation and quality assurance; g) to adjust personnel policies in accordance
with national needs and European exigencies.
Although based on recommendations from the World Bank, the elaboration of the
strategy and decisionmaking lacked transparency and were methodologically unclear.
Thus, of the major actors that should have been interested in this process, only the
central health authorities were involved. In the necessary steps of preparing the policy
(planning, organization, implementation, evaluation) representatives of the medical
corps (professional unions, professional associations) participated only when the ways
were discussed by which the decisions already made by the Ministry of Health should
be implemented, and in such circumstances it was only natural for tension to develop
that inuenced the nal outcome. The representatives of those directly involved in the
experiment, namely the users, were not consulted at all, and thus the legitimacy of the
process had serious weaknesses.
Until the change of government in 1996, the MoH demonstrated either indierence
or resistance to reform activities, but persistent pressure from the World Bank, together
with support from stakeholders outside the MoH, permitted some progress in reform
components. Between 1992 and 1994 there was an initial simulation testing dierent
mechanisms of payment in four districts carried out by four dierent teams involving
Romanian and external consultants. The teams were from the UK (Nueld and Kings
Fund), Denmark, and Swedeneach working with a dierent district and helping to
choose the most appropriate way of PHC delivery. The initial idea was to implement
dierent options and compare them to see which was most appropriate.
Between 1994 and 1996 pilot health reforms were implemented in Romania in 8
districts, building on some of the recommendations of technical assistance carried out
in 19921994.
Legislation was passed in 1995 to establish the College of Physicians. Elections
were held for this body, but they were conrmed by the government only after the 1996
election; the college started to function from 1997. The social health insurance bill was
approved by the Senate in 1994 and by the Chamber of Deputies in mid-1997; its implementation started in 1999, but the numerous amendments changed the initial philosophy
of the law signicantly. A more detailed description of this essential component of the
reform health policy in Romania is developed in the last section of this report.

3.1.2 General Government Decentralization and the Health Sector


The Law of Local Public Administration, passed in 1992, set out the new structure
of decentralized public administration in the country. This dened the organizational
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context in which the public sector health services operate. It describes three forms of
decentralization:

Functional deconcentration within the MoH operates through 41 DHDs. These


are supposed to apply at the district level the guiding principles of health policy
of the MoH. They are headed by a director, who is always a doctor and is appointed by the MoH with the agreement of the prefect (see below).

Prefectoral deconcentration exists through the central appointment of a prefect in


each district. They are representatives of the central government in their district
and should ensure the legality of all decisions made by the local authorities
and coordinate the activities of the functionally deconcentrated state services.
The prefect also heads an administration council including the president of the
district council, the mayor of the principal urban center in the district, and
the directors of the deconcentrated central government bodies (including the
director of the DHD). The prefect must approve appointments made to the
administration council of the DHD, although the appointments are made by
the MoH. The prefect can also issue instructions on technical aspects of health
service, although these must be signed by the director of the DHD.

Devolution operates through a system of local government which takes the form
of locally elected councils. These have a number of powers with implications
for the health sector. These are: a) to approve the organization and activities
of local civil servants, including their appointment; b) to ensure the proper
functioning of local services; c) to monitor hygiene in public places and of
food products; d) to prevent and limit outbreaks of infectious disease; and e)
to authorize the opening and closing of local health facilities. This structure
of public sector operation has nevertheless maintained a relatively centralized
character through the lines of central-periphery authority, nancial control, and
central administrative regulation

Delegation operates after the introduction of the health insurance system. The
health insurance fund collects and utilizes funds for health as compulsory health
premiums, income-based, outside the state budget, throughout 41 DHISFs which
are autonomous bodies entitled to retain and use 75 percent of the collected
funds at the local level; however, starting from 2003 this situation changed, as
the DHISF are no longer entitled to retain the 75 percent of the collected funds
in practice and all the funds are send to the NHIH which then allots them to
districts based on its own formula (see the case-study on health insurance)

3.1.3 The Primary Healthcare Reform


During the communist era, Romanian health systems and health nancing were biased toward expensive secondary and tertiary inpatient hospital care. Primary care was
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undernanced and relatively neglected. Most outpatient care was provided by specialists in outpatient polyclinics, or in rural health centers. After hours, patients relied
on national ambulance services to provide primary care (such that over 90 percent of
ambulance visits were for primary care in Romania). General practice doctors were
relatively few, received only basic medical training, and had little professional prestige.
As a result, improvement in PHC was seen by the Romanian authorities as a key point
of the reform of the health system and was included as the main component in the rst
World Bank loan. The reforms were intended to strengthen access to and quality of
primary healthcare, improve client responsiveness through competition among GPs,
and reduce reliance on specialists and hospital care by giving GPs a gatekeeper function. The design and implementation of general practice reforms were consistent with
recommendations in the project-sponsored 1993 sector study.
Implementation began in 1994, and involved a new way of nancing primary healthcare provision through a pilot program (see Box 1). Apart from this pilot approach, over
200 rural health clinics have been upgraded and equipped with basic items for PHC.
However, several reports showed that almost half of them had no doctor at the end of
the PHC pilot, even if the dispensaries were rehabilitated and endowed with necessary
medical equipment (WB 2002).
Box 1.
The Romania Pilot Decentralization Program
The reforms described below were a response designed in support of one of the
key objectives set for health sector reform in Romania in the early 90s, i.e. shifting
toward independent providers both in primary and secondary care and developing
new payment mechanisms for these providers. This approach was intended to address some of the perceived problems of the Romanian health sector: ineciency
resulting from the imbalance between hospital services and primary care in favor
of the former, inequity due to limitations of access to basic services, resulting from
inadequate stang (especially in rural areas) and funding for primary care, and
lack of choice for patients in primary care. Income of sta was low (also compared
to average income in the economy, the ratio is much lower than in OECD countries) and was xed according to professional seniority and years of serviceno
link existed between income and the volume or quality of services provided. Primary care facilities were part of the same organization with the local hospital and
polyclinic, thus sharing one budget allocation, with decisions made by hospital
managersalways hospital-based clinicians. In an environment of overall scarcity
(Romanias public spending on health services has uctuated narrowly around 3
percent of GDP from 1990 to 1997) and given the distribution of power in favor
of hospitals, allocations for consumables, drugs, and equipment were even more
limited for primary care centers than for other levels of care.

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In the last quarter of 1994, based on Government Decision 370 of that year, the
eight pilot districts of Romanias 40 districts (covering 4 million people) introduced
changes in the provision and payment of general practitioners services. The plan
for piloting was received enthusiastically by district sta and generally welcomed
by doctors, but had only lukewarm support initially from the MoH. It is notable
that the pilots took place at all. The government had previously resisted piloting,
particularly experimentation with private sector approaches to service delivery, and
the pilots were only able to proceed in 1994 once the government and Parliament
passed specic legislation authorizing them. The system switched from the xed
allocation of patients to GPs according to residence to the free choice of the GP
by the population. Payment moved from xed salary (set according to professional
rank and seniority) to a combination of age-adjusted capitation (about 60 percent
of the total) fee for service items (related mainly to prevention, mother and child
care, early detection and follow up of major chronic diseases) and bonuses related
to dicult conditions of practice and professional rank (about 40 percent of total).
GPs contracts were held by district health authorities. District health authorities
established contracts with doctors, ending their status as hospital employees. Terms
of service introduced new requirements for 24 hours available for emergencies.
The contracts specied primary care services to be covered (which continued to
be free) and patients were allowed to choose their family doctor. Family doctors
were expected to enroll between 1500 and 2500 patients each.
An evaluation of preliminary pilot experience was carried out in 1995 (Jenkins
and others 1995). This was too early for an eective evaluation but provided some
preliminary ndings. After two years, 86 percent of the population was covered
by family doctors, with eight percent higher coverage in urban areas. Few patients
changed doctors, but surveys indicated that family doctors had become more client oriented. The output of family doctors increased, providing 21 percent more
consultations and 40 percent more home visits, and 87 percent provided emergency
coverage at night or on weekends. Doctors incomes increased by 15 percent on
average, and there was some evidence of declines in informal payments (although
these were already relatively low for primary care). However, dierences in access
between rural and urban areas persist as the limited nancial incentives included
in the scheme were not sucient to attract more physicians to rural areas. There
was no eect on hospital admissions, however, and no evidence regarding impact
on key coverage indicators (such as vaccination rates) or health outcomes.
The reforms therefore strengthened the GP as the gateway to the referral system
in addition to the introducing of a competitive element through patient choice
and new forms of payment. However, purchasing authorities with insucient
capacity and experience, operating in a weak regulatory environment, have been

