The Romanian Healthcare System: Between Bismark and Semashko

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The Romanian Healthcare System: Between Bismark and

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The Romanian
Healthcare System:
Between Bismark
and Semashko
Cristian Vlădescu
Silviu Radulescu
Sorin Cace
The Romanian Healthcare System:
Between Bismark and Semashko
Cristian Vlădescu, Silviu Radulescu, Sorin Cace
1. EXECUTIVE SUMMARY
The objective of this report is to review the formulation and implementation of health
sector reform in Romania from the 1989 revolution to 2003. The study was conducted
through three-person fieldwork in Romania, using interviews and documentary analysis.
The analysis covers main aspects of the health policy process in Romania. First, in the
historical review section, the structural context of health sector reform is identified. The
deteriorating health conditions in Romania are referred to, in addition to the problems
of healthcare delivery. It is particularly important that these latter problems are under-
stood within the context of financing the public sector. Health sector reform should
be seen as part of the broader transition to a market economy and political pluralism.
Second, in Section 3, the principal and potential actors in health sector reform are
identified and described. The analysis focuses on the distribution of power within the
health system and on the important positions and roles of the medical profession, the
World Bank, and public servants; in this context, the content of the proposals and agreed
reforms to the health sector since 1989 are described; these include the decentraliza-
tion of government, the primary healthcare project, and the development of the health
insurance system Third, in a section devoted to country-specific experience, we focus
on the implementation of the health insurance system in Romania and make specific
comments/suggestions related to health policy in this area.
These reforms are consistent with similar changes in both Western Europe and FSE.
Also, the decision-making process on health sector reform is examined. This incorporates
the way in which health sector reform issues arrive on the political agenda, the process
by which actual decisions are made, and the process of implementation. The following
characteristics of the process are highlighted: the international character of the reform
process and the prominent role of the World Bank, inter-ministerial relations, the lack
of community and user participation, the form of consultation with group interests,
437
D E C E N T R A L I Z A T I O N I N H E A LT H C A R E
political coalitions for health sector reform, the lack of policy debate, the pace of reform,
and conditions and contradictions in policy.
2. INTRODUCTION
2.1 General Information on Romania
Romania is situated in the southeastern part of Central Europe and covers an area of
237,500 km2. It is bordered by the Black Sea and the Republic of Moldova to the east,
Ukraine to the north, Hungary and the Serbia to the west, and Bulgaria to the south.
As of 2002, Romania was home to 21.68 million inhabitants, down from 22.81 million
in 1992 (according to that year’s census); 54 percent live in urban areas. The capital
Bucharest concentrates about 10 percent of the population. According to the last census
the ethnic composition was 89.5 percent Romanian, 7.1 percent Hungarian, 1.8 percent
Roma, and 1.65 percent other nationalities. The official language is Romanian, but
minorities are entitled to use their native language. 86.8 percent of Romanian citizens
professed to be Romanian Orthodox, 5.1 percent Roman-Catholic, 3.5 percent Prot-
estant, 1 percent Greek-Orthodox, and 3.6 percent belonged to other religions.
The district (judet) is the basic administrative unit of the country. There are 42
districts, with an average population of about 0.5 million inhabitants each. The lowest
administrative level is the local council, whose mayor holds executive power. Both the
local council and the mayor are directly elected for a four-year period. Above the local
council level is the district council, which coordinates the activity of the local councils.
Relations between them are based on the principle that there should be local autonomy,
and that public services should be decentralized. They work together to address common
problems and neither level is subordinate to the other. Central government is represented
at local level by the prefect, who is appointed by the government and whose role is to
coordinate and supervise public services. Romania is a republic, led by a president and
governed by a two-chamber Parliament: the Senate and the Chamber of Deputies.
These are directly elected for a four-year term. Former communists dominated the
government until 1996 when they were swept from power by a fractious coalition of
center-right parties. Currently, the Social Democratic Party forms a nominally minority
government, which governs with the support of the opposition Democratic Union of
Hungarians in Romania.
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T H E R O M A N I A N H E A LT H C A R E S Y S T E M : B E T W E E N B I S M A R K A N D S E M A S H K O
2.2 Trends in Socio-economic and Health Indicators
2.2.1. Socio-economic Indicators
Following World Bank classifications of GDP, Romania is seen as a lower-middle-income

country. Romania’s GDP was 1,585 USD per capita in 1999, almost three times smaller
than the CEE average, and about 15 times smaller than that of the EU.
Romania, one of the poorest countries in CEE, began the transition from commu-
nism in 1989 with a largely obsolete industrial base and a pattern of output unsuited
to the country’s needs. Over the past decade economic restructuring has lagged behind
most other countries in the region. Consequently, living standards have continued to
fall—real wages are down perhaps 40 percent. Many major businesses remain under
state control and have yet to address the fundamental issues which enable business to
survive and flourish in a competitive environment. After a spurt of growth up to and
including 1996, the GDP contracted annually between 1997 and 1999 and started to
grow from 2000; in 2001 the GDP growth was around 5.3 percent and for 2003 the
estimations are around five percent (see Table 1). With industrial output declining,
services contracting, and investment plummeting, unemployment has been rising. The
trade gap has widened appreciably for a number of years, and the current account deficit
stood at 5.4 percent of GDP in 1998 but improved to 3.0 percent in 2002. The work-
ing population dropped by over 20 percent between 1989 and 2002 and the number
of wage earners fell by over 27 percent. This decline in employment was largely due to
layoffs or retirements from large, state-owned textile, metal, and machinery industries.
