The national healthcare system scored the penultimate in the European Consumer Health Index 2013 Report performed by Health Consumer Powerhouse. The index comprises six sections: patient rights and information, waiting time for treatment, outcomes, range and reach of services, prevention and pharmaceuticals. The result reflects the poor quality of the Romanian healthcare system, as well as one of the lowest health expenditures in Europe.
The healthcare expenditure accounts for only 5% of the country’s GDP, in comparison with the European average of 8% (Business Monitor International, Romania Pharmaceuticals & Healthcare Report Q4 2014) . Physicians and nurses are still leaving the country to work abroad for a much higher income, leaving Romania behind the regional average for health workforce (World Health Organization, Romania: health profile, May 2014).
After more than 6,000 physicians (30% of practicing doctors) left the country since 2011, the number of physicians per 10,000 inhabitants decreased considerably, reaching 23.9 in May 2014, 28% lower than the regional average.
Healthcare expenditure trend
As illustrated in the chart below, Romania has a predominantly publicly funded healthcare system, which is not an advantage, but rather a disadvantage due to the minimum level of 4.78% of the country’s GDP allocated to health spending in 2013.
For 2014, the Government allocated 23.5 billion RON (5.08% of GDP) for healthcare, which implies a slight increase of 3.1% versus 2013. But this does not mean that there will be more funds available, RON 1.06 billion being used for paying off backdated debts. In conclusion, healthcare spending is expected to remain flat over the year.
The main financing source for healthcare in the public sector is the National Unique Social Health Insurance Fund (Romanian FNUASS, “the Fund”) which administers 85% of the total financing, but also the Ministry of Health (MoH) and local administrations contribute to the total Government spending.
The National Unique Social Health Insurance Fund was founded following the “Emergency Ordinance No.150” from 2002 which clearly defines the obligations of health insurance companies and insurants. The National Insurance Company (Romanian CNAS) together with the health insurance companies are direct responsible for the administration of the collected funds, this legislative stating that 96% of these should be used for financing the medical services, medicinal products, sanitary equipment and medical devices used by the insurants.
The main sources of income for the FNUASS stated in its Budget Execution statements are the insurance contribution (from companies and insurants), clawback tax, non-tax revenues, EU funds and public budget subsidies in order to cover the expenses.
The health insurance contributions for 2013 reached RON 15.5 billion (66.94% of the total income) and are almost evenly distributed between contributions from employers and contributions from insurants (employees and pensioners). The health contribution continuously dropped over the last 15 years. If between 1999 and 2002, the employers and the employees each contributed with 7% to CNAS, the percentages reached 5.5% for individuals and 5.2% for companies in 2008. Recently, there were speculations regarding the increase of the healthcare contribution, but all were denied by the Health Minister, Mr. Nicolae Banicioiu, who stated in July 2014 that the Ministry is not in discussions with IMF or any other international organization for the contribution increase (Ziarul Financiar, online edition “Voinea: the increase of CASS was never discussed with IMF”, 29 July 2014). The health insurance contributions therefore remain dependent on the evolutions of the population (especially the active population) and of the salary.
The claw-back tax introduced in 2009 refers to the fact that all medicinal products distributors (medicinal products from which the insurants benefit) are obliged to contribute with 5% to 11% of their annual sales to FNUASS. Also, if the budget for medicinal products is exceeded, the vendors will have to contribute with 70% of their additional income. The amount raised from the claw-back tax in 2013 is RON 1.06 billion (4.61%), a not very substantial one and definitely not covering the needs for financing, but providing instead a negative impact on the financial performance of the pharmaceutical companies.
In order to access EU funds for the health sector development, there are available the European Regional Development Fund - for healthcare infrastructure and the Social European Fund – for aging population, eHealth, and education in healthcare. For the 2007- 2013 period, the European Regional Development Fund allocated RON 5 billion for infrastructure development (http://ec.europa.eu/health/health_structural_funds/policy/index_ro.htm). In 2013, the Fund was financed by only RON 74.8 million from EU funds, and for 2014 there are another RON 33.5 million planned. Although these resources are not considered significant, the European Commission advises that the national and regional authorities should use them efficiently.a
Mr. Nicolae Banicioiu stated in August 2014 that MoH reached an agreement with the European Funds Ministry for 2014-2020 worth EUR 1 billion, which is going to be invested in infrastructure, screening, research and personnel training, but more important, in the construction of 3 public hospitals in Iasi, Cluj and Craiova, exclusively from EU funds (ZF Corporate, “Banicioiu: We will build three hospitals in Iasi, Cluj and Craiova, exclusively from EU funds”) .
The funds available for the FNUASS are mainly directed towards medicinal products, sanitary equipment and medical devices (50.5%), and medical services in hospital (37.4%). In order to meet the financing demands for healthcare, FNUASS receives subsidies from the state budget and also from other public administrations. In 2013, the amount received was RON 6.43 billion (27.87% of total budget), almost triple the subsidies received in 2012. This situation shows that the healthcare contribution together with the own revenues and the EU funds do not cover the expenses in the healthcare sector. There is a necessity of finding new financing options in order to reduce the dependency on the state budget and to balance the situation between revenues and expenses in healthcare.