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facing serious diculties in monitoring the payment scheme (especially the feefor-service component) both in terms of number and quality of services reported
(billed) by providers.
The pilots continued until 1997, when they were discontinued by the new government. While the pilots would have beneted from further evaluation, national
and district sta involved in the pilots played key roles in developing subsequent
reform regulations, and a number of adjustments were made as a result of pilot
experience. These included greater specicity in contracts regarding doctors responsibility for primary care, adding a practice allowance to the capitation payments
for doctors to help cover capital and recurrent expenditure, doubling capitation
payments for family doctors practicing in remote or low-income areas, and permitting doctors to charge for vaccinations to children not on their lists.
Source:

Vladescu (2002).

Several additional lessons can be drawn from the PHC experiment: the proposed
reforms create the potential for improved primary care, but the success of reforms depends not only on establishing appropriate incentives in the payment system, but also
on developing adequate capacity within the purchasing authority (DHA) for regulation
and monitoring of general practitioners; therefore changes in the payment and delivery
system should be accompanied by adequate training for the sta of health authorities.
Both national and especially local-level changes in employment and payment system
of GPs should be accompanied or preceded by intensive training for family doctors,
to allow them to adapt to their new roles and increase credibility for reforms among
patients and the medical profession. The training needs generated by reforms outstrip
available training capacity, especially if not properly planned from the beginning of the
reform program. While the PHC approach to primary care had the potential to succeed
in urban areas, nearly half of the Romanian populace lives in rural areas, where many of
the stated aims of the project cannot be achieved for objective reasons: lack of adequate
coverage with medical personnel and therefore lack of choice and competition between
providers; diculties in accessing health facilities; inadequate basic medical facilities, etc.
Some of these problems could be overcome by using new approaches which can maximize
the existing scarce resources; for instance encouraging group practice (where possible)
holds promise for addressing a number of issues, including pooled use of equipment
and administrative assistance and improved coverage for after-hours care

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3.1.4 The Health Insurance Law


The Law on Social Health Insurance was approved by the Senate in 1994 and the
Chamber of Deputies in July 1997. The introduction of health insurance was expected
both to increase resources available for health (through compulsory health premiums)
and serve as a catalyst for further system reforms, including improving system eciency.
At the beginning, this reform commanded wide in-country support, but for dierent
reasons: the Ministry of Finance, for example, hoped for increased eciency and cost
control, while doctors expected higher salaries.
The nancing based prevalently on general taxation was replaced with one based on
mandatory insurance premiums. The latter are calculated according to income and paid
in equal proportion by the insured person (the employee) and the employer, as a xed
percentage of the income (the salary and the wage fund respectively). In the rst year, i.e.
1998, employee and employer contributed ve percent each; afterwards, from January
1999, each contribution amount to seven percent, and starting with 2003 the employee
contribution was 6.5 percent; the size of the contribution is matched by a corresponding
reduction in income tax. Children and young people, disabled persons, and war veterans,
as well as dependents without income, have free access to health insurance. For conscripted
soldiers and people serving prison sentences, insurance contributions are paid from the
budgets of the Ministry of Defense and Ministry of Justice. The key provisions of this law
regulate the revenues of the health sector and the allocation of funds across health services
and healthcare providers. These include hospitals and their outpatient units, diagnosis
and treatment centers, health centers, dispensaries and medical oces). Through this
social insurance-based system, healthcare providers are contracted by the district health
insurance funds (DHIFs) to deliver health services to the insured.
All the funds are collected locally with the DHIFs. In order to improve equity across
districts in resource allocation, up to 25 percent of funds collected by the district health
insurance houses are redistributed through the National Health Insurance House between
districts, according to their resources and needs. In the rst year (January 1, 1998 to
January 1, 1999) the DHIFs operated as components of the district health authorities,
and afterwards as independent bodies. In the same year, the Ministry of Health acted as
the National Insurance Fund; the latter was set up as an independent body on January
1, 1999. Figure 1 illustrates the nance ow within the new structure.
There are another two special health insurance houses: one for military structures
(Ministries of Defense, Interior, and Justice, as well as intelligence structures) and one for
the Ministry of Transport. They actaccording to the special laws which complement
the Health Insurance Lawas district health insurance houses, collecting money from
their sta and redistributing up to 25 percent of their incomes to the national health
insurance house. An analysis of the implications of these special funds will be made in
the last section of this report.
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The new system grants insured peoples rights to health services, medicines, and
health implements, as stipulated by the frame-contract, which includes: the list of
health services to be provided by health units, the services quality and eciency parameters, the method of payment, the hospital length of stay, criteria, and medication.
The insurers are allowed to choose health services providers, and family physicians play
a gatekeeper role
The framework contract is the basis of the contract to be concluded between the
DHIFs and health organizations: hospital and their outpatient units, diagnosis and
treatment centers, health centers, family doctors practices, etc.
Screening, prevention, and early detection of diseases in medical practice are reimbursed by the DHIFs; health programs are nanced by the state budget, the health
insurance budget, and other sources. The packages of services nanced by the DHIFs
do not include health services provided for occupational hazards and diseases, labor accidents, a number of highly specialized health services, a number of dentistry services,
and high-rank hotel services. All this shall be paid for directly by the patients or through
other methods of payment.
Quality is assured, according to the HIL provisions, by selective contracting (meaning
the DHIFs shall only conclude contracts with the health units which meet the quality
criteria approved by the National Insurance Fund and the College of Physicians); control
is provided by physicians employed by the DHIF medical division together with the
representatives of the College of Physicians specialty boards.
The Law on Social Health Insurance stipulates a variety of methods of payment,
such as capitation (pay-per-insured person) and fee for servicefor primary healthcare
and specialized outpatient care; global budget for hospitalscalculated to various rates
(hospitalized patient, day of hospitalization, health service, and other formulae to be
negotiated).
A more detailed discussion on the health insurance system in Romania and its recent developments will be made in the last section dealing with the country case-study
(see Figure 1).

