Health policy when moving out of an austerity program

1 Financial crisis, austerity and health policy

The international financial crisis of 2008 met Portugal’s domestic crisis of slow and decreasing economic growth since 2002. In 2011, Portugal had to request international financial assistance, following on the steps of Greece and Ireland.

Under the international financial assistance, a series of policy measures aimed at public finances were set in a Memorandum of Understanding. Many of these measures have been implemented to full (or some) extent.

There are now several challenges for the coming years. Some challenges derive directly from the adjustment period in public spending. Others would be present anyway.

The Portuguese policies in the health sector insert well into the overall pattern of response to the crisis. Portugal, like Greece and Ireland and other European countries, had a reduction in per capita public spending on health (EOHSM, 2014, p.14). The extension of coverage in terms of who is covered and which services are covered was not officially affected by these measures.

On financial protection, Portugal adopted measures going in opposite directions. On the one hand, it increased values of user charges (in 2012) and reduced tax subsidies for wealthier households. On the other hand, it increased exemptions to user charges by changing upwards the threshold below which exemptions apply.

A general objective explicitly included in the Memorandum of Understanding was to improve efficiency in operation of the National Health Service. This was translated into hard measures such as reduction in the level of salaries paid to health workers (a feature shared with other countries: Belgium, Cyprus, France, Greece, Ireland, Latvia, Lithuania, Romania, Slovenia and Spain).

Another area of strong intervention was pharmaceutical policy, which a strong decrease in prices over this period, which in the case of generics already started in 2010, prior to the financial rescue of Portugal. This is a common feature in the great majority of European countries.

Some reorganization in entities that do not provide care to the population also took place, with mergers and extinction of services aimed at reducing costs.

Clinical practice was also targeted with the introduction of practice guidelines. Again, other European countries adopted the same type of measures (Belgium, Cyprus, and FYR Macedonia, for example).

The discussion of public spending on health needs to recognize that its evolution results from the combination of three elements: quantity of care provided, price/cost per unit of care provided and the fraction of price that is taken up by the Government.

Broadly speaking, the majority of the adjustment in Portuguese Government spending in the health sector resulted from price effects, little or non from quantity reductions and only a small part due to shift of financial responsibility from the Government to citizens.

The crisis and the response adopted in Portugal create several challenges to the near future, which are likely to be shared by the countries that adopted similar measures.

2 The challenges for the near future

Although it is still not enough information available to provide a full assessment of the impact of the adjustment program in the NHS and in the health of the Portuguese population, it is possible to highlight several remaining challenges for the near future.

The challenges ahead can be grouped into three types. The first one is to complete reforms actually initiated before the financial rescue program. The second group contains the measures needed to achieve the adjustment program target, both in terms of results and in terms of process. The third group contains measures to set the roots of future evolution of the National Health Service.

The next two years will still be under the influence of the MoU, even though it formally ends by mid-2014.

The main current challenges relate to financial pressure on hospitals. At the forefront, we have the challenge of stopping debt accumulation of NHS institutions, most notably hospitals.

The crucial question is whether, or not, the recent changes in budgetary procedures, adopted generally in the public sector, were able to contain debt creation, by building up arrears, mostly delayed payments to the pharmaceutical industry, and increasingly to the medical devices industry.

A second challenge, staying for the moment in the background, is associated with wage cuts. These were announced as temporary ones, so either the cuts become permanent or wages are reset to their initial values. Either case poses a different threat to the National Health Service.

Giving back the wage cut implies an upward cost pressure, which must be compensate by spending cuts or cost reduction elsewhere in the system, or by additional NHS budget.

In case the wage cut is set as permanent, the challenge is to keep motivation and effort by health care professionals, who kept to a considerable extent dedication to patients and quality of care provided. This resilience may be at risk if wage cuts become permanent instead of perceived as temporary. There is considerable uncertainty on this point.

At an organizational level, also two main challenges can be identified in the near future. The first one is the integration of ADSE – the civil servants health insurance coverage into the NHS. The ADSE is an health insurance coverage offered by the Government to its employees. It was founded well before the NHS creation and did not change after the NHS start operations. ADSE is a second layer of health insurance coverage that required a relatively small contribution from beneficiaries, based on income, the remaining fund needs being provided by Government transfers. Under the adjustment program, the ADSE system must evolve to self-sustainability, that is, independence from the Government’s budget. This objective can be achieved by reducing benefits (coverage), by increasing payments from the beneficiaries or both. The increase in contributions, based on monthly wages, has already started its implementation.

