US embassy cable - 05BRATISLAVA319

C O N F I D E N T I A L  BRATISLAVA 000319 
 
SIPDIS 
 
 
E.O. 12958: DECL: 04/21/2015 
TAGS: ECON, KCOR, LO 
SUBJECT: RADICAL HEALTH CARE REFORMS?  MAYBE NOT 
 
Classified By: By CDA Scott Thayer for reasons 1.4 (b) and (d) 
 
1. (C)  Summary.  In October 2004, the Slovak Parliament 
passed six health care reform laws that the World Bank called 
some of the "most radical reforms in the world."  The laws 
seek to reduce the GOS's role in health care and make Slovaks 
pay for medical services that were once free as a way of 
helping keep the highly-indebted Slovak health care sector 
solvent.  However, six months and two rounds of amendments 
later, many of the details of these reforms remain unclear. 
Upon inspection, many of the reforms are only potential 
changes.  The GOS is still primarily responsible for health 
care.  A shadowy financial group appears ready to profit from 
the system and is suspected of buying MPs' votes to make sure 
parts of the reform legislation passed.  The Slovak health 
care system has abundant room for improvement, and these 
reforms are an important step, but they are not as radical as 
they are billed to be and could take years to be implemented. 
 End summary. 
 
2. (U) Slovakia's health care reform movement really began in 
2003 with the adoption of laws requiring citizens to start 
paying, although modestly, for medical services that 
previously had been free.  The charges of approximately USD 
0.65 to visit a doctor, USD 1.65 per night to stay in a 
hospital, and USD 0.65 to fill a prescription represented the 
first ever out-of-pocket health care costs to Slovaks.  They 
were not warmly received by the public, many of whom failed 
to understand the severity of the sector's financial 
problems.  However, these changes appear to have achieved the 
desired effect by reducing the over-use of the system and 
cutting the sector's financial shortfall.  This was truly the 
first step in saving the Slovak health care sector. 
 
WHAT REFORMS? 
------------- 
 
3. (SBU) The October 2004 reforms attempt to formalize the 
idea that Slovaks need to take responsibility for their own 
health, share an even greater portion of medical care 
expenses, and accept the idea that profitable health 
insurance companies do not necessarily take money away from 
public health needs.  The six laws give a general outline of 
health care rights and responsibilities, procedures and 
medicines that will be covered by insurance, the 
privatization of hospitals, responsibilities of emergency 
health care services, the division of public and private 
insurance spheres, and conditions governing health insurance 
companies.  Unfortunately, many of the details of the six new 
laws remain unclear, such as the percentage of costs covered 
by insurance, despite two rounds of amendments.  The World 
Bank has backed off its claim that these reforms represent 
the most radical health care reforms in the world, though 
agrees that the 2003 change of simply making people pay for 
health care services represents a great step. 
 
4. (SBU) According to media reports, many of the decisions 
about which medical procedures will be covered by insurance 
and to what degree will likely not be decided until after the 
2006 Parliamentary elections.  This leaves a huge hole in the 
middle of the GOS's ambitious set of reforms.  Slovakia's 
ruling minority coalition government has made a name for 
itself with successful reforms in banking, foreign 
investment, privatization, taxes, pensions, and initial steps 
in health care.  Possibly they are holding something back for 
a potential third term in office to go along with expected 
reforms to the education system.  On the other hand, 
reforming a heretofore free health care system will be 
comparatively expensive for all Slovaks and is maybe not 
something the GOS wants to undertake before an election (in 
September 2006).  However, if the opposition wins the next 
election, it would be highly doubtful that many of the health 
care changes would be finalized.  Regardless, the 
introduction of fee for services that was passed in 2003 has 
already significantly changed the Slovak health care sector. 
 
PENTA GROUP 
----------- 
 
5. (C) Despite its great budget difficulties, the amount of 
money flowing through the health care system make it a 
potentially very lucrative sector.  Though many issues 
remain, one that was clarified is that owning franchises of 
pharmacies will become legal.  Because the GOS was able to 
pass the six reform laws fairly easily due to support from 
independent MPs, there were rumors that votes had been 
purchased.  A suspected source of vote-buying was the Penta 
Financial Group.  Known for its predatory business practices, 
Penta has grown from a small start-up company in 1995 to 
having USD 350 million in assets today.  Penta and its 
network of companies already control three of Slovakia's five 
health insurance companies (the other two are state-owned), 
have plans to purchase 100 pharmacies, and have also been 
trying to buy hospitals.  (Comment: Having a vertically 
integrated health care company could be beneficial in 
 
developing the new Slovak health care sector, but many 
Slovaks question Penta's suitability.)  A reliable contact 
with ties to Penta told econoff that the company paid SKK 2 
million (USD 67,000) each for an undisclosed number of 
independent MPs' votes to assure that the reform legalizing 
the franchising of pharmacies passed.  According to the same 
contact, Penta wants to use franchising agreements and the 
ownership of insurance companies to steer customers to its 
pharmacies and squeeze competing pharmacies out of business. 
Currently, pharmacy ownership is decentralized, but Penta 
recently bought 20 pharmacies and is in the process of 
closing a deal for 17 more. 
 
6. (C) Managing the cash flow of the only three private 
health insurance companies gives Penta sizable profit 
potential in addition to using these companies to feed its 
down-stream operations in pharmacies and (selected) 
hospitals.  The powerful office of the Supervisor of Health 
Insurance Companies will be charged with monitoring and 
interpreting the actions of insurance companies and enforcing 
regulations.  This position has yet to be filled.  Many 
Slovaks believe that it is bad for health insurance companies 
to make a profit because those profits represent money that 
should be going to health care. 
 
COMMENT 
------- 
 
7. (C) The Slovak health care sector is truly being 
transformed from an inefficient, indebted and corrupt 
(according to Minister of Health Rudolf Zajac) system into 
one that is closer to sustainability.  Zajac's lobbying 
efforts with the public and MPs to win support for reform 
appear to be bearing fruit.  Despite accusations of vote 
buying for one of the reforms, it is important to remember 
that all six reforms passed.  Although the GOS has not yet 
been able to significantly diminish its role in the system, 
patients are now sharing the burden of paying for medical 
care.  This has had the beneficial effects of reducing waste, 
over-use of the system, and red ink.  Unfortunately, it will 
likely be left for a future Slovak government to take the 
next bold moves in shoring up the health care sector, but at 
least the beginnings of the reforms have been placed in 
motion.  Post will continue to monitor progress in health 
care reform and potential impediments to establishing a 
transparent and sustainable system. 
THAYER 
 
 
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