460

HIH

Specialist
cabinets

Hospitals

District Health
Insurance House

National Health
Insurrance House

CP

District College
of
Pharmacists

College of
Physicians and
College of
Pharmacists

Ministry of
Health

GP Cabinets

DHA Control
Commission

District Health
Authority

Controller for
Public Fund

District Director of
Labor and Social
Protection

District Director
for Public
Finances

Contract

Subordinate

Control

Ministry of Labor
and Social
Security

Ministry of
Finance

Figure 1.
Relationships between Actors in the Social Health Insurance System

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3.2 Policy Actors and The Decision-making Process


In the last 14 years Romania witnessed a great number of individuals, groups, and institutions with political interests in health sector reform. Among them we can mention:
the government (MoH, MoF, local and regional governments, etc.), health insurance
houses, Parliament, the presidency, the professional associations (CoPh, CoP), political
parties, pharmaceutical companies and dealers, trade unions, NGOs, multilateral and
bilateral external agencies (the World Bank, EU/Phare, UNICEF, WHO, UNAIDS,
USAID, the German government, Swiss government, DFID, JEIKA-Japan, CIDACanada, OSI-Soros, etc.). Given the great number of these players in health policy
arena and the inevitable space restrictions, we will focus only on the most prominent
of these actors, i.e. the MoH, NHIH, CoPh, and the World Bank

The Ministry of Health (and Family, from 2001 to June 2003the MoHF)
To a large extent the governmental system in Romania continues to operate as a centralized bureaucratic command and control system. This focuses important political power
at the top levels in the ministerial hierarchy. In the case of the MoH, the minister and the
high level technocracy have originated a number of reforms or taken on board reforms
suggested by the World Bank and groups of parliamentarians. The MoHF maintains the
responsibility for developing national health policy and dealing with public health issues;
at the local level the MoHF acts through district public health directorates and plays a
major role in the decision-making process in health policy. Almost all the major health
policy documents were initiated by the MoH. Starting November 2002, the MoHF
also coordinates the functioning of the National Health Insurance House. It should be
mentioned that since health reform tends to involve changes in public nances, almost
all the decisions required the approval of the Ministry of Finance. Thus, in the last several years the MoF has been in a position to heavily inuence the budget approved by
Parliament for the NHIH; in this way the MoF can be seen as an important (indirect)
player in the eld of health policy.

The National Health Insurance House


The NHIH sets the rules for the functioning of the social health insurance system and
coordinates the 41 District Health Insurance Houses (DHIHs). The NHIH negotiates
the framework contract which sets up, together with accompanying norms, the benet
package to which the insured are entitled to. The NHIH also controls the redistribution
mechanisms between districts and the resources allotted between specialties (primary
care, hospital care, ambulatory care, emergency care, dental care). The NHIH has the
right/power to issue implementing regulations (rules, norms, and standards) mandatory
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to all DHIHs, in order to insure the coherence of the health insurance system. The
annual budget for the NHIH is based on a framework contract, agreed upon annually
by the NHIF and the College of Physicians. This framework contract is approved by
the government and denes the benets package, conditions for service delivery, and
payment mechanisms. There are co-payments required for drugs and allowed for other
services. Family physicians play a gatekeeper role. The framework contract sets the general
terms for provision of healthcare services and is the basis of the contracts between the
District Health Insurance Funds (DHIFs) and healthcare providers (hospital and their
outpatient units, diagnosis and treatment centers, health centers, and medical oces).
The budget for the NHIF and its forty-one DHIFs is designed to cover ambulatory
(primary and specialist), inpatient, and dental care, including clinical preventive services
and drugs. The insured are entitled to prescription drugs and healthcare materials needed
to correct eyesight and hearing; prosthesis of the limbs is also either partially reimbursed
by the insurance funds or free. The Ministry of Health and Family and the NHIF, using recommendations from the College of Physicians and the College of Pharmacists,
compile a list of prescription drugs on a yearly basis with reference prices. Pharmacists
must sell the cheapest available drug, if only the generic name is on the prescription,
and must mention potential substitutes
Starting from November 2002 NHIF is coordinated by the MoHF, and the president of NHIF became deputy minister in the MoHF (see also the specic section on
HIS).

The College of Physicians and Medical Personnel


The CoPh registers doctors as provided by the 1995 law. The CoPh has important and
extended responsibilities in all areas of concern for physicians. This involves most elds
of the healthcare sector, including the health insurance system in which the CoPh is
involved in negotiating the framework-contract that forms the basis of all individual
contracts between DHIHs and providers. By virtue of this, the CoPh has an inuence
on the contents of the benet package for the insured population, the type of reimbursement mechanisms in place for health service providers, what drugs are compensated,
and in what proportion. After the change of government following the 2000 elections,
new legislation initiated by the MoH considerably reduced the responsibilities of the
CoPh in areas related to health policy (the CoPh has now only a consultative role in the
majority of the health policy decisions in which it was before involved).
Physicians have been particularly concerned about their relative lack of ocial status
in the old system, their low ocial income, and the limited technological environment
in which they work. With a view to improving their income the profession supported
a health insurance system and increased private medicine in the early 1990s. Dierent
opinion surveys indicate, however, that this initial reformist zeal has now weakened
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(CPSS 1999, 2000) It is possible that physicians (especially in hospitals) have come
to realize the benets of under-the-table and untaxed payments from patients. Also,
in the present system they are largely unaccountable for their work, a situation which
could change with the introduction of a more coherent health insurance system. At
the same time, the rst years of health insurance did not bring spectacular improvements in their social and nancial status, and for some physicians more administrative
work was required at incomes similar to what they earned before the introduction of
health insurance system. It also should be mentioned that medical professionals are
not well-organized politically, but are individually important due to their links with
Parliament (approximately 50 members of Parliament were/are medical professionals,
including the president and vice president of the health commission), political parties,
and particularly in their occupancy of important positions in the MoH hierarchy. This
raises another issue related to the analysis of health sector reform: healthcare reform was
planned and implemented by the medical elite who have a vested interest in scientic
research and high technology medical activities; numerous studies signaled that in Romania the medical profession maintains almost exclusive inuence on policy making
and strategic decisions (World Bank 2001). Referring to the CEE in general, the WDR
(1996) is clear: The medical lobby is well placed to steer policy in CEE countries and
the NIS because, in contrast with most market economies, the health minister is often
a physician, as are many parliamentarians. As a result, the Ministry of Health can easily
become the ministry of the health profession (World Bank 1996).

The Role of the World Bank


First, it should be mentioned that the two major reform projectsprimary healthcare
and health insuranceshow a clear inuence from health systems of other countries.
The introduction of capitation payments and contracting draws on UK experiences
in this eld, while the health insurance system draws on the German experience in
this eld. Both projects relied heavily on consultants from these respective countries.
Second, there is a growing presence of international agencies involved in the health
eldUSAID, EU (through PHARE and other specic programs, especially after
Romania was invited to join the EU and started the pre-accession procedures), the
governments of Germany and Switzerland, British Council, UNFPA, and UNICEF,
etc. Third, the World Bank has been an important player in the process of health sector
reform in Romania.
The World Bank project started in 1992 and involved a loan of US $150 million.
Originally designed to terminate in June 1996, it was extended to 1999 to allow the
government to spend the remaining monies. The project has the following major aims:
1) upgrade rural dispensaries; 2) improve reproductive health; 3) train health practitioners; 4) procure and distribute drugs and consumables; 5) improve management of
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emergencies; 6) strengthen health promotion; 7) develop a national health strategy;


