Before I share with you a couple of facts about the Czech Republic, let me elaborate briefly on a basic question. Why have some new members of the European Union implemented necessary reforms earlier than their western, more developed and more experienced counterparts?
I will offer a complementary view to the experiences of Slovakia, a country that is definitely entitled to set an example to others on this issue. First of all, I do not want to underestimate the personal contributions of all the bright and brave people who stood up for reforms in Estonia, Slovakia and elsewhere, but such people do not exist only in those countries. Why is it that they have succeeded here where others have failed? We could also have a very long debate about whether the citizens in the former communist countries are more or less used to generous welfare systems, and whether they have adapted to change as part of their everyday lives since 1989.
In actual fact, in most cases the countries of eastern Europe initially copied the generous welfare systems common in the West, but found that they did not have sufficiently deep pockets to fund them. The individual irresponsibility that these systems incorporate, in combination with less efficient public institutions than in the West, is actually bringing our welfare systems close to bankruptcy, even before the effects of an ageing population are fully felt.
The drying-up of public money and the consequent rise in demand for reform among important stakeholders were among the most important reasons behind my decision to help found the think tank healthreform.cz, and why we believe we will be able to implement at least some of our proposals.
Let me share with you a couple of facts about the situation in the Czech Republic. We have a very generous, old-fashioned social security system. There are pensions, fully financed on a pay-as-you-go basis. Our health services are financed through mandatory insurance paid as a percentage of income. But the current left-of-centre government is doing nothing to change the situation.
Coupled with this, we also expect to feel the first impact of population ageing as the post-war generation starts to retire. In the long run, we expect the proportion of people over 65 years of age to increase from 17% of the population today to 43% by 2050. We have modelled the impact of this on healthcare costs and on the contribution rate. Were we to have the projected demographic structure of 2050 today, healthcare costs would jump by 30% - a rise caused solely by the ageing of the population, never mind the development of medical technologies and the increase in expectations of consumers.
If you combine this with the diminishing tax base, you find that the rate of health insurance contributions will more than double from an already high 13.5% of gross salary today. Clearly, substantial reform is needed.
Our goals are to keep general access to necessary health services for the whole population but, at the same time, to provide citizens with incentives for reasonable care consumption, and to change the whole system from one that is provider-centred to one that is consumer-centred.
We believe that there are two solutions to the problem. One is reform of financing. The second is reform of our institutions.
In terms of reform of financing, we plan to reduce the scope of mandatory insurance and to introduce individual health accounts to combine public and private contributions. The money saved on these accounts could be used either to buy supplementary insurance or to pay directly for healthcare not covered by mandatory insurance. We want to leave citizens with a choice. Also, gradually, we would like to turn the individual health accounts into savings instruments.
An equally important measure is reform of institutions. We strongly believe that it is necessary to change the legal statutes of health insurers and healthcare providers with the aim of setting clear roles and bringing clear motivation and transparency into these institutions. We believe that it is necessary to turn most of them into for-profit institutions to create a real market in healthcare provision and health insurance.
Second, we very much want to turn health insurers into real purchasers of care, leading to contractual freedom. The most important thing is to transform the current, very stagnant, health service market into a competitive and vibrant one.
If we achieve this, through institutional reforms very similar to those already carried out in Slovakia, what lessons are there for the West?
The first is the value of practical experience. Countries should be cooperating to find new approaches to healthcare. The basic challenges and principal solutions are the same for all European countries. Since, as with all reforms, not everything will go as well as planned, the mistakes made in the design and implementation of reform in the East will provide valuable lessons for Western European countries contemplating reform.
The second point (and I would like to thank Slovakia here for setting the example) is actually to stand up and demonstrate that it is possible to carry out substantial reform successfully - even in the area of healthcare, which has long been treated as a sacred cow of government activity.
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