Unemployment in 2002 was officially reported to be 9.0 percent (in 1991, 3.0 percent),
with female unemployment about one-sixth greater than male, and longer lasting, but
with short-term male unemployment fluctuating severely. Unemployment is expected
to continue to climb in 2003–2005 as a result of the closures or restructuring of major
enterprises. Thus, the structure of the economy is changing. The contribution of agri-
culture to the GDP has constantly decreased since 1990, arriving by 2001 at a value
of 15 percent (21 percent by 1993). The contribution of industry has also decreased to
30 percent by 2000, compared with 43.1 percent in 1992, having the same negative
impact on industrial worker’s income. Another factor contributing to the deterioration
of living standards was the high rate of inflation, 45.7 percent by 2000 (the rate in 1997
was 154.8 percent), decreasing to 19 percent in 2002, with an estimation of 13–14
percent for 2003 (see Table 1).
The long transition period in Romania has seen an enormous increase in poverty.
In 1989 an estimated seven percent of the population was living below the poverty line.
According to the National Institute of Statistics, this share had risen to 38.3 percent of the
population by 2001. After 1989, a deep social stratification became visible in Romania.
439
Table 1.
Selected Economic Indicators, 1997–2001
Indicator 1997 1998 1999 2000 2001 2002
Real GDP growth –6.1 –4.8 –1.2 1.8 5.3 4.5

Unemployment rate 8.9 10.4 11.8 10.5 8.6 9.0
(end of period, %)
Consolidated public sector deficit –5.3 –5.4 –3.6 –4.0 –3.3 3,0
(% of GDP)
Consumer Price Index (1995=100) — — 820.3 1,194.9 1,606.8 1,968.9
Labor force as % of population 51.4 50.2 50.6 51.0
Annual average rate of inflation % 154.8 59.1 45.8 45.7 34.5 19.1
Government revenue as % of GDP 26.7 28.2 31.4 27.2 na na
Source: World Bank (2002) and the National Institute of Statistics.
Considering the poverty line to be a disposable income of less than 60 percent of average
household expenditure, the categories of population most affected by poverty are: a)
employees with low income and dependent children (39 percent of the total population
below the poverty line in 1998); b) pensioners, whose average pension is below 50 USD
(25.9 percent of the total population below the poverty line); c) farmers living in rural
areas; and d) unemployed persons (11.1 percent of the population below the poverty
line). Given these data and other reports, a majority of researchers agreed that much
economic restructuring remains to be carried out before Romania can achieve its hope
of joining the European Union.
2.2.2. Health and Healthcare Indicators
From the 1960s to the 1990s health status in Romania steadily declined. At the begin-
ning of this period Romania was comparable in many important respects to Western
European countries. Since then a tendency of relative and absolute decline prevailed.
Table 2 synthesizes the main demographic indicators since 1980.
Mortality trends over the past three decades in Romania, like many other countries
in Eastern Europe and the NIS, suggest a new pattern of the epidemiological transition,
distinct from the experience of other developed and middle-income countries in Asia
and Latin America (World Bank 1998). The principal distinguishing feature of this
new pattern is a sustained increase in mortality among adult males, with a duration
and order of magnitude that has never been observed previously. In an industrialized
region noted for numerous improvements in child health, explanations for the rise in
440
Table 2.
Demographic Indicators
Indicator 1980 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
% age 0–14 26.6 24.9 24.6 24.7 24.2 23.5 22.8 22.2 21.5 20.9 20.5 18.8 18.3 17.8
% age 65+ 10.4 10.1 10.3 10.7 11.1 11.4 11.7 12.0 12.2 12.6 12.8 13.0 13.3 13.6
Live births % population 18.0 16.0 13.6 11.9 11.4 11.0 10.9 10.4 10.2 10.5 10.5 10.4 10.5 9.8
Total fertility rate 74.8 66.3 56.2 48.7 46.6 44.3 43.3 41.1 39.9 40.6 40.6 40.2 40.3 37.8
Life expectancy at birth 69.2 69.4 69.5 69.8 69.8 69.5 69.5 69.4 69.1 69.0 69.2 69.7 70.5 71.1
Source: MoH, Statistical Yearbooks, 1990–2002.
441
mortality of adult males include factors such as smoking, alcohol consumption, diet,
and pollution. Some lifestyle indicators are presented below:
Table 3.
Lifestyles Indicators
Year % of Regular Daily Smokers Liters of Pure Alcohol Consumed
(Men Aged 15–24, Women Aged 15–44) per Year per Capita, Age 15+
1991 8.0
1992 9.0
1993 Women: 15 Men: 40 8.6
1994 8.7
1995 9.0
1996 8.9
1997 9.3
1998 8.1
1999 Women: 26 Men: 45.4 7.3
2000 7.3
Source: 1. Reproductive health survey, 1993, 1999; 2. Health for All database, WHO.
The health data attest to a general decline over the past three decades in the lifespan
of males, in contrast with a steady increase, since mid-1960, in the average life span
of females.