8) develop a health information system; 9) establish a school of health services and
management. On a six -point scale (highly unsatisfactory, unsatisfactory, moderately
unsatisfactory, moderately satisfactory, satisfactory, and highly satisfactory) the project
outcome was rated as moderately satisfactory. As a comparison the US $34 million Estonia
Health Project was rated highly satisfactory and the US $56 million Hungarian project
was rated moderately unsatisfactory.
A second loan project of US $40 million was approved and started up in 2000. The
six-year, two-phase Adaptable Program Loan seeks to further strengthen health reforms
while supporting additional investments, especially for district hospitals and emergency
medical services. The project retains a strong focus on infrastructure and is not providing direct project support for strengthening health insurancethe European Union has
emerged as the primary donor for insurance. But the project seeks to combine investments with support for systemic reforms (for example, piloting an integrated approach
to emergency services).
The impact of the World Bank on health sector reform in Romania has been important. The primary care project outlined above follows from the World Bank-sponsored
Kings Fund/NIH report and comes within its program of health sector reform (see also
Box 1, for more details). Although the World Bank was not involved in the initial development of the health insurance system, they have played an important role in reshaping
the structure of the health system (see also the case-study section on HIS).
In Romania, the World Bank has looked to restrain and guide the process of health
insurance reform. A clue to its reservations here is oered in the WDR (1996) which
expresses three concerns over health insurance reforms: the tendency towards structural
decits given the need to subsidize the unemployed population; the increase in the
cost of labor and the incentives to work informally; the lack of control over spending.
An additional concern in Romania was that the health insurance scheme should be in
accordance with other reform projects, such as pensions, and that these should be seen
and considered together.
World Bank involvement in Romania should be seen in the context of its overall
approach to the transition process in FSE. This is put forward in the WDR in which a
prescription of freeing up economies, scal discipline, and control over ination is put
forward. In the social policy eld, attempts should be made to ease the pain of transition, but also push the transition process forward. Health policy options proposed
include the need to: a) focus on health improvements through changes in lifestyle and
aecting pollution and occupational risks; b) improve healthcare delivery through more
eective resource allocation, provider competition, and involvement of the private sector; c) achieve the correct funding balance between taxation and social insurance in
addition to the correct balance between provider payments through fee-for-service and
capitation payments (WDR 1996). A more detailed description of the role played by
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the World Bank in the development of the HIS in Romania is given in the case study
section of this report.

3.3 Policy Debates and the Pace of Reform


In comparison with some other CEE countries, the pace of reform in Romania has been
relatively slow. In attempting to explain this, one can nd both political and technical
arguments.
Major changes in an area that concerns every member of a society cannot be achieved
unless major politicians are involved, appropriate information is disseminated, and
citizen support is secured (both from providers and recipients of healthcare). Major
health policy changes have historically beneted from the direct involvement of important public gures: in the 19th century Germany, the new social security system was
introduced under the leadership of chancellor Bismark, and the second modern health
system was introduced in England after WWII by Lord Beveridge, both system types
now named after the two politicians. While in other countries, changes in health policies led to extensive analyses and debates by institutes and professional analysts, with
wide media coverage, in Romania the debates involved only peripheral issues and the
discussions were usually triggered more by spectacular episodes related to the dayto-day aspects of the systems (non-)operation and less by the causes and possibilities
to solve such deciencies. What we witness in Romania is the concern of both population and specialists with the continuous deterioration of health indicators and medical
care quality, reected by many opinion polls and statements, coupled with an almost
complete lack of debates on this issue in the media; even the discussion and passing in
Parliament of the Social Health Insurance Law went almost unnoticed by the public.
Political involvement was minimal, and all discussions on health reforms were at the
level of the Ministry of Health, with isolated involvement of actors like the College of
Physicians or certain unions, whose approach is rather reactive and strictly limited to
the interests of their own members.
In this context, the lack of a body of professionals in political analysis and the lack
of interest from the government for such assessments caused important decisions to be
taken without proper justication. Also, the provision of health services in the command
and control system, where the Ministry of Health and the local bureaucracy played a
part in almost every decision of the health units, severely limited the ability of managers and political decision-makers to gain experience in using information, incentives
and competition to achieve the desired results. In this context, the call for an increase
in the managerial eciency of the health system has very little support from the facts,
both at the macro level and at the local and health-unit level.

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4.

COUNTRY-SPECIFIC EXPERIENCE

4.1 Case-study on the Development of the


Health Insurance System in Romania
In this section the new health insurance system introduced in Romania will be presented
and analyzed. The topics that will be discussed will deal with: the regulatory and institutional history of the HIS, the new process of resource allocation in the health sector
and its impact on performance indicators, and the way in which the new health policies
linked with the introduction of the HIS in Romania fulll the declared objectives and
expectations of health reform. It will conclude with authors recommendations on the
development of the HIS in Romania

Regulatory and Institutional History


Discussed for the rst time in the Romanian Parliament in 1994, voted and promulgated
in the summer of 1997, the Law on Social Health Insurance initiated the transformation
of the health system from a state-nanced model to a social insurance-based model. The
Health Insurance Law was intended to begin partial operation on January 1, 1998, and
complete operation from January 1, 1999. Due to the lack of political stability (four
ministers in less than two years) and lack of decision-making capacity, 1998 was not a
preparation and training year, as was intended. Thus, instead of the insurance system
entering into force on January 1, 1999, it was necessary to make several modications
to the Law on Social and Health Insurance (LSHA) by government ordinances. The
system starting functioning legally only in April 1999. The same reasons (lack of political stabilityfour presidents in less than two yearsand lack of managerial capacity)
produced a situation where the NHIH did not produce any new forms of reimbursement
for the main providers of medical services (ambulatory clinics and, especially, hospitals)
which function in practice, according to previous administrative patterns. In spite of the
contracts being signed with insurance houses, almost all the mechanisms for resource
allocations at the outpatient and hospital level remained unchanged.
The introduction of the Law on Social Health Insurance was strongly supported at
the beginning by the population, physicians, and also by decision makers, especially the
health committee of the Romanian Parliament. This massive endorsement of the law, and
implicitly a public health insurance system, had two motivating sources. First, a political
source: after the changes of 1989, with everything associated with the old regime being
challenged, the Soviet-imported Semashko system of healthcare could not keep itself
o of the chopping block. In the given conditions a replacement had to be chosen, and
the options were not very numerous. Taking into account the fact that European tradi467

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tion and reality, both Western and Romanian, made the adoption of a private system
practically impossible; the only options remaining were a Bismarck-style public health
insurance system, like in Germany, France, or Austria, or, a Beveridge system, based
on general taxes, like in England, Italy, or Sweden. The option for a Bismarck system
was determined in this case by arguments connected with politics and tradition; this
kind of system being close to that existing in Romania prior to the Second World War.
Another factor was ideological factormost of the debates on this topic were between
supporters of a free market and supporters of government planning. In this context the
health insurance system was positioned somewhere in the middle of these two options,
and therefore acceptable to both sides.
The second motivation was technical, meaning how to implement the chosen system
and with what conditions. Many documents and statements by decision makers and
providers promoted the idea that social health insurance model is technically capable of
providing many of the desired and requested healthcare features: more resources allotted
to health, increased earnings for health professionals, greater nancial independence,
an increase in transparency a better match between patients needs and the services
provided, improved quality of care, and an increase in service-provider accountability.
The result is that the reformed Romanian healthcare system has not yet fullled the
expectations created in 1997, although health insurance did succeed in increasing the
revenues available to the sector, as is shown in Table 8.
Table 8.
Trends in Healthcare Expenditure, 19972000
1997

1998

1999

2000

Public expenditure as share of GDP (percent)

2.8

3.1

3.8

3.8

Total expenditure as share of GDP (percent)

3.5

3.9

4.6

4.6

Source:

Ministry of Finance.

Still the amount of spending on health, both as a percentage of GDP and also
as net gures, places Romania at the lower end of the spending distribution among
countries with a similar per capita GDP, as well as among most other countries in the
CEE region.
However, some of the most striking outcomes of the evolution of the health insurance system in Romania are linked with the way in which the current legislation and
functioning of the HIS match and fulll the initial aims of the Social Health Insurance
Law, and this debate will be made below.

