US embassy cable - 05WARSAW959

UNCLAS  WARSAW 000959 
 
SIPDIS 
 
 
Sensitive 
 
STATE FOR EUR/NCE TARA ERATH AND MICHAEL SESSUMS 
USDOC FOR 4232/ITA/MAC/EUR/JBURGESS AND MWILSON 
TREASURY FOR OASIA ERIC MEYER AND MATTHEW GAERTNER 
FRANKFURT FOR TREASURY JIM WALLAR 
 
E.O. 12958: N/A 
TAGS: EFIN, ECON, ELAB, PREL, PL, Economy 
SUBJECT:  Defeat of Health Care Bill Prompts Health Minister 
to Offer Resignation 
 
Ref: (A) 2004 Warsaw 4285 (B) 2004 Warsaw 2683 (C) 2004 
 
Warsaw 865 
 
(U) This cable is sensitive - but unclassified, and NOT for 
Internet distribution. 
 
1. (SBU) Summary: On 17 February, the Sejm rejected a long 
awaited bill on restructuring of public health care units. 
The bill, prepared as part of the government's public 
finance reform package, was designed to write off up to $3 
billion in local hospital debts in exchange for reforms, 
including preparing a debt restructuring program to return 
to profitability within two years.  The bill's defeat 
resulted from a combination of worker protests (including 
hunger strikes) and objections by local government and by 
opposition parties in parliament.  The government undermined 
its own efforts by offering a confusing bill, supported by a 
tepid public affairs effort.  The defeat of the bill was a 
major blow to the government's fiscal reform plan, and 
prompted the Minister of Health to offer his resignation. 
PM Belka rejected the resignation, and instead asked Balicki 
to submit a revised version of the bill in the coming days. 
It is not clear how the GOP will amend the bill, but it may 
opt to offer a short-term financial fix and leave the 
problem for the next government to address.  End Summary. 
 
Hospitals restructuring Bill 
- - - - - - - - - - - - - - - - - - - 
 
2. (U) The Sejm rejected a bill (208-196) which would have 
restructured local hospital debt.  The bill proposed that 
hospitals which prepare debt-restructuring programs would 
get loans from the government and would receive protection 
from debt collectors while implementing the restructuring 
program.  The bill also contained a number of controversial 
provisions, including one requiring hospitals to forego 
claims against the central government, such as the flawed 
pay increases passed by the Sejm in 2000, (ref c).  Health 
sector debt remains a serious problem, despite wholesale 
reforms in 1999, done in coordination with large World Bank 
loans.  Local hospitals have wracked up as much as $3 
billion in new debts which they are having trouble paying. 
The GOP believes part of the problem is that local 
governments are reluctant to rationalize health services to 
meet realistic demand and cut costs.  The GOP identified 
health care financial reform as one of its top priorities 
(reftels), and set aside 2.2 billion Zloty ($800 million) in 
the 2005 budget to fund the loans to entice the hospitals to 
accept these reforms.  The GOP is also concerned that 
hospitals are taking advantage of a legal loophole which 
means they are not subject to debt collection provisions 
applicable to commercial companies.  Under this bill, the 
GOP proposed amending the commercial and civil codes to make 
it applicable to the health sector. 
 
3. (U) The bill attracted opposition from a number of 
sources.  One of the proximate causes of its defeat was the 
opposition of health care workers, who, led by the 
Solidarity trade union, staged a hunger strike in Warsaw and 
other cities (which proved once again to be a very effective 
political weapon as it did in the 2003 rail strike).  Health 
sector workers are (correctly) concerned that restructuring 
could lead to hospital bankruptcies and job losses.  Local 
government organizations joined the unions in opposition to 
the bill in part out of a concern that they would be stuck 
paying back wages stemming from a flawed law passed in 2000 
(ref c).  Many regional government executives opposed the 
bill because they were not convinced the measures would stem 
the tide of hospital debt.  Some opponents of the bill also 
objected to the notion that the bill would lead to the 
privatization of the health sector. 
 
4. (U) At the last minute, Balicki almost won over local 
government representatives with the withdrawal of the 
requirement of hospitals to forego debts owed by the central 
government, but found himself undercut when Deputy PM 
Hausner refused to accept this provision.  This cemented 
parliamentary opposition against the bill, and, coupled with 
the absence of 17 of the 152 SLD MP's, sealed the bill's 
fate.  This was the second important vote SLD lost to the 
opposition this week (the first was on abortion). 
 
Health Minister Offers Resignation, Plans Further Fight 
 
 
- - - - - - - -  - - - - - - - - - - - - - - - - - - - - - - 
- - - - 
 
5. (U) The Minister of Health. Marek Balicki, first offered 
his resignation on February 17 in reaction to the defeat of 
the bill.  After PM Belka refused to accept it, Balicki 
declared on February 18 that he would present an amended 
draft to the Sejm before the weekend.  Balicki indicated 
this revised draft would take into account a proposed 
compromise with some of the bill's opponents which would 
better explain the terms of the debt writeoff and loan 
provisions.  He also suggested that the GOP may back off one 
of the central provisions of the planned reform under which 
hospitals applying for the state loans would be required to 
implement fiscal reforms, including implementing 
restructuring plans under which the hospitals would return 
to solvency over two years. 
 
President Pledges Support 
- - - - - - - - - - - - - - - - - - 
 
6. (U) Immediately after the bill's defeat, President 
Kwasniewsjki received Sejm Speaker Cimoszewicz and PM Belka, 
and declared he is willing to use his constitutional powers 
to introduce the new Balicki bill in the Sejm a presidential 
bill if necessary.  He also expressed support for the key 
elements of the GOP's health reform plan. 
 
Comment: 
- - - - - - - 
 
7. (SBU) As in many countries, health care is a very 
sensitive issue in Poland.  On the one hand, the public does 
not want to lose access to health care at low prices, 
particularly since access (not further defined) to health 
care is guaranteed by the constitution.  On the other hand, 
the public also wants improvements to medical services, and 
but is unwilling to pay the higher taxes required to fund 
it.  The central government is determined to break the cycle 
of debt dependency of local hospitals by forcing local 
governments to be more responsible with costs and service 
levels.  While the GOP has rightly identified this as an 
important priority, it did itself no favors by presenting a 
confusing bill the first time around, under which it was 
hard to determine which hospitals would have access to the 
program, and exactly what reforms they would be required to 
implement.  It is unclear how much of its original reform 
plan the government can be salvaged with this revised bill, 
even if it passes.  It seems increasingly likely that the 
government may end up offering a short-term fix to bail out 
the most pressing debt, while leaving this complicated issue 
for the next government.  We expect that health sector 
unions will be emboldened by their success in defeating this 
bill to continue to resist job or salary cuts in the sector, 
as well as privatization of the sector. 
 
Ashe 
 
 
NNNN 

 2005WARSAW00959 - Classification: UNCLASSIFIED