ADSE does not have own provision of services. It relies on NHS provision of services and on contracts signed with the private sector (under any-willing provider conditions). ADSE has therefore a long tradition of buying services in the private sector. It is claimed sometimes that has obtained in certain areas lower prices than what the NHS has contracted with the private sector for similar services. There is no data source or reference available for a systematic verification of this.

The ADSE allows their beneficiaries to skip gatekeeping by general practitioners, unlike the National Health Service. It also allows freedom of choice in selection of the health care provider, with different coverage levels – reimbursement – being applied to on- and off-list health care providers.

Integration of ADSE into the NHS may allow for an extended role of its purchase ability and knowledge although some tensions may result on the coverage side, as the NHS will then differentiate across citizens even if the extra layer of coverage is completely funded by additional contributions. A likely issue for debate is the enrolment rules in ADSE: will remain restricted to the civil servants, as of today, or will it be open more generally?

The second major organizational challenge is the reorganization of hospital care, stated as one of the commitments in the Memorandum of Understanding, with the objective of achieving permanent cost savings. The main course of action in hospital reorganization has been concentration of management and merger of services. This originates a series of questions: is the current path a globally coherent one? Does it generate the desired efficiency gains? In particular, building up very large organizations may run into diseconomies of scale as they become too large to be manageable efficiently? Are the current changes enough?

These challenges are likely to materialize fully in 2014.

3 Challenges to the medium run

Taking a broader perspective in time, a two to three years horizon, identifies further challenges: (a) to continue the roll out and support the reform of primary care with the creation of more family health units, replacing older and larger primary care centres; (b) to complete the network of continued and long term care and make it operational and sustainable, including an adequate contractual and financial relationship with private partners. These partners are mostly from the private not-for-profit institutions; (c) the implications of the patient mobility directive, which may take a couple of years before producing relevant impacts but it will eventually matter to the Portuguese NHS; and (d) management of relations with professional orders and unions. While under the adjustment program the Government has been able to postpone a series of discussions with health professional organizations that inevitably will come back to the table as soon as the adjustment program ends.

4 Long-term challenges

Thinking on an even longer-term perspective, beyond three years, and considering a decade into the future, there are several issues in need of taking roots now for future effect.

First, redefinition of patient pathways inside the health system (National Health Service included), in particular for patients with chronic conditions, promoting more use of community services and self-management and less of hospital care.

Second, manage in a coherent and intelligent way the margins of substitution (overlap) in health care professions: nurses vs medical doctors, medical doctors vs pharmacists, pharmacists vs nurses, nurses vs trained medical assistants, etc.

Third, improve quality of management in NHS organizations, including the design and implementation of mechanisms aimed at reforming or exiting low-performance organizations from the National Health Service.

Fourth, deal with technological innovation. Innovation has been, in Portugal and elsewhere, a main driver of health care costs growth. Definition the conditions for adoption of innovation in the NHS will be a major issue. The methodological guidelines for economic evaluation in pharmaceuticals have to be revised, to reflect new knowledge and techniques, and similar principles will have to be considered for medical devices and, possibly, for technology adoption defined more broadly (including surgical procedures, or patient pathways, for example).

5 Political challenges

Finally, on top of the above technical challenges, there are two policy challenges. On the one hand, the approach of the 2015 general election may put a pressure on a coherent path for health policy. On the other hand, the political will and ability to assess what went right and wrong in the recent past will be smaller and decrease the possibility of improvement in policy actions. 

6 Concluding remarks 

The existence of an official austerity program in public spending conditioned health policy in Portugal. The formal ending of the program in June 2014 will leave behind several challenges. Some are directly linked to temporary measures taken during the international financial assistance period. Since not all structural problems appear to have been solved, some of the previous challenges remain. This is particularly true for debt creation in the National Health Service and temporary wage cuts.

References:

European Observatory on Health Systems and Policies, 2014, Health, health systems and economic crisis in Europe. Impact and policy implications. Summary. World Health Organization, Regional Office for Europe.