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Box 2.
The Principles of the Romanian Health Insurance System according
to the Law on Social Health Insurance
Universality: all citizens should be equally eligible for certain medical care goods
and services, totally or partly nanced by social health insurance.
Solidarity: health insurance contributions are based on a percentage of income,
regardless of the amount of the income or the health condition of the insured
person. Those with higher incomes nance those with lower incomes, the healthier
nance the sicker, the younger nance the older, the more developed counties
nance the less developed.
Subsidiarity: certain entities (pension funds, other social funds, or the state budget)
pay health insurance contributions (or their equivalent) for those: a) unable to pay
(the poor) or b) excepted from payment.
Non-discrimination and equity: equal access to certain healthcare services regardless
of payment. In other words: to equal health needs equal medical services.
Autonomy and decentralization: the independence of the health insurance fund
from the central government and the interested parties, as well as decisions being
made as close as possible to the place where funds are used (district level).
Specialization: the health insurance fund is a nancial institution specializing in
purchasing healthcare goods and services.
Financial independence coupled with increased transparency in the process of resource allocation, both geographically and regarding dierent types of medical
units.
Source:

World Bank (1998).

In other words, the expectations were that the new health system would: a) deliver
more and better healthcare services to the population, b) rationalize provision of healthcare goods and services, c) make more cost-ecient allocation of resources, and d) build
a public/private mix in the provision of healthcare goods and services.
Following numerous amendments to the HIL, coupled with other decisions for
reforming the health system, resulted in the annulment and/or diminishing of some
fundamental objectives covered in the original text of the HIL passed by the Romanian
Parliament. Even this is not a negative aspect per se; it raises the issue of legislative coherence and the accountability of the decision-making process. Below we will analyze
the existing structure and health policy of the HIS from the point of view of coherence
and successful achievement of the initial aims of the Health Insurance Law.

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But rst we will notice the important role played by international bodies, especially
the World Bank. Immediately after the adoption of the Health Insurance Law by the
Senate, the World Bank commented on the nancial implications of the law, a fact
that delayed voting in the Chamber of Deputies. The bank soughtwith mixed successto inuence the process through analytic work and policy dialogue. It should be
mentioned here that its advice evolved over time. The World Bank sponsored a 1993
sector study, which called for the establishment of national health insurance, but offered few caveats regarding feasibility or adapting the model to the Romanian context
(Kings College Fund 1993 ). While social insurance had little support from the MoH
initially (the government never formally responded to the recommendations in the
study) social insurance commanded growing support in Parliament. By the mid-1990s,
the bank began to regularly raise concerns in its policy dialogue regarding the viability
and advisability of national health insurance for Romania, but the political momentum
was already established. The project also supported a study on health sector nancing
(1998), carried out by the Health Insurance Commission of Australia. This was initially
intended to assess whether the government should establish national health insurance,
but Parliament passed a health insurance law before the study was launched. The study
instead focused on assessing policy options under health insurance. It is specically
credited with raising the problem of equity among the various district health insurance
funds, which led MoH and Parliament to amend the law to allow up to 25 percent of
funds to be transferred to poor districts. In practice, however, the reallocation formula
is not transparent, and has beneted districts on the basis of revenue shortfalls, rather
than equity criteria. Although the banks current project (see previous section) does
not provide direct support to national or district health insurance funds (the European
Union has taken the lead in this area) the bank has sought to maintain engagement in
these issues through its macroeconomic and sector dialogue.
Immediately after the adoption and promulgation of the Health Insurance Law, the
World Bank made some recommendations, this time more precise, shown in Box 3.
The greater part of these recommendations were adopted through dierent normative documents by the end of 2000. The arrival of the new, left-oriented government,
which came to power at the end of 2000, brought a stated intent to continue the implementation of health insurance and some of the previous reforms, in accordance with
the government health program (see Box 4).
What our case-study discovers is an important gap between general policy and implementing reality, almost in all the enumerated health areas (decentralization, new and
ecient mechanisms of resource allocation, autonomy of health institutions, etc.).
Therefore, almost all the legal amendments made in the last 4 years have brought
signicant changes to the Social Health Insurance Law (SHIL) as compared to the rst
text and the rst purposes. This important aspect has to be analyzed not only regarding
SHIL but also from the point of view of other laws that function in the same eld.
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Box 3.
World Bank Recommendations Concerning the Amendment
of the Health Insurance Law

Source:

Establish a single health insurance house with 41 district branches (instead


of 42 autonomous district insurance houses, with responsibility in collecting
and managing local nancial resources).
Increase the seven percent for redistribution among districts to 25 percent,
in order to decrease the inequities between available resources and healthcare
needs.
Elaborate a nancial plan for the years 19982000, which should consider
variations in nancing stipulated by the Health Insurance Law.
Give up elections as a mechanism of establishing the leading structures for
insurance houses in favor of direct appointment of a board president by the
prime-minister.
Alter the role of the College of Physicians to prevent a conicts of interest.
Merge the collection agencies for the health, pension, and unemployment
funds to improve collection of all social funds.
World Bank (1998 and 2002).

Box 4.
The Government Health Program
The government program proceeds from the principle that healthcare must
be a collective social asset, accessible to all Romanian citizens, irrespective of their
solvency, on the background of free and balanced access to healthcare services.
In establishing the actions and measures to be taken toward the strategic goal
of a healthier Romania with low morbidity and less premature deaths, account
was taken of the discrepancy between the populations healthcare needs and the
structure and orientation of healthcare services. Also considered was the fact
that the current healthcare system has too many units where certain services are
overstrained while others are inecient, and there is an overemphasis on hospital
services to the detriment of outpatient and community care services. In this context
the following goals will be pursued:
Develop integrated medical services (primary care, specialized outpatient,
inpatient, and emergency care) so as to enhance the quality of medical care and
determine a more ecient response to consumer demand, and achieve an adequate
cost-eciency ratio.

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To the end of improving the mortality and morbidity indicators of the general population, 32 national programs will be applied and the network of public
healthcare services will be developed by altering the inpatient-outpatient care
ratio. The state, through its representatives, must guarantee the development and
monitoring of healthcare in Romania for all population segments (urban and
rural, children, old people, employees, jobless people, disadvantaged persons, and
low-income or no-income persons).
The Ministry of Health and Family will issue and apply normative acts to
replace the centralized command system by a decentralized and ecient one beneting the citizen. This new system should also dene the relationship between
the central and local authorities. The growing autonomy of healthcare services will
stimulate competition and improve the quality of medical services. The Ministry
of Health and Family will be rm and correct, restoring the authority of the state
institution, developing a strategy and applying government policy in the eld of
healthcare employing modern principles to protect and maintain collective and
individual health.
The Ministry of Health and Family retains the responsibility of managing funds for: budget allocations for healthcare; healthcare programs of national
importance; public and private healthcare regulation systems; research regarding healthcare policy; nancing buildings and high-tech equipment; developing
managerial capacity; creating a pluralist system to nance medical activity made
up of public and private resources.
The gist of the system will be equal opportunities for medical services and
equitable solutions to problems of payment for services supplied. Payment modalities will be made known to the entire population. The healthcare system will be
nanced from social insurance funds and the payments made by patients. The state
budget will fund national medical programs and investments in hospitals, buildings,
and high-tech equipment. Health insurance funds will nance healthcare services
(primary care, outpatient, inpatient, emergency care, dental care, rehabilitation,
and compensated pharmaceutical products). The patient will contribute part of
the payment for certain medical services and the whole payment for other medical
services, as well as part of the payment for compensated medical drugs.
The National Health Insurance House, the main provider of nancial resources
for medical services, will clearly dene the package of healthcare services supplied
to the population, will establish the rights of patients, will enhance the quality of
medical care by imposing quality standards, establish a quota of universal medical services in view of the limited budget, and support the decentralization and
improvement of central and local management.

