This presentation was made by Vlasta KOVACIC MEZEK, Slovenia, at the 5th Meeting of the joint OECD DELSA/GOV Network on Fiscal Sustainability of Health Systems held on 4-5 February 2016 at the OECD Conference Centre in Paris.

1. 4. February 2016
Vlasta Kovačič Mežek
Health
System
Expenditure
Review:
Slovenia

2. Why Expenditure review in Slovenia?
• Impact of economic crisis
• Announced health reform in Slovenia
• Country specific recommendation

3. Working method
• Analysis of Health System in Slovenia
• Working group (among others)
• Data gathering
• Working meetings
• Analyzing
• Final report
• Workshops
• Policy dialogues

4. Key findings: preview
• Economic crisis revealed susceptibility of the health system to
fluctuations in social security contributions
– LESSON: Need to diversify revenues and develop
countercyclical approaches to financing
• Level of health-care programmes and accessibility of services
were preserved through heavy reliance on CHI, price
reductions and delayed payments
– LESSON: CHI plays a key role in maintaining fiscal balance
– LESSON: Delayed payments lead to provider debt that is
ultimately the responsibility of the MoF
• Only minor variations in distribution of HIIS spending over
time but HIIS pays for too many non-health service items
– LESSON: General revenues should cover non-health
service items

5. Public debt as a share of GDP has been
increasing since 2008
-16
-14
-12
-10
-8
-6
-4
-2
0
0
10
20
30
40
50
60
70
80
90
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Deficit/Surplus
DebttoGDP
Debt/GDP Deficit/Surplus

6. But public expenditure on health is
not the driver of high public debt
12
00 02 04 06 08 10 12 14 16 18 20
Slovakia
Netherlands
Czech Republic
Ireland
Norway
Iceland
United Kingdom
Lithuania
Germany
Austria
Denmark
European Union (28 countries)
Euro area (15 countries)
Belgium
Finland
Croatia
France
Italy
Spain
Malta
Portugal
Sweden
Estonia
Bulgaria
Luxembourg
Slovenia
Romania
Poland
Hungary
Latvia
Greece
Cyprus
Switzerland
Health as a share of total government expenditure, 2013

7. HIIS expenditures are constrained to
revenues and reserves
-4.00%
-2.00%
.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Growth in revenues Growth in expenditures

8. Contribution rates vary widely and make
HIIS very dependent on the employed
0
50
100
150
200
250
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
employed in legal
entities
persons performing
independent business
farmers
pensioners
unemployed
self insured
municipality coverage
other
Average per person monthly contributions to
HIIS (in EUROS)
Contributions
declining from
employment agency
Pensioners are
increasing but
contributions on their
behalf are low

9. Because a large share of public resources come
from payroll contributions, HIIS revenues are
very susceptible to labour market fluctuations
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Growth in Social Security Contributions to HIIS Rate of unemployment by ILO in %
Gross wage per employee - real growth in %

10. The labour market outlook for the future is
somewhat more favourable, though not as good as
in previous years
-10
-08
-06
-04
-02
00
02
04
06
08
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Real GDP Growth Unemployment rate Real growth in gross wages per employee

11. The share of HIIS enrollees with higher contribution
rates has fallen during the crisis and is not expected
to fully recover in the near term
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Active population (employed, self-employed, farmers)
Persons covered by national and local budget (retirees, eligible persons covered by national
budget, unemployed, persons without income-covered by local governments, others)
Family members in all categories

12. In most other countries with social insurance
systems, tax revenues contribute a sizeable
amount to public expenditure
.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
Netherlands1
Denmark
UnitedKingdom
CzechRepublic
Luxembourg
Sweden
Romania
Estonia
Croatia
France
Italy
Germany
Austria
Belgium
Finland
EU28
SlovakRepublic
Slovenia
Spain
Poland
Greece
Ireland
Lithuania
Malta
Latvia
Portugal
Hungary
Bulgaria
Cyprus
Social security funds

13. The contribution to the health system from
general revenues has been consistently low
in Slovenia since long before the crisis
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Central government Local government
Social security funds Corporations (excluding health insurance)
Private health insurance Households

