Reforming health systems

Everywhere, health sector reform is a continuous and complex struggle. Neither governments nor free markets can by themselves allocate resources for health efficiently. As policymakers try to reach compromises, they must deal with powerful interest groups (private doctors, drug companies, medical equipment manufacturers and private insurer) and strong political constituencies, including urban dwellers and industrial workers.

The world's diversity of health care systems is matched by the diversity of reform movements. However, several common themes are beginning to emerge. First, governments are increasingly recognizing the centrality of their own role in public health. Second, governments are exploring ways to introduce more competition and foster a diversity of public and private institutions in the delivery of clinical service. Third, governments are examining new approaches to finance and insurance, including selective user fees in the public sector, systems that discourage third-party reimbursement, systems that mix finance form compulsory social insurance and form general tax revenues, and systems that set fixed budgets for each patient or each case.

Examples of health system reforms in recent years are of Zimbabwe, which imposed a decade-long moratorium on new investments in central hospital and has concentrated on improving health centres and other district-level infrastructure. Tunisia has converted eleven large government hospitals to semi-autonomous institutions with strong incentives for improved performance. During the 1980s (then under a military government), Chile delegated responsibility of its entire primary clinical care system to its 325 local governments and fostered more public and private competition in health service delivery and in insurance. Costa Rica and Korea have achieved universal health coverage through social insurance. Malawi has increased the health share of the government budget from 7.1% in 1991 to 9.1% in 1995, raising the fraction of health spending for district health services from 15 to 23%, and reducing the share devoted to the country's three central hospitals from 35 to 25%. To strengthen the district health system, more than 3,500 new lower-level health workers have been engaged to rural clinics and communities.

[Formerly socialist countries] Historically the government was responsible for both the finance and the delivery of health care in the formerly socialist countries of eastern Europe and the former Soviet Union. Health expenditures were financed from general revenues. In principle, they were provided free of cost to the population at government clinics and hospitals and at facilities run by state enterprises, but in practice "informal" payments were injected into the system. Today the health systems in these countries are in severe crisis. Many doctors and pharmacists are leaving the government health services to practice fee-for-service medicine in the private sector. Since real government spending for health has fallen dramatically during the recent transition toward a market economy, the government health system is also experiencing serious shortages of drugs and equipment.

Largely because they know all too well the problems of central government control, policymakers, medical professionals and consumers in the formerly socialist countries have looked to systems of public and private insurance in industrial countries as possible models for reform. Some countries—for example, the Czech Republic, Hungary and Poland—have much in common with upper-middle-income countries such as Argentina, Costa Rica and Korea. They may be also able to adapt some features of the systems of the Nordic countries and the UK, which are financed from general revenues, or of the universal social insurance approaches of Germany and Japan. Others in this group—including the relatively poor Central Asian republics—face many of the same issues currently confronting lower-middle-income and even low-income countries, such as Pakistan and Yemen.

Despite this diversity, the governments of all the formerly socialist countries need to consider health sector reforms in at least three main areas: improving the efficiency of government health facilities and services, partly by reducing the size of the public system; finding new ways to finance health care; and encouraging private supply of health services while strengthening public regulatory capacity. The Czech and Slovak republics and Hungary are experimenting with forms of social insurance. Under the Hungarian health-financing system, public sector doctors will be salaried employees of the central and local governments, and private general practitioners will be paid on a capitation basis. Russia and Ukraine are also implementing mixed systems of social insurance and general revenue financing. However, because real wages have fallen dramatically and the costs of drugs and equipment have increased faster than inflation, payroll taxes to cover employee benefits absorb around 40% of wages in Russia, making it difficult to finance an affordable package of health services through the social insurance system.

Public opinion can be a powerful force for health reform, not only in industrial countries but also in developing countries such as Brazil, Chile, Nigeria, South Africa and in eastern Europe. Professional associations may also be able to bring about some reorientation of health workers, especially physicians; however, reshaping the training curricula of medical and nursing schools to include a greater emphasis on public health and general practice is likely to be the more efficient way to enlist the support of physicians and nurses. Political leadership in health reform is indispensable, and can also be attracted and engaged by the prevailing views of the international community. In many countries, maintaining the support of the middle class and of urban groups for health policy reforms—including the reallocation of public spending from tertiary care to basic public health and clinical care for the poor—will require a gradual shift in resources rather than wholesale changes in just a few years. External financial assistance can help countries handle politically difficult tradeoffs and ease the process of policy change.

Change in health systems is impossible in practice due to the influence of the array of interest groups that stand to lose—from suppliers of medical services to rich beneficiaries of public subsidies to protected drug companies. What developing country government would risk losing its foreign executives from the capital by not providing them with a world-class hospital?