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There are plans for developing a model to objectively allocate the funds to
hospitals, dependent on the characteristics of the hospital and of the pathology of
the patients treated. The nancing system proposed will use a methodtested and
utilized in many developed countriesbased on diagnostic-related groups.
Source:

Governmental program 20012004.

One of the rst aims of the new SHIL was to promote a system with equal opportunities for healthcare for all Romanian citizens; one of the rst major changes that
occurred several months after the SHIL was approved was the introduction of a two-tier
system, by permitting the existence of parallel health insurance houses.
One can estimate that the principle of solidarity in nancing and supplying medical services is altered by these regulations, which result in the creation of parallel health
houses, based on professional principles. They are targeted at socio-professional categories
with low risk and high income in relation to the national averagenamely personnel
working in the military structures, justice, and transport. These houses, then, do not
contribute to the redistribution of resources to those who have greater needs and lower
incomes: the elderly, the unemployed, the chronically ill.
The structure of the insured is dierent between district houses and the two special/parallel houses, both as far as sickness risk and incomes are concerned. It is dicult,
then, to build up a truly equitable redistribution mechanism in the whole HIS. While
the shortcomings of the redistribution formula are not important when applied to the
population of districts (where variations are smaller) the main determining factor of service
consumption is population number. In the case of those insured by the two houses, these
dierences are much bigger. Thus the average income per insured person is approximately
3 times higher in the CAST (the Health Insurance House for Transport) and 30 percent
higher in CASOPSNAJ (the Health Insurance House for Military Structures) compared
to the average income per insured person in the district houses (Table 8).
Expenditures on medical services per insured person are almost 30 percent higher
in CAST and almost 30 percent lower in CASAOPSNAJ compared to the average
expenditures per insured person in the district houses (Table 8). The situation of the
expenditures in CASAOPSNAJ can be explained by a more favorable risk structure
(healthier insured persons) or, more probably, by the services obtained by the insured in
hospitals, which have a contract with the district houses. As a matter of fact, the house
where the patient is insured does not cover expenditures. This is a consequence of the
shortcomings in the determination of insured status, the circulation of this information,
and the dicult mechanism for reimbursement.
Even after contributing 25 percent to the redistribution fundin the case of CAST
with higher average expenditures per insured personthe budget surplus of CAST
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and CASOPSNAJ is very high; 30 percent higher than the surplus of all the other
district houses together or 57 percent of the total excess in the insurance system (Table
9). This shows the major discrepancies in the enforcement of the equity and solidarity
principles, very dicult to avoid under the special structural conditions of the insured
in the two houses.
Table 9.
Rectied Budget 2000, EGO 155/2000, in Thousand Lei
Military

Transport

Income prior to
redistribution
Income per
insured
25% redistribution

3,100,000,000

1,246,882,300

24,656,114,200

29,002,996,500

1,608

3,659

1,221

1,292

775,000,000

311,720,575

6,164,028,552

7,250,749,127

Total expenditures,
without redistribution
Medical services
expenditure
Medical services
expenditure
per insured
5% reserve

1,572,766,950

497,308,486

23,191,003,579

25,261,079,015

1,479,216,000

450,550,400

21,995,077,475

23,924,843,875

767

1,322

1,090

1,065

Excess
Number of
insured persons
Source:

District Houses

Total

116,250,000

46,758,086

924,604,283

1,087,612,369

880,108,050

418,588,910

993,070,700

2,291,767,660

1,927,440

340,778

20,187,267

22,455,485

Ministry of Finance and National Health Insurance House.

The average expenditures for each insured person suggest a dierent prole related
to access to services for the insured in both houses and/or major deciencies as regards
the accurate distribution of related services costs (and implicitly their bearing from the
district houses funds). Therefore:
In 1999 average expenditures for drugs in ambulatory services were signicantly greater
for CAST and CASAOPSNAJ in comparison with the countrys average (only three district
houses having increased expendituressee Table 9). The situation completely changed in
2000 (Table 10) as regards CAST and CASAOPSNAJ expenditures. These expenditures
were considerable in light of the countrys average expenditures. This means either fewer
drugs were administered due to a better checking mechanism regarding the insured, with
the help of drug stores (with possibly limited access) or information about insured patients
was incomplete and expenditures have been met by district houses.
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In comparison with all other houses, CAST has the highest ratio of expenditures
per person for ambulatory-specialized services (Tables 10 and 11). This ratio was two
times higher in comparison with the national average for 2000a fact that suggests a
more facile access to these services for persons belonging to CAST.
CASAOPSNAJ had nine times less expenditures for primary assistance in 2000 in comparison with the national average, begging the question concerning the access the insured
had to primary care services (situations where an individual insured by CASAOPSNAJ is
registered on the list of a civil GP are frequently cited).
Table 10.
Average Expenditure per Insured Person, 1999, Eective Expenditures
(Achievement), in Thousand Lei
Medical Services

District
Average

Minimum

689

266

2,022

443

655

63

38

99

57

54

Ambulatory specialized

43

15

77

28

77

Dental care

17

49

21

44

440

101

1,476

200

359

56

132

99

74

22

10

22

Total
Primary

Hospital
Ambulatory medicine
Prostheses and
sanitary devices
Ambulance and therapy
Reserve fund
Source:

Maximum

Army

Transport

25

50

13

22

10

22

National Health Insurance House and Ministry of Finance, 2000.

The contributions collection and their situation is more complicated and presume
supplementary costs met by economic agents (who must determine if an employee
selected a house other than the district house) or district houses. At the same time,
for the suppliers, supplementary costs appear regarding determination of the secured
quality of a person and the administration of some additional agreements with CAST
and CASAOPSNAJ.
In fact the continuing presence of parallel houses violates the Law on Social Health
Insurance in other conceptual aspects as well. The organizational system was intended to
be national with district representation; the existence of parallel houses made this goal
very unlikely to be achieved, given the fact that almost two million people registered in
those two health insurance houses are excluded from district representation.
Decentralization was also severely amended. Inside the parallel systems it is obvious
that this principle cannot operate because of closed systems of command and control. The
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same thing may be said about the transparency process regarding resource distribution.
Without such data, the eciency and performance of the system cannot be evaluated,
and consequently, cannot be improved.
The maintenanceand even developmentof parallel systems is paradoxically
harmful not only to the public system, by decreasing revenues and increasing the risk
average of the insured; they are also harmful to new parallel systems. In this respect,
the personnel in the army, transport, etc. cannot be treated or checked free of charge as
per the civil system, as they are subject to agreements signed by the respective insurance houses.
The principle of the insured persons free choice must be critically examined, especially considering the Romanian economic situation, where total expenditures related
to health are lower than other European countriesa level set higher because of diminished economic support. A system with multiple and parallel insurance houses spends
a higher amount on administration to the disadvantage of direct expenditures related
to medical services. Does this supplementary expenditure happen simultaneously with
higher eciency in services for the parallel health insurance houses provided by real
competition? Or is there only a parallel bureaucracy with supplementary eorts and
expenditures both for insurance houses and for the providers of these services? One
cannot conrm that the existence of CAST and CASAOPSNAJ respects the principle
of free choice for the insured. Persons in the eld of transport and defense have no real
option beyond CAST or CASAOPSNAJ.
It must be underlined that to dissolve parallel houses does not inuence the character
of the ownership or the organization of the units belonging to the respective ministries
and structures (Defense, Interior, Transport, Justice, the intelligence agencies, etc.). In
practice, these ministries may keep their present structure unaltered and receive supplementary funds from the state budgetfunds designated to investments and specic
medical services, expenses not covered presently by insurance houses (spatial medicine,
specic medical services connected to transport insurance, etc).
To sum up, parallel houses were organized for socio-professional categories with low
risk and above-average income. They do not participate in redistribution of resources,
but rather impoverish the rest of the system. Parallel systems also violate the principles
of autonomy, territorial distribution, and transparency. The dissolution of parallel houses
may aid in implementing the overall national strategy for healthcare.