14. While HIIS revenues have been susceptible to
fluctuations, CHI have generally had small annual
profits
62,208,275 57,165,544 63,774,043
36,192,392
47,804,707 53,059,171 58,987,550 62,121,019
-100,000,000
0
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
600,000,000
2007 2008 2009 2010 2011 2012 2013 2014
Premiums minus claims
Premiums minus claims and operating
costs
Net earned premium
Net claims incurred
Net operating costs

15. Pros and cons of CHI
• Cons
– Flat premium is somewhat regressive
– Administrative costs are significant
• But low compared to CHI in other countries
• Pros
– Households pay for a relatively small share of
health care OOP despite high coinsurance
rates
– CHI allows for cost-shifting from public to
private
– CHI pays for care even after HIIS-contracted
volumes are met

16. Financial protection is very good and
unmet need is low as a result of CHI
.071% .994%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2012
No OOP
No risk of impoverishment
At-risk of impoverishment (within 20%
of poverty line)
Impoverished
More impoverished
Catastrophic expenditure (>40% of
capacity to pay

17. Public expenditure on health has slowed
overall, but the distribution is relatively stable
0
500
1000
1500
2000
2500
3000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
MillionsofEUR
Capital formation of health care provider institutions
Health administration and health insurance
Prevention and public health services
Medical goods dispensed to out-patients
Ancillary services to health care
Services of long-term nursing care
Services of curative home and rehabilitative home care

18. Some of the small shifts have been
positive, while others less so
00
00
02
00
01
00
-01
00
00
-01
-2 -1.5 -1 -0.5 0 0.5 1 1.5 2
In-patient curative and rehabilitative care
Day cases of curative and rehabilitative care
Out-patient curative and rehabilitative care
Services of curative home and rehabilitative home
care
Services of long-term nursing care
Ancillary services to health care
Medical goods dispensed to out-patients
Prevention and public health services
Health administration and health insurance
Capital formation of health care provider institutions
Changes in distribution of public health care expenditure, 2008 to 2013
Good!
Good!
Not so good!

19. HIIS currently pays for some items that are
not in their mandate
• Expenditures for specializations funded by
HIIS amounted to 45,821,329 EUR and for
trainees 16,919,965 EUR (2014)
• Increased general VAT rate from 20 to 22%
and the reduced VAT rate from 8.5 to 9.5 %
– estimated that the VAT rate increase
contributes about 3.5 million EUR to
annual HIIS expenditure
These expenditures are of a comparable magnitude
to CHI annual operating costs + profits!

20. Methods currently used to reduce HIIS
annual expenditure
1) Changes in prices
– Volumes are maintained while revenues
decline
2) Changes in coinsurance
– Costs shifted onto CHI without damaging
access to services
3) Delaying payments to providers
– ~150 million EUR in liabilities (2010-2013)
Can incentivize
providers;
Profitable for CHI
Bad for providers
and bad for fiscal
policy
CHI increases premiums;
May support providers

21. Providers are burdened by delayed
payments, though providers who suffer
losses may have poor management
And then the Ministry of Finance provides
loans to support providers…

22. Health sector salaries have not kept pace
with other sectors
90
100
110
120
130
140
150
2005M01
2005M05
2005M09
2006M01
2006M05
2006M09
2007M01
2007M05
2007M09
2008M01
2008M05
2008M09
2009M01
2009M05
2009M09
2010M01
2010M05
2010M09
2011M01
2011M05
2011M09
2012M01
2012M05
2012M09
2013M01
2013M05
2013M09
2014M01
2014M05
2014M09
2015M01
All monthly
earnings (base
2008)
Human health gross
activities (base
2008)
All monthly
earnings (base
2005)

23. Overtime payments can be high, but
have a negligible effect on aggregate
labor costs
-20.00%
-10.00%
.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
2007 2008 2009 2010 2011 2012 2013 2014
Total wages Total wages minus overtime Overtime

24. What are the key issues?
• Reliability of public resources is a greater concern than
the level of public expenditure
• HIIS is susceptible to labour market fluctuations and the
ageing population (WP3)
– Without increasing the tax funding component of the
health financing system or significant gains in
employment and wage growth to counterbalance the
growing older population, this will put downwards
pressures on revenue
• CHI provides an important function to maintain access to
care without increasing the public or OOP burden but its
efficiency can still be improved (WP3)
• Delayed payments to providers lead to retrospective
funding from MoF (WP4)
• HIIS should not pay for unfunded mandates like
specialization training and other non-health service
functions

25. And what now...?
Has been this report useful?