The 1990 life expectancy at birth for males and females in Romania was estimated
by World Bank studies to be 69.0 and 72.3 years, respectively. The World Bank’s 1995
estimate of life expectancy for the total population is 70 years, compared to 77 in the
United States. Between 1980 and 1995, life expectancy at birth remained constant
(World Bank 1998). Thus, the statistics on life expectancy at birth for males provides
an illustrative example of trends in health in Romania, especially if compared with
other countries. Male life expectancy in Romania, at 67.8 years in 2000, is the lowest in
Central and Eastern Europe (not including the newly independent states of the former
Soviet Union). There are positive developments, however. In 1998, life expectancy for
males began rising in a pattern similar to other Central European countries such as the
Czech Republic, Poland, Bulgaria, and Hungary.
The crude death rate for the total population hovered around ten per 1,000 be-
tween 1980 and 1990 jumped to 12.0 in 1995. In part, this rise in the death rate may
be explained by the decrease in birth rates and growing proportion of the population
aged 50 years and older. Between 1980 and 1995 the general fertility rate plummeted
roughly 40 percent. The annual rate of natural growth in Romania was estimated at
442
negative 0.2 percent in 1997 and negative 0.27 in 2000. Reflecting improvements in
infant and child health, MoH data document a marked decrease since 1980 in deaths
among the 0-4 year age group, with almost a 50 percent reduction between 1990 and
1995. A drop in the infant mortality rate was reported, from almost 30 per 1,000 live
births in 1980 to 21.2 in 1995, and less than 20 in 2001 and 2002; however this is still
one of the highest in Europe. There are also considerable regional differences: in 2000,
infant mortality rates ranged from 12.2 to 28.3 per 1000 live births in different districts.
The post-neonatal mortality (9.5 per 1000 live births in 2000) is also high, being 1.9
times the CEE average and 5.8 times the EU average. Post-neonatal mortality was two
times higher in rural areas compared with urban areas (13.0 vs. 6.6 deaths per 1000 live
births) indicating that access to effective medical care is poorer in rural areas.
In contrast, Romania’s maternal death rate of 66 per 100,000 live births is more than
three times the average for Eastern Europe and over six times the average for Western
Europe, despite a huge decline since 1990 (from 83.6 deaths per 100,000 live births
in 1990 to 33 per 100,000 live births in 2000), which were a result of new national
abortion policies and their implementation. Abortion is still the most frequent method
used for avoiding unwanted pregnancies. Though this indicator value has decreased very
much, it is still at a high level of 1,107.8 abortions for 1,000 live births in year 1999,
respectively 1.1 abortions to one born child in comparison with 3.1 abortions to one
born child in 1991. There is an increase in the number of children born outside mar-
riage and a decrease in the number of children born within marriage.
The increase in communicable diseases could also be associated with the fall in
socio-economic conditions of the population. Trends in the incidence of tuberculosis
confirm the pattern indicated by mortality statistics. The incidence rates increased stead-
ily in the 1990s, from 61 cases per 100,000 in 1991 to 105.5 cases in 2000. Even more
disturbing is the doubling of tuberculosis incidence rates in children (from 13 cases
per 100,000 inhabitants in 1990 to 32 cases in 1999). The incidence rates for syphilis
increased steadily from 19.8 cases per 100,000 inhabitants in 1989 to 45.17 cases in
2000. The total numbers of AIDS patients registered by the Ministry of Health and
Family beginning in December 1998 were 5,040 AIDS children and 690 adults. There
were another 3,257 registered HIV positive children and 642 adults. The proportion
of children under nine years old was 86.9. However, there has been a reduction in new
cases in recent years, due to the improvements in blood testing and ending a number
of unsafe medical practices in children’s foster homes. Table 4 presents some trends in
main morbidity indicators.
The World Bank has analyzed the health status of the Romanian population by
estimating the burden of disease (BOD), or the loss of healthy life due to premature
mortality and disability. The aggregate unit of measurement for the BOD is the dis-
ability-adjusted life year (DALY). DALYs are calculated with Romanian mortality data,
but disability calculations apply a “ratio method” of total DALYs to death DALYs from
443
Table 4.
444
Mortality-based Indicators
Year 1980 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Crude death rate per 10.40 10.70 10.60 10.90 11.60 11.60 11.70 12.00 12.70 12.40 12.00 11.80 11.40 11.60
1,000 individuals
Circulatory disease* 588.00 617.60 627.00 658.20 707.80 712.30 709.90 736.10 785.90 761.50 738.60 737.00 701.80 710.60
*
Heart disease 152.30 199.80 202.20 209.50 221.80 251.60 247.10 248.40 261.50 256.01 248.45 249.73 230.57 228.36
*
Cerebro-vascular 182.20 191.80 185.40 188.40 189.80 244.20 241.30 243.40 253.20 246.79 238.82 231.03 215.51 214.54
Malignant neoplasms* 135.00 141.6 142.10 144.70 153.00 158.90 162.20 165.50 170.30 173.60 174.60 176.70 184.00 190.80
*
Digestive disease 45.40 53.5 50.30 50.80 57.90 62.50 65.60 68.20 71.70 75.50 71.70 65.50 64.00 70.60
Chronic liver disease* 32.70 36.24 34.60 36.10 40.03 44.69 47.67 50.64 53.93 57.12 53.72 46.00 44.47 49.43
*
Respiratory disease 136.70 105.70 97.30 91.30 94.00 79.70 80.60 75.80 86.20 77.60 70.80 74.40 66.10 62.90
Infectious 10.84 12.12 12.52 12.07 13.54 15.08 15.06 15.21 15.91 16.04 14.39 14.98 14.55 15.80
and parasitic diseases*
Accidents* 67.10 74.70 76.50 72.80 74.30 73.80 76.10 78.60 78.70 76.80 72.20 64.40 64.20 63.70
Motor-vehicle traffic — 9.84 19.53 16.81 15.37 13.94 — — 12.57 12.56 12.22 11.52 12.81 13.31
accidents*
Infant deaths per 29.30 26.90 26.90 22.70 23.30 23.30 23.90 21.20 22.30 22.00 20.50 18.60 18.60 18.40
1,000 live births
Maternal mortality 133.00 170.00 83.00 66.50 60.30 53.20 60.40 47.80 41.10 41.40 40.50 41.80 32.80 34.03
rate per 100,000
live births
Note: * SDR per 100,000 individuals—all ages.