Resource Allocation in the HIS


Another important area is resource allocation in the health sector, as the improvement
of this mechanism was considered of utmost importance when the new system started to
be developed and implemented. As noted earlier, the HIS was designed to allow a better
match between patients needs and the services provided by making the allocation of
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health insurance funds responsive to the demands of the insured, to improve eciency in
the allocation of resources, and to increase service provider accountability to the insured.
In practice, however, the system has operated as a hybrid between social insurance and a
publicly managed system, where revenues are collected as health insurance contributions,
while the government still exercises a considerable amount of discretion in allocating
funds, through the interference of the Ministry of Finance in dening expenditure
ceilings. This happens because the Pension Fund has statutory payment obligations
that exceed its revenues and, as a result, has been running large decits. The Ministry
of Finance has therefore been imposing spending limits on the Health Insurance Fund
so that its surpluses help oset the consolidated budget decit. This means that each
year the health insurance budget is set with a considerable surplus; for instance in 2001
expenditures were set at 91 percent of revenues and in 2002 at 95 percent of revenues.
This has created tensions within the system, weakening accountability and nancial
control, as the practice of having expenditures still dened by the central government
is inconsistent with the contributory social insurance model adopted by Romania in
1997. Excessive control reduces the funds ability to develop stable, rational funding
agreements with providers. This in turn leads many providers to develop mechanisms
to deal with budget uncertainty (including substantial arrears), with the perverse eect
that the overall level of nancial control of the health system is reduced and weakened,
so increasing transaction costs lead to a situation where one of the most poorly-nanced
health systems in the CEEC carries the highest cost for healthcare (for drugs, medical
consumables, etc.).
These distortions in budget design stage have also meant that budget implementation
is marked by the accumulation of substantial arrears, and the need to reduce funding
for key services (e.g., primary care, ambulatory specialist care, emergency services). For
instance, in early 2001 late payments by state-owned hospitals reached close to 4 trillion lei, even though the accumulated surplus of the National Health Insurance Fund
amounted to 3.6 trillion lei, and there was an additional 1.4 trillion lei set aside in a
mandatory reserve fund. This placed tremendous pressure on the implementation of
the 2001 budget, leading to a reduction of expenditures in key services accompanied by
a rapid build-up of new arrears to suppliers by hospitals. The latter is estimated by the
National Health Insurance Fund to have reached 4.6 trillion lei by the end of September
2001. Furthermore, district insurance funds had more than eight trillion lei deposited
in their accounts from carrying forward the surplus from previous years and from the
dierence between revenue collected in rst nine months of 2001 and the expenditure
made in accordance to the budget program.
The consequence, however, has been to reduce the accountability of the management
of these social security funds, as fund managers and service providers under these funds
(e.g., hospital and other healthcare units) accumulate payment arrears to lay claim in
advance on these surpluses.

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All the available data suggest that due mainly to budget design issues, but also to
other problems related to the distribution of power in the health system, there is increasing evidence of a disconnection between resource allocation at the budget-design
and execution stages.
Thus, the policy objectives and nancial plans dened in the framework contract
and approved in the budget do not match the actual resource allocation of the executed
budgets of the health insurance funds. This can be seen by comparing actual budget
provisions with the revised budget and actual expenditure by type of service during
the period from 1998 to 2000 (Table 12.). The actual expenditure for primary care,
outpatient specialists, drugs, dentistry, medical aids, and pre-hospital emergencies were
systematically lower than planned, whereas hospital services actual expenditures were
always higher than approved in the framework contract and budget. Indeed, despite the
stated objective of increasing expenditure in primary healthcare, actual expenditures remained relatively constant as a proportion of total expenditures. Meanwhile, expenditures
on hospitalizations continued to account for around two-thirds of total expenditures,
with this share rising to just under three-quarters if one takes into account that almost
all insurance payments for drugs are made to hospitals (see Table 11).
As one of the declared intentions of the introduction of the HIS in Romania was to
improve the eciency of the system (by shifting the demand from secondary and specialist
care toward primary caremeaning resources are allocated to services where there is greater
demandi.e. allocative eciency) and the equity (increasing access to healthcare services
for the poor and vulnerable) we will try to analyze how these aims where achieved.
The available data show that most of the public resources in the health system
continue to be spent on hospitals (almost 70 percent) with an increasing share now
allocated to ambulatory specialized outpatient treatment. As a result, there is a decline
in spending allocated to primary care (family doctors).
Table 11.
Functional Allocation of Current Expenditure by Level of Care, 19992001
1999

2000

2001

Primary healthcare

13

12

10

Outpatient care

14

19

18

Hospitals

70

68

67

100

100

100

Other
Total
Source:

World Bank 2002.

Given the fact that almost half of the Romanian population lives in rural areas where
the only available health services are primary care facilities, the gures suggest that, at
478

World Bank 2002.

100

Total

Source:

4.3

Medical aids, prostheses

0.1

3.2

Rehabilitation

Programs

0.8

Dentistry

Pre-hospital emergencies

6.8

2.7

Outpatient drugs

5.8

67.2

Hospitals

9.0

Primary care

Outpatient specialists

Actual
Expenditure
1998

Type of Service

100

0.0

4.5

3.0

1.0

4.2

20.0

40.0

11.7

15.5

Framework
Contract
1999

100

5.0

3.8

0.6

1.2

2.8

9.3

61.2

6.6

9.5

Revised
Budget 1999

100

5.2

3.7

0.3

1.1

2.4

8.0

64.2

6.1

9.1

Actual
Expenditure
1999

101

0.11

34

2.53

1011

5961

8.75

14.515

Framework
Contract
2000

100

0.0

3.0

0.3

0.6

1.6

12.8

64.0

7.8

9.8

Revised
Budget 2000

100

7.0

3.0

0.3

0.6

1.4

11.3

65.5

7.5

8.8

Actual
Expenditure
2000

100

11.2

10

5053

8.75

14.515

Framework
Contract
2001

Table 12.
Health Insurance Fund Expenditures: Comparison of Framework Contract Provisions, Revised Budget Provisions and Actual
Expenditures, 19982001 (%)