To conclude, the continuous drop of health contributions (one of the lowest in Europe) contributed decisively to a chronic lack of financing within the Romanian healthcare sector and the IMF urged the Romanian Government to introduce new reforms in order to have a balance between the increasing medical expenses and the scarcity of funds.
Healthcare reform in the public sector
Part of Romania’s emergency funding agreement with the IMF in 2013, the Government has the obligation to reform its healthcare system and to move forward towards its privatization. Whether the second objective is far more complex, time consuming and involves several steps, the reform is already in progress. The reform’s main target is the health insurance system, based on three pillars: a basic healthcare provision for insured patients, a social healthcare package for lowincome persons and a minimal healthcare package for uninsured patients. As of 2013, Romanians were supposed to adhere to an insurance company or a mutual company, as per their preference. Also, in 2013, a co-payment obligation in public hospitals was introduced, which is between RON 5 and 10 for each patient for the entire period of hospitalisation.
Starting with June 2014, the basic healthcare package became available for all health insured Romanians, and it covers emergency medical services, preventive care, family medicine, imaging and diagnostic services, hospitalization and medical care at home. The minimum package is expected to take effect in 2015 and will comprise emergency care, family medicine, family planning and access to consultations for serious diseases.
In light of the presidential elections expected at the end of 2014, the healthcare reform is currently on standby, future movements being expected only after the beginning of 2015.
Private healthcare sector: from subscriptions to private health insurance
All the above mentioned issues of the public healthcare sector have led to a turn towards the private clinics and hospitals, especially in the most important cities in the country (where the private healthcare companies are present and also households income is higher). Private healthcare services are considered more expensive, but also have a higher quality due to the modern infrastructure and a better qualification of staff.
In 2013, the private healthcare market was estimated at EUR 657 million, with the first 10 private companies having a market share of 40%. The market leader is Medlife, followed by Medicover, Regina Maria, Sanador and Gral Medical (Pro EAST Consulting: The Private Healthcare Market in Romania, Trends 2014-2015, August 2014 Bucharest).
Countrywide, there are 58 private hospitals, the top 20 having a turnover between EUR 1.5 million and EUR 7.1 million in 2013(Ziarul Financiar: “Health Insurances reveal themselves out of the shadow. The market moves towards 30 million Euro, 40% higher” by Ioana David, 19 September 2014), most of them located in Bucharest and Brasov (4 in each city). The current pipeline announces investments of over EUR 74 million in other 5 private hospitals, 3 in Bucharest (Romgermed, Spitalul Gral / Onconfort and Medas), one in Cluj Napoca (Pelican Universitary Hospital) and the last in Satu Mare (“St. Anton” Clinic) (Pro EAST Consulting: The Private Healthcare Market in Romania, Trends 2014-2015, August 2014 Bucharest). Through the current infrastructure, only inhabitants of the most important cities in Romania have access to private healthcare services. In order to improve this aspect, private healthcare continuously needs new financing options to build clinics and hospitals and enlarge their catchment area.
The private healthcare sector is mainly financed through fees for services, but those are highly dependent on the number of subscriptions (Corporate medical coverage and individual healthcare subscriptions). According to ZF, in Romania, there are 650,000 subscriptions sold annually, which would make a market of EUR 40 million (considering a EUR 5 monthly payment for a subscription) .
These corporate medical subscriptions, as well as the basic healthcare package introduced this year in the public sector, are not covering all the medical services that a patient may need, and lead to higher medical expenses for individuals, which represent the main source of income for private healthcare companies. A private health insurance instead provides access to a wider range of medical services and the possibility to choose between more private hospitals / clinics. If in western European countries the private healthcare insurances are the main choice, in Romania they represent only 15-20% of the subscriptions market. This is the main argument that supports the high development potential of the private health insurance market in Romania.
Signs towards the transition from medical subscriptions to health insurance were present on the Romanian market since the beginning of 2014:
? Renault and Auchan, together having over 27,000 employees in Romania, have signed contracts with Groupama and Regina Maria for health insurance;
? BCR Life Insurace signed with Transgaz (5,000 employees) a EUR 5 million contract for 4 years;
? As per ZF, the 20,000 employees of Petrom will be insured by Omniasig and Signal Iduna, with one of the highest insurance premium on the market: EUR 2.5 – 3 million per year;
? ING Life Insurance together with Regina Maria have launched a new health insurance for the completion of the medical subscription.
To conclude, the private healthcare sector is at the beginning of a transition period, the already established medical subscription market still has a long way until is replaced by private health insurance. The healthcare reform in Romania is expected to play a major role in this transition as the Government will have to adopt supportive measures towards private health insurance in order to lay the groundwork for the healthcare privatization - a long-term objective.