Friday 6 May 2011

The Memo and the health sector adjustments

The Memorandum of Understanding has several measures related to the health sector. I provide my own view on them.

The savings required are important: 550 Million euro. The proposed measures do aim more than just short-run expenditure savings. There is a concern of building mechanisms for future control of expenditures in the public sector. These mechanisms involve performance assessment and benchmark, use of competition forces in public procurement, and introduction of best-practices in transparency and information on the evolution of the National Health Service.

Several of the measures are important and deserve to be implemented, even outside the current crisis setting. They must be seen as stepping stones for the future. They are not disruptive of the National Health Service, only of its culture of opacity.

Curiously, some - but not all - of the measures were already present in the recommendations of 2006 report commissioned by the Government.

A good deal of the effort lies in time horizon for implementation, forcing both technical excellence and political determination to be present.

In a quick appraisal of the main areas:
- moderating fees - values are to be revised, should be updated according to inflation, the structure of fees should guide patients to primary care and away from emergency departments.
- pharmaceuticals - margin reduction in distribution, change in margin structure making it regressive (here I believe we should go for dispensing fee approach instead of margin as percentage of retail price), redefine the international referencing price system to the minimum of the prices in reference countries, instead of current average.
- electronic prescription and quality in prescription - this area has been little explored as a source for savings, and the steps announced are good news for improvement. It will be essential the cooperation from the medical profession, and the IT system will have to work properly (finally, I would add!!)
- Efficiency gains - without mentioning specific areas, but looks for the incentive role that transparency and clear benchmark analysis may have. Continue redefinition of supply network of the National Health Service (including closure of unnecessary or unsafe units). The major warning is about the political process of closure, to avoid unwarranted population unrest.
- planing of health expenditures and projections over 3 or 5 years ahead. This is definitely a good idea. It was used in one specific programme (continued care network). Should be expanded to the whole system.
- reduction in fiscal benefits / tax allowances - it will mean an increase in effective copayments paid by the population, as the implicit health insurance provided is reduced. The tax allowance should not be totally removed on the account of tax evasion of providers if patients lose all interest in asking for receipts for tax purposes.
- explicit planning and follow-up of medical profession dynamics (training, exit, retirement decisions). I would take the chance to do it with all health professions.

Overall, the effect of this set of measures is crucially dependent on Government commitment . There are adjustments to be made in several points, which cumulatively have to produce the aimed savings. But the proposal plan attempts to reach these savings without compromising basic values of the National Health Service. A closer scrutiny needs to be in place, to ensure progress is achieved.


  1. IT system
    Dear Pedro, this was too long to put on the wall but if the SNS is searching for an electronic medical records system that incorporates both hospital and outpatient clinic info you should see the one we have at the VA. It incorporates all clinical info such as lab results, providers notes, CT and MRI scans, even records for when a patient is seen outside the VA scan be scanned and incorporated into the system. There are also clincal reminders for physicians indicating when a patient needs a particular screening or vaccine and the pharmaceutical end checks for missed fills on medicines and alerts the provider that the patient is behind. The nordic countries or some others may already have a more advanced system but I tell you no private system in the US even comes close to the VA which is now being merged with Department of Defense's system as well so we have the info on what happend to the patient while they were active duty military. Of course the system is centralized nationally on servers so we can see everything from any of the 145 VA medical centers in the US. Best of luck with everything! Libby Dismuke

  2. And how about improving the transparency of the accounts of the SNS?
    Does it makes any sense, from an economic point of view that hospitals are not all considered in the public sector in the national accounts (S13)? This independently of the formal esa95 rules.

  3. It's very comprehensive blog for health issue. Thanks

  4. Carlos,
    Sure! improving the transparency of the accounts of the NHS is crucial. Doing the benchmark exercises needs comparable information across all units - including old/traditional public sector hospitals, the EPE and the PPP Hospitals in the hospital sector, and the USF and primary care centre.

  5. Dear Prof.,

    Don't you think the State lacks capacity to monitor all of this? In Portugal we don't have a good tradition on controlling our Health sector performance... We'd probably need a NICE to do it effectively!
    How will we manage to cope with these demandings in a serious way?

    PS - I totally agree with you on your analysis - but I just can't see all of this happening at the same time...!

  6. Vladimiro

    You touch a fundamental issue:
    are we (all of us) taking this memorandum seriously, and start working to get it done?

    or are we trying to move around it, with announcements doing just lip service to the memorandum?

    I give a non-negligible probability to the second chance, and the coming days will show the option our Government takes.

    We should keep in mind two points:
    - the IMF some years let Argentina go into recession, and very hard times, because they did not follow the agreement; they tried a change and the IMF simply stopped the bailout. I doubt we are more relevant than Argentina.
    - why not have our own team with the duty of monthly reporting the progress, so that we do not have any surprise at the reviews of the IMF/ECB/EC? get some people that will have the task of being as harsh as they will be, and detect earlier any problems.

    I know, this is wishful thinking...

  7. I just wonder what are our politicians planning to do about this... if they're really planning anything!
    A few years ago, someone asked an English official what did the English thought about the Lisbon Treaty. He laughed and said "this is like the rules of a golf club"... Unfortunately, I'm afraid in Portugal there are many people in the two main parties thinking just the same way about this agreement...!

    PS - Like many other people, I got very surprised with our bailout terms and contitions (I was expecting more money, higher interest rates and harder constraints). We got a very good deal, given the circunstances. Will we be up to the job? That's the 78-billion euros question!