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least for the rural population, access could have worsened in recent years. This could also
mean that people will have to use hospital facilities more frequently, as they dont have
the choice of primary care; in turn this would increase costs, creating a vicious cycle.
Another explanation of this resource allocation pattern is linked with the distribution
of power within the system: almost all the power from the healthcare system in Romania is concentrated in the hands of people working in or linked with hospital activity.
Anyway, as mentioned earlier, the major reform, from the point of view of nancing,
occurred in PHC, and the expectation was that this area would rapidly grow. One of
the reasons why this hasnt happened is linked with the fact that no coherent training
and investment policy was coupled with the nancial reform of the PHC.
However, this data also shows an increase in outpatient expenditures in recent
years. One of the areas where this increase is most evident is the area of ambulatory
medical tests, but here we have a paradoxical situation. According to NHIH regulation, the hospital lab cannot be contracted to perform medical tests for patients other
than those admitted in the respective hospital. This leads to the situation when only
private laboratories can be hired to execute signicant contracts with the local health
insurance houses. At the same time, in main district hospitals high-performing testing
equipment has been purchased with public money, with automated systems that can
perform an important number of tests daily with low additional costs, but they cannot
be reimbursed for outpatients.
One of the national house explanations was that this encourages private practice,
but the measure as such is contrary to the principles of the market economy, because one
competitor has restricted access to the medical services market. A possible explanation
would be in the new nancial circuits created within the new insurance system. So, in
order to benet from the reimbursement from insurance houses, medical testing rms
have to provide tests for patients having a prescription from the family physician, who
in turn should have a contract with the district health insurance house.
In reality, the big companies hire several such physicians who are then remunerated
by a share (percentage) in accordance with the number of patients sent to have their
tests performed. This is a widespread semi-legal practice with the following results: the
cost of the medical service increases, while public institutions in many cases cannot
investigate patients recommended by the family doctor, because they cannot oer the
same nancial compensations as private companies do. One of the motivations invoked
by certain analysts is that the participation of public institutions is not correct, because
they are not supposed to cover certain expenditures, for instance the amortization of
the investments made or a future investment fund. This can be partly true, but the
regulation of this aspect fells into the attributions of other institutions than the houses
of social health insurance, and we end in a situation where a publicly funded institution
(the NHIH) is legally supporting private companies, at the same time denying the right
of public medical institutions to participate in the specic market.
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Recent Developments in Policy Linked to the Health Insurance System


On taking oce, the new, left-oriented government that came into power at the end of
2000 asserted their intention to continue implementing the insurance plan along with
several other previous reforms (see Box 2). However, it resulted in issuing normative
acts which will signicantly alter the operation of the system in practice. The new PSD
government appears to favor increased centralization, increasing the power of the central
government and decreasing the power of professional associations.
Paradoxically, some decisions are more right-oriented than those of the previous government. An interesting example is the privatization strategy of health public services.
Here are included not only PHC facilities and/or ambulatory care cabinets but also
the selling or concession of hospitals, which is an unusual approach in the European social
democratic area. It should be mentioned here that this privatization strategy also relies
heavily on the WB recommendation this time the IFC was the WB structure which
made the recommendation related to privatization of the health services in Romania
A government ordinance in 2003 signicantly altered the role of the NHIH. Through
modications to the Law on Health Insurance, district autonomy was practically eradicated. District houses became branches of the central house and have no power over
locally collected funds. Previously, districts had control over 75 percent of the funds
collected and only 25 percent were sent to the National House for redistribution. Now
all the funds are allocated by the NHIH, without any transparent formula.
The solidarity principle has also been altered by new regulations. Under present conditions, when, according to the law, almost half of the insured do not pay an insurance
fee (starting from January 1, 2003, pensioners do not pay an insurance contribution
which, between 1998 and 2002, was automatically deducted form the pension fund) this
principle is dicult to enforce. The governments argument is that pensioners cannot
aord this deduction, but the deduction came from the pension fund, not from individual pensions. It is submitted here that this will lead to the collapse or restructuring
of the system. If neither of these events takes place, it means that the earlier allocation
of funds was incorrect, perhaps fraudulent.
Regarding decentralization, we have another paradoxical situation. Several normative acts support decentralization, while others increase centralization. Thus, the new
government ordinance that modied the SHIL practically abolished decentralization
at the district level, at least in terms of nancial autonomy. Also, according to the same
ordinance, the National Health Insurance House lost its autonomy and became a part
of the MoHits president being appointed deputy minister of health.
On the other hand, another new ordinance transfers ownership of almost all
medical facilities from the MoH to local councils. In theory this could be benecial as
the decision related to the functioning of medical facilities would be made as close as
possible to those who need specic health services. But in reality local councils have
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neither competent specialists in this sector, nor in many cases, the resources, in spite of
the fact that the mayor is supposed to approve the budget and the personnel structure
of sanitary units. Here we should note that basically the mayor has no decision-making power in this respect, as both the quantity of hired personnel and its structure is
set at the MoH level. Starting in 2002 there is an order from the Ministry of Health
and Family, which establishes the number of personnel per department. The logic of
the insurance system, which introduces the contract system as a basis for resource allocation, is to be paid according to medical services supplied and not according to the
number of personnel. It was seen as important to perform ecient medical activities,
and the management of the hospital was to decide how many people they employ, in
accordance with local needs. In order to avoid abuses or decreases in quality of medical
service, the NHIH was mandated to develop quality criteria, but this process is still in
a preparatory phase.
What, then, can be anticipated, is the dissatisfaction of the population as medical
sta are transferred from the central to the local level, even though major decisions are
still made at the central level, as the MoH maintains control over all medical aspects of
health facilities (the MoH is the only structure to set the number and variety of medical
units, personnel, investment policies, basic benet packages, reimbursement policies, etc.).
Thus, under the present conditions, we imagine that there can be three possible
outcomes for the insurance system in Romania:
1. The National House modies its strategy substantially, in accordance with
existing legislation, and develops its capacity related to the use of the funds
(which will be collected by a separate body starting in 2004). It will develop
performance and quality indicators for medical services and will contract with
both public and private suppliers.
2. The National House will function in the same way as up to now but will lose
its role in collecting funds. In this case the role of the house in the healthcare
system would become somewhat redundant, as the ways of paying medical
suppliers would be almost the same as before the introduction of the Law on
Health Insurance. The system is based mainly on historical budget criteria and
political inuences without a direct link with performance (quality included) of
the sanitary service suppliers. There are no such criteria worked out so far at the
national level, which could be included in the contracts concluded between the
house and the sanitary service suppliers. This approach could lead to a third
option.
3. The National House, together with the rest of the health insurance system,
will be merged into the MoH structure, both at the central and the local level,
and the health system will turn into a mixture, similar to the Beveridge system,
with district health authorities in charge of purchasing health services for their
population.
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5.

CONCLUSIONS

In the context of the implementation of a social health insurance system, a central problem is that the initial solutions supported by decision makers and even the electorate
were eschewed for certain political and technical reasons. These new developments will
bring neither political nor technical benet.
As we have succinctly presented in this paper, one of the principle technical advantages of a social health insurance system is separation between health service providers,
nanciers, and customers. It is less restricted than a Ministry of Finance-controlled
system based on taxes.
In fact, the present organizational structure of the NHIH has not succeeded in
bringing the split necessary to place the system on a transparent, coherent, and sustainable basis from the nancial and administrative point of view. As a result, certain
functions that the Ministry of Health refuses to give up are duplicated. Paradoxically,
after the development of the insurance system, at a time when two-thirds of the MoH
budget was allotted to other structures, the ministry increased its sta by 25 percent.
At the same time, it cannot perform clear and specic tasks such as dening a coherent
health strategy.
The sustenance, and even the development, of parallel insurance systems are detrimental not only to the public system whose incomes they reduce concomitant with an
increase in the average risk factor of the insured. These also discourage parallel systemsa
fact being in conformity with actual regulations.
Continuous and sometimes conicting changes in health legislation increased the
lack of accountability at all levels of the Romanian healthcare system; in this context,
dierent attempts to decentralize the health system could be seen, in our view, more like
a measure to shift the blame for the shortfall of the system than an attempt to increase
responsiveness to local needs
With no claim of making inferences or anticipation regarding the future of the
Romanian Health System, one can assess that at least in the medium-term the SHIL
did not lead to major structural changes relative to the functioning of the health system,
and the Romanian reformed healthcare system has not yet fullled the expectations
created in 1997.
As a closing remark we must point out that, both the population and the medical
personnel have a negative image of the quality of health services in Romania, an image
emphasized by many studies (CPSS 19992003; IMSS 2001). This means that the
population and medical personnel expect and want to sustain coherent changes to the
healthcare system.

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