Source: European Health for All Database, WHO.
the former socialist economy region as a whole. In contrast with standard mortality
measures, the BOD methodology, constitutes a policy-making tool that establishes
close links between the economy and health by measuring future loss of productive
life that includes disability. The highest proportion of all DALYs, 30 percent, is lost to
heart-related conditions. Cerebro-vascular diseases claim 14 percent of all DALYs. Third
in order of importance are tumors or cancer of various kinds, especially of the lung,
stomach, colon, breast, and prostate. Fourth, is the DALY loss (ten percent) associated
with alcohol-related mental disorders. Trauma and respiratory diseases have the same
share of DALY loss, at six percent each. The DALYs lost to trauma are less in Romania
than in other Eastern European countries with higher rates of vehicle accidents. Diabetes
falls in the nutritional/hematological classification which contributes three percent to
total DALY loss. Infections and parasite diseases contribute two percent to all DALYs
lost. Table 5 presents the trends of some morbidity-based indicators.
To conclude, in the last decade, the health status of the population continued to
decline. There are significant differences in health indicators between Romania and
Western European countries. Even comparisons with countries in the accession process
to the EU are not favorable—not only in terms of health indicators, also in terms of
both access to basic sanitation services and essential medical services. The distribution of
diseases associated with high and low levels of income (like circulatory system diseases,
typically associated with higher income countries or tuberculosis, usually associated with
poor socio-economic conditions) shows a west-east divide, having a similar pattern as the
resource distribution of primary healthcare providers, hospital beds, and medical profes-
sionals, all of which having more resources per capita in the west of the country (the
region of Transylvania) than the east (the region of Moldova). There is also a significant
urban–rural divide in terms of distribution of physicians, with a shortage of physicians
in rural areas. A more detailed description of trends in major health indicators is given
in the Annex (see Tables 5 and 6).
445
Table 5.
446
Morbidity Indicators (All Data Expressed in Incidence per 100,000 individuals)
Year 1980 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Tuberculosis incidence 54.50 58.30 64.60 61.60 73.40 82.50 87.30 95.00 98.60 95.80 101.20 104.10 105.50 115.30
Viral hepatitis 227.20 351.40 322.10 218.60 117.90 89.50 118.70 139.40 104.30 88.00 74.00 99.70 117.90 115.30
Hepatitis A 191.60 307.00 0 182.60 87.21 65.48 84.84 106.80 81.30 68.26 52.08 77.99 97.81 94.24
Hepatitis B 34.84 43.12 34.02 29.38 24.09 21.31 23.76 24.43 20.92 17.14 13.73 12.27 12.01 11.95
Diphtheria 69.90 48.20 31.80 32.50 35.60 38.20 51.30 36.60 24.10 24.70 17.40 15.30 12.10 11.60
Acute poliomyelitis 0.56 0.05 0.03 0.13 0.08 0 0 0 0 0 0 0 0 0

Table 6.
Health System Indicators
Indicator 1980 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Total health expenditure — — — — — — — 176 299 257 215 203 190 —
per capita US $ (PPP $)
Public health expenditure* — 100 100 100 100 100 100 100 100 100 100 100 — —
*
Total inpatient expenditure — — — — 57 58 59 59 58 63 — — — 53
Total pharmaceutical ex- — — — — 11 14 18 17 19 17 20 — — —
penditure*
Salaries* — — — — — — 54 50 48 38 — — — —
Beds per 100,000 — — — 890 790 790 770 760 760 740 730 730 740 —
individuals
Physicians per 100,000 — — — 551 536 565 567 565 552 546 530 486 490 —
individuals
Average length of stay (days) 11.1 11.1 11.4 11.7 11.7 11.4 10.3 10.9 10.4 10.1 10.0 9.5 8.9 8.6
Bed occupancy rate 77.5 72.8 67.6 66.3 78.3 78.3 79.1 77.5 77.8 78.6 78.0 75.6 75.3 79.4
Private hospital beds — — 0 0 0.01 0.01 0.01 0.01 0.01 0.01 0.02 0.02 0.03 —
as % of total hospital beds
Note: * Percent of total health expenditure.
447
2.3 Structural Background to Health Sector Reform
In this section of the report the principal contextual issues of health sector reform in
Romania will be analyzed. This should provide an understanding of the key issues to
which the reforms of the health sector, as outlined in section 2 and 3, respond to.
