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Responding to the Challenge of Financial Sustainability in Estonia's Responding to the challenge of financial sustainability in Estonia’s health system Sarah Th omson, Andres Võrk, Triin Habicht, Liis Rooväli, Tamás Evetovits and Jarno Habicht Keywords FINANCING, HEALTH - trends HEALTH POLICY SUSTAINABILITY DELIVERY OF HEALTH CARE – economics ESTONIA ISBN 978 92 890 4199 7 Address requests about publications of the WHO Regional Office for Europe to: Publications WHO Regional Office for Europe Scherfigsvej 8 DK-2100 Copenhagen Ø, Denmark Alternatively, complete an online request form for documentation, health information, or for permission to quote or translate, on the Regional Office web site (http://www.euro.who.int/pubrequest). © World Health Organization 2010 All rights reserved. The Regional Office for Europe of the World Health Organization welcomes requests for permission to reproduce or translate its publications, in part or in full. The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the World Health Organization concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. Dotted lines on maps represent approximate border lines for which there may not yet be full agreement. The mention of specific companies or of certain manufacturers’ products does not imply that they are endorsed or recommended by the World Health Organization in preference to others of a similar nature that are not mentioned. Errors and omissions excepted, the names of proprietary products are distin- guished by initial capital letters. All reasonable precautions have been taken by the World Health Organization to verify the information contained in this publication. However, the published material is being distributed without warranty of any kind, either express or implied. The responsibility for the interpretation and use of the material lies with the reader. In no event shall the World Health Organization be liable for damages arising from its use. The views expressed by authors, editors, or expert groups do not necessarily represent the decisions or the stated policy of the World Health Organization. Printed in Estonia. Responding to the challenge of financial sustainability in Estonia’s health system Sarah Thomson, Andres Võrk, Triin Habicht, Liis Rooväli, Tamás Evetovits and Jarno Habicht From values to action: implementing the Tallinn Charter: Health Systems for Health and Wealth in Estonia Table of contents List of tables ............................................................................................................... v List of figures ............................................................................................................ vi Acknowledgements ................................................................................................. vii Abbreviations ......................................................................................................... viii Executive summary .................................................................................................... 1 1. Introduction ........................................................................................................... 12 Report aims ................................................................................................................... 12 Methods ........................................................................................................................ 13 Framework for analysis ................................................................................................... 17 Outline of the report ....................................................................................................... 18 2. Health financing and tax policies ......................................................................... 19 Health financing policy ............................................................................................. 19 Tax policy ............................................................................................................................. 33 3. Assessment of health financing policy ................................................................ 46 Financial protection ......................................................................................................... 46 Equity ................................................................................................................................ 50 Health service quality and efficiency ............................................................................. 53 Administrative efficiency ............................................................................................... 66 Transparency and accountability ................................................................................... 67 Summary of key findings .................................................................................................. 68 4. Health expenditure and revenue projections ....................................................... 69 Factors affecting future revenue and expenditure .................................................... 69 Expenditure projections ................................................................................................... 75 Revenue projections .......................................................................................................... 83 The financing gap ............................................................................................................... 90 Summary of key findings ................................................................................................ 94 5. Stakeholder views ................................................................................................ 96 Strengths and weaknesses of health financing policy ........................................... 96 Challenges facing health financing policy ................................................................ 98 Views on financing, coverage and values ................................................................. 99 6. Options for financial sustainability .................................................................. 102 Challenges to financial sustainability .......................................................................... 102 Broadening the public revenue base and generating additional revenue .............. 103 Changes in coverage breadth, scope and depth ....................................................... 112 Improving resource allocation and purchasing .................................................... 119 Strengthening governance ....................................................................................... 121 7. Recommendations ............................................................................................... 122 Annex 1. Summary of the workshop in Tallinn on 3 April 2009 ...................... 126 Annex 2. Summary of the workshop in Tallinn on 20 October 2009 ................ 130 Annex 3. Interview guide ......................................................................................... 133 References .............................................................................................................. 135 iv List of tables Table 1. Participants in the 3 April 2009 workshop .......................................................... 13 Table 2. Participants in the 20 October 2009 workshop .................................................... 14 Table 3. Interviewees, 5–8 April 2009 ................................................................................. 16 Table 4. Trends in health expenditure, 1995–2007 ........................................................... 19 Table 5. Main sources of health financing, 1995–2007 ................................................... 21 Table 6. Main sources of health financing, by tax categories, 2000–2007 ........................ 22 Table 7. Breakdown of EHIF-insured people, June 2008 .................................................... 23 Table 8. Breakdown of EHIF’s budget by category, 2001 and 2009 .................................... 25 Table 9. User charges by type of care, selected years ...................................................... 29 Table 10. Prescription drug expenditure, 2008 ................................................................. 30 Table 11. General government revenue and expenditure, 2000–2008 .............................. 34 Table 12. Overview of taxes and earmarking, 2009 ............................................................. 36 Table 13. Social tax paid by the state or the unemployment insurance fund ................. 40 Table 14. Kakwani progressivity indices of health financing, 2000–2007 ...................... 51 Table 15. Cumulative EHIF reserves, 2001–2008 .............................................................. 66 Table 16. Demographic projections, 2007–2030 .................................................................. 70 Table 17. Labour market projections, 2007–2030 .............................................................. 72 Table 18. Macroeconomic projections, 2007–2030 ........................................................... 73 Table 19. Assumptions about health service use in the utilization growth scenario .... 77 Table 20. Assumptions about unit cost development ......................................................... 78 Table 21. Projected
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