2.3.1 Health and Healthcare in Romania
The previous section indicated that, although health indicators in Romania are in many
respects typical of its position as a middle-income country, the comparisons with es-
tablished market economies of Western Europe highlight the health problems facing
Romania. There is also a current concern that health indicators show a recognizable
downturn in recent years. In many respects these follow from the legacy of social and
economic problems from the Ceausescu regime and the social and economic dislocations
experienced during the transition to a market economy. To Adeyi (1996) this transitional
deterioration in health status comes as little surprise due to the “i) reduction in real
income and widening income disparities; ii) stress and stress-related behavior, iii) lax
regulation of environmental and occupational risks; and iv) breakdown in basic health
services.” To these we may add the increase in crime and violent deaths.
Healthcare services are also confronting major problems. First, the economic reces-
sion, according to a London School report (1994: 9) “has led to a reduction of resources
available for health services, leading to decreased immunization rates, lack of availability
of drugs, and decreasing ability to provide treatment for certain conditions.” Second,
the legacy of the Semashko model and the identification of critical organization and
management problems will be indicated in the next section. These problems are fre-
quently cited in Romania as the critical targets of reform. Table 6 presents some of the
major healthcare indicators in Romania.
2.3.2 Financing the Public Sector
All researchers are mentioning the low level of resources dedicated to healthcare in
Romania as shown in Table 7, in comparison with both CEE, with an average of 5
percent of GDP and with UE with an average of 8.5 percent of GDP (see Table 7).
It is not surprising therefore that health sector reform has shown concern for increas-
ing the resources dedicated to the healthcare system. However, any attempt to increase
this sum has to be viewed within the context of policy constraints facing government.
The economic recession of the 1990s, high inflation, and the upheaval of the transition
process hardly represent a solid basis for increased allocations to the health sector. There
448
Table 7.
Total Expenditures for Health, 1990–2000
Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Total expenditure 3.7 3.6 3.3 3.3 3.1 3.7 3.7 3.5 3.9 4.6 4.6
as percent of GDP
Source: Ministry of Health, Statistical Yearbooks, 1991–2001.
are clear dilemmas in determining where additional resources would be collected from.
The government is under pressure to reduce the size of the public sector and the tax
burden as part of the transition to a market economy. In order to increase the flow of
resources to the health sectors, nearly all FSE countries have opted for schemes of social
insurance, and this was also the political option of the Romanian Government, as will
be described in the following sections. There are however, definite concerns over their
appropriateness to the social and economic conditions in FSE. Resource constraints can
clearly limit the options for health sector reform. Taking these constraints into account,
different researchers suggested the need to focus health sector reform within existing
resource constraints: “the maximum possible value needs to be obtained from the limited
sums available (and) the healthcare services provided need to relate to the existing and
foreseeable patterns of disease in Romania”(Jenkins et al. 1995).
In this context, one further point is important to mention regarding Romania—lack
of transparency. This refers to the process of resource allocation and raises important
questions about issues like equity in the delivery of healthcare services.
2.3.3 Social and Political Transition and the Health Sector
The revolution of December 1989 is leading to important changes in the structure of

Romanian society. Health sector reform should be seen as part of this broader change in
society. Deacon (1992) suggests that these may be seen as part of a broader change from
a “bureaucratic state collectivist system of welfare” to capitalism. Important structures
of the previous regime have disappeared, and new social structures and processes are
being formed. The partial introduction of capitalist relations, market systems, and liberal
democracy are expressed through the emergence of a multiparty system, national and
local political elections, a measure of land reform, the development of free enterprise,
and the formation of trade unions. A particular feature of this new configuration of
social and political power is the absence of an active and developed civil society. There are
indications that the overall structure of social and political power in Romania has not
been conducive to rapid and possibly major changes through health sector reform
449
Noting the importance of the transition is not to suggest that there is a clear idea
within Romania as to the type of society that will emerge from this process. Platforms
for change range from free market neoliberalism to social democracy and variations on
state collectivism, even if now Romania is a candidate for accession to the EU. Certainly
the overall direction of the change is towards the introduction of market systems and
political pluralism and implementation of the acquis communitaire in order to become
a full member of the EU. There are however many imponderables around the way in
which the economy will face up to international pressures, the impact of a market
economy, and the moment when Romania will join the European Union. It should be
mentioned here that the healthcare system, along with other branches of social protec-
tion, are generally not yet developed to a level consistent with that which is found in
the EU. Romania continues to strive to secure economic viability and modern planning
and management—not least for the healthcare system, its effective management, and
planning of resource allocation. There is a growing gap between professionally possible
and affordable health services. The pre-accession strategy stresses the importance of in-
stitution building, especially related to public accountability and budgetary control. The
health sector is an important user of public funds and institution building is particularly
important. It seems clear that the governing elite are facing a number of pressures in
developing new policies on social welfare, to accommodate both internal demands and
external constraints.
2.3.4 External Features of Health Sector Reform
Three points should be mentioned here. First, the issue of health sector reform is on
the agenda, albeit in differing degrees, in all the CEEC. One can notice two major
trends in this respect. There is a shift from a taxation-based system based on citizenship
to a system of earmarked taxation of the payroll leading to individual entitlement to
healthcare provision. This is seen as a way of increasing the flow of funds to the health
sector. The other trend is designed to improve the system’s efficiency and involves the
adoption of a pluralistic approach involving internal market mechanisms. While other
countries are at the forefront of these changes, reform in Romania is more gradual and
incremental. Second, the role and position of the World Bank (WB) has to be taken
into account. This will be developed in the next sections this report. Third, we should
be aware of the connections with the process of health sector reform in Western Europe.
This will be seen to be of some importance when we refer to the primary healthcare
project and the health insurance system in the next sections.
To conclude, this section has referred to the deteriorating health conditions in
Romania and the problems of healthcare delivery. It is particularly important that
450
these latter problems are understood within the context of financing the public
sector. Health sector reform should be seen as part of the broader transition to a market
economy and political pluralism. The structural issues outlined in this section cannot
be understood in isolation. There are links between them, as one issue is reinforced
and/or reinterpreted by another. At the same time, the structural issues constitute
contradictory pressures for policy makers. For example, we saw how policy makers face
contradictory pressures to both restrict and expand the amount of resources dedicated
to the health sector.
3. AN OVERVIEW OF REFORM: POLICIES, PROCESS

AND OUTCOMES
The Romanian health system has been passing through radical structural changes since
1989. In some aspects, the present situation can be compared with what occurred after
the Second World War. Then, the change of the health system was similar to that of
the whole society, for the health system being imported was a model that had very few
connections with the tradition or with the real situation in Romania at that time, the
so-called Semashko model. After 1989, we are witnesses to a reverse process, of passing
from a model that had been in place for five decades to another model with foreign roots,
which is closer to what existed in Romania prior to the Second World War. In spite of
this general tendency to reform the healthcare sector, finding the optimal structure of
the health system has proven to be a very difficult task for at least three reasons. First
of all it should be underlined that the health system should have certain objectives.
Theoretically, most countries define three major objectives for their health system: a)
universal and fair access to a reasonable package of health services; b) control of costs
of health services, and c) efficient utilization of resources.
In spite of the relative concord about the objectives of a functioning health system,
to establish their relative weight and prioritize them became very difficult for most
countries that want to reform their health sector. This aspect can be discussed only
after the socio-economic objectives and priorities of a country have been established.
Another important factor for the development of health systems is ideological—the
debates between supporters of free initiative versus the supporters of government plan-
ning. Another major issue has been the relative lack of information concerning the
functioning and performance of different health systems. The remaining two section
of this report will try to show how these questions were answered.
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3.1 Health Policy Reform Since 1989
In the developments of the health policy after 1989 two main periods can be identified:
one between 1990 and 1996, and the second from 1997 until today, the threshold be-
ing the general election of November 1996, after which major new health legislation
enacted. Even if the government changed again in 2000, it adopted most elements of the
previous government’s health strategy. This section will describe the principal reforms in
the health sector from the revolution in 1989 up to 1996; the later period from 1997
until today will be described in the last section of this report, as it basically covers the
period in which the HIL was implemented and the new HIS started to function. In
this section, particular attention will be paid to:
• the initial policies and demands for change after December 1989
• general government decentralization and the health sector
• the primary healthcare reform
• key actors in health policy and the decision-making process
• multilateral and bilateral external agencies, with a focus on World Bank involve-
ment in the reform process.
All the changes that occurred in health policy after 1989 were influenced by the
pre-1989 health system. The Semashko healthcare system was common in Central and
Eastern European countries. Central to this system was the state provision of services
for all members of society, leaving little or no choice to the user but seeking to achieve
a high level of equity. The highly regulated, standardized, and centralized system was
operated through the MoH. The legacy of this system can be felt in the current operation
of healthcare: a) the relatively small proportion of the GDP dedicated to healthcare; b)
the centralized and inequitable allocation of resources (with under-the-table payments
and privileges for the nomenclature); c) physicians usually lacking adequate motivation,
as they were poorly paid and underemployed; they had a narrow clinical orientation
and lacked broader knowledge of public health issues and health management, includ-
ing cost containment in modern health systems; d) the system was vertically integrated
and required less regulation as it relied on a rigid hierarchical command and control
structure, and the financial flows were independent of outcome; e) lack of response to
local needs; f ) poor quality of first level services, inadequate referral and overemphasis
on hospital-based curative services with a lack of good equipment and drugs; g) the
supply of beds and personnel not matched by the provision of equipment and drugs;
h) alienation from responsibility for one’s own health; lack of associations of interested
citizens, at both the national and local level, and lack of an autonomous civil society
(still a challenge at present) was both a cause and a symptom of a situation characterized
by a passive attitude towards issues which the state was supposed to take complete care
452
of; i) growing inequity in healthcare provision between regions and between different
social groups.
3.1.1 Initial Policies and Demands for Change

after December 1989 to 1996
Following the political changes of December 1989, the overall approach of the new
government was to make preparations for the process of change but not to dismantle
the existing system until a new health policy had been adopted. Between 1990 and 1992
the healthcare crisis grew steadily worse, and the dialogue between the unions of health
professionals and the national and sub-national administration became increasingly
more difficult. Faced with severe and complex problems, the main difficulty for health
authorities did not consist in identifying needs, but in establishing their hierarchy. Under
these circumstances, the major decisions made by the Ministry of Health immediately
after the December 1989 events were the following: to avoid the de-structuring of the
healthcare system prior to adoption of a new health policy; to inform both the govern-
ment and the population on the difficult conditions of the system; to consider the HIV
and Hepatitis B epidemics as a top priority; to lower maternal mortality by providing
free access to safe abortion; to initiate competitions for admitting doctors to specialty
training, and thereby reduce the strain in the ranks of health professionals (such com-
petitions had been prohibited for 8–10 years); to provide free movement of doctors in
a decentralized manner—at the level of district authorities; to create the specialty of
general practitioner, and to re-introduce post-high school health education for training
nurses, initiation of a managerial training process for the new directors of healthcare
units, those who had been elected after the political events of December 1989, and who
had to manage the crisis and lead the change. It can be noticed that in the competi-
tion for priority, the emergency criteria were the uppermost, and those with a possible
immediate impact, also favored by short-term conjuncture and political interests. The
winner was, in fact, the preoccupation with reform of the healthcare services, and not
for the reform of the health system.
Between 1992 and 1993 Romanian specialists, with the support of foreign experts
and financing from a loan from the World Bank, produced a project for the rehabilita-
tion of the health system in Romania, called “A Healthy Romania.” In fact the project
proposed the framework of a new strategy for the reform of health services. The more or
less explicit major aims of the new strategy were the following: a) reduction of the state
monopoly and its ownership role, which enabled it, at the same time, to finance and
acquire, to provide and to manage health services; b) to introduce social health insur-
ance and improve the financing of the system; c) to decentralize the system, increasing
the political and strategic roles of the Ministry of Health; d) to ensure management
453
autonomy for the hospital, and the development of independent medical practice; e) to
develop primary medical care and free choice of family doctor; f ) to develop mechanisms
for accreditation and quality assurance; g) to adjust personnel policies in accordance
with national needs and European exigencies.
Although based on recommendations from the World Bank, the elaboration of the
strategy and decisionmaking lacked transparency and were methodologically unclear.
Thus, of the major actors that should have been interested in this process, only the
central health authorities were involved. In the necessary steps of preparing the policy
(planning, organization, implementation, evaluation) representatives of the medical
corps (professional unions, professional associations) participated only when the ways
were discussed by which the decisions already made by the Ministry of Health should
be implemented, and in such circumstances it was only natural for tension to develop
that influenced the final outcome. The representatives of those directly involved in the
experiment, namely the users, were not consulted at all, and thus the legitimacy of the
process had serious weaknesses.
Until the change of government in 1996, the MoH demonstrated either indifference
or resistance to reform activities, but persistent pressure from the World Bank, together
with support from stakeholders outside the MoH, permitted some progress in reform
components. Between 1992 and 1994 there was an initial simulation testing different
mechanisms of payment in four districts carried out by four different teams involving
Romanian and external consultants. The teams were from the UK (Nuffield and King’s
Fund), Denmark, and Sweden—each working with a different district and helping to
choose the most appropriate way of PHC delivery. The initial idea was to implement
different options and compare them to see which was most appropriate.
Between 1994 and 1996 pilot health reforms were implemented in Romania in 8
districts, building on some of the recommendations of technical assistance carried out
in 1992–1994.
Legislation was passed in 1995 to establish the College of Physicians. Elections
were held for this body, but they were confirmed by the government only after the 1996
election; the college started to function from 1997. The social health insurance bill was
approved by the Senate in 1994 and by the Chamber of Deputies in mid-1997; its imple-
mentation started in 1999, but the numerous amendments changed the initial philosophy
of the law significantly. A more detailed description of this essential component of the
reform health policy in Romania is developed in the last section of this report.
3.1.2 General Government Decentralization and the Health Sector
The Law of Local Public Administration, passed in 1992, set out the new structure
of decentralized public administration in the country. This defined the organizational
454
context in which the public sector health services operate. It describes three forms of
decentralization:
• Functional deconcentration within the MoH operates through 41 DHDs. These
are supposed to apply at the district level the guiding principles of health policy
of the MoH. They are headed by a director, who is always a doctor and is ap-
pointed by the MoH with the agreement of the prefect (see below).
• Prefectoral deconcentration exists through the central appointment of a prefect in
each district. They are representatives of the central government in their district
and should ensure the legality of all decisions made by the local authorities
and coordinate the activities of the functionally deconcentrated state services.
The prefect also heads an administration council including the president of the
district council, the mayor of the principal urban center in the district, and
the directors of the deconcentrated central government bodies (including the
director of the DHD). The prefect must approve appointments made to the
administration council of the DHD, although the appointments are made by
the MoH. The prefect can also issue instructions on technical aspects of health
service, although these must be signed by the director of the DHD.
• Devolution operates through a system of local government which takes the form
of locally elected councils. These have a number of powers with implications
for the health sector. These are: a) to approve the organization and activities
of local civil servants, including their appointment; b) to ensure the proper
functioning of local services; c) to monitor hygiene in public places and of
food products; d) to prevent and limit outbreaks of infectious disease; and e)
to authorize the opening and closing of local health facilities. This structure
of public sector operation has nevertheless maintained a relatively centralized
character through the lines of central-periphery authority, financial control, and
central administrative regulation
• Delegation operates after the introduction of the health insurance system. The
health insurance fund collects and utilizes funds for health as compulsory health
premiums, income-based, outside the state budget, throughout 41 DHISFs which
are autonomous bodies entitled to retain and use 75 percent of the collected
funds at the local level; however, starting from 2003 this situation changed, as
the DHISF are no longer entitled to retain the 75 percent of the collected funds
in practice and all the funds are send to the NHIH which then allots them to
districts based on its own formula (see the case-study on health insurance)
3.1.3 The Primary Healthcare Reform
During the communist era, Romanian health systems and health financing were bi-
ased toward expensive secondary and tertiary inpatient hospital care. Primary care was
455
underfinanced and relatively neglected. Most outpatient care was provided by special-
ists in outpatient polyclinics, or in rural health centers. After hours, patients relied
on national ambulance services to provide primary care (such that over 90 percent of
ambulance visits were for primary care in Romania). General practice doctors were
relatively few, received only basic medical training, and had little professional prestige.
As a result, improvement in PHC was seen by the Romanian authorities as a key point
of the reform of the health system and was included as the main component in the first
World Bank loan. The reforms were intended to strengthen access to and quality of
primary healthcare, improve client responsiveness through competition among GPs,
and reduce reliance on specialists and hospital care by giving GPs a “gatekeeper” func-
tion. The design and implementation of general practice reforms were consistent with
recommendations in the project-sponsored 1993 sector study.
Implementation began in 1994, and involved a new way of financing primary health-
care provision through a pilot program (see Box 1). Apart from this pilot approach, over
200 rural health clinics have been upgraded and equipped with basic items for PHC.
However, several reports showed that almost half of them had no doctor at the end of
the PHC pilot, even if the dispensaries were rehabilitated and endowed with necessary
medical equipment (WB 2002).
Box 1.
The Romania Pilot Decentralization Program
The reforms described below were a response designed in support of one of the
key objectives set for health sector reform in Romania in the early 90’s, i.e. shifting
toward independent providers both in primary and secondary care and developing
new payment mechanisms for these providers. This approach was intended to ad-
dress some of the perceived problems of the Romanian health sector: inefficiency
resulting from the imbalance between hospital services and primary care in favor
of the former, inequity due to limitations of access to basic services, resulting from
inadequate staffing (especially in rural areas) and funding for primary care, and
lack of choice for patients in primary care. Income of staff was low (also compared
to average income in the economy, the ratio is much lower than in OECD coun-
tries) and was fixed according to professional seniority and years of service—no
link existed between income and the volume or quality of services provided. Pri-
mary care facilities were part of the same organization with the local hospital and
polyclinic, thus sharing one budget allocation, with decisions made by hospital
managers—always hospital-based clinicians. In an environment of overall scarcity
(Romania’s public spending on health services has fluctuated narrowly around 3
percent of GDP from 1990 to 1997) and given the distribution of power in favor
of hospitals, allocations for consumables, drugs, and equipment were even more
limited for primary care centers than for other levels of care.
456
In the last quarter of 1994, based on Government Decision 370 of that year, the
eight pilot districts of Romania’s 40 districts (covering 4 million people) introduced
changes in the provision and payment of general practitioners’ services. The plan
for piloting was received enthusiastically by district staff and generally welcomed
by doctors, but had only lukewarm support initially from the MoH. It is notable
that the pilots took place at all. The government had previously resisted piloting,
particularly experimentation with private sector approaches to service delivery, and
the pilots were only able to proceed in 1994 once the government and Parliament
passed specific legislation authorizing them. The system switched from the fixed
allocation of patients to GPs according to residence to the free choice of the GP
by the population. Payment moved from fixed salary (set according to professional
rank and seniority) to a combination of age-adjusted capitation (about 60 percent
of the total) fee for service items (related mainly to prevention, mother and child
care, early detection and follow up of major chronic diseases) and bonuses related
to difficult conditions of practice and professional rank (about 40 percent of total).
GPs’ contracts were held by district health authorities. District health authorities
established contracts with doctors, ending their status as hospital employees. Terms
of service introduced new requirements for 24 hours available for emergencies.
The contracts specified primary care services to be covered (which continued to
be free) and patients were allowed to choose their family doctor. Family doctors
were expected to enroll between 1500 and 2500 patients each.
An evaluation of preliminary pilot experience was carried out in 1995 (Jenkins
and others 1995). This was too early for an effective evaluation but provided some
preliminary findings. After two years, 86 percent of the population was covered
by family doctors, with eight percent higher coverage in urban areas. Few patients
changed doctors, but surveys indicated that family doctors had become more cli-
ent oriented. The output of family doctors increased, providing 21 percent more
consultations and 40 percent more home visits, and 87 percent provided emergency
coverage at night or on weekends. Doctors’ incomes increased by 15 percent on
average, and there was some evidence of declines in informal payments (although
these were already relatively low for primary care). However, differences in access
between rural and urban areas persist as the limited financial incentives included
in the scheme were not sufficient to attract more physicians to rural areas. There
was no effect on hospital admissions, however, and no evidence regarding impact
on key coverage indicators (such as vaccination rates) or health outcomes.
The reforms therefore strengthened the GP as the gateway to the referral system
in addition to the introducing of a competitive element through patient choice
and new forms of payment. However, purchasing authorities with insufficient
capacity and experience, operating in a weak regulatory environment, have been
457
facing serious difficulties in monitoring the payment scheme (especially the fee-
for-service component) both in terms of number and quality of services reported
(billed) by providers.
The pilots continued until 1997, when they were discontinued by the new gov-
ernment. While the pilots would have benefited from further evaluation, national
and district staff involved in the pilots played key roles in developing subsequent
reform regulations, and a number of adjustments were made as a result of pilot
experience. These included greater specificity in contracts regarding doctors’ respon-
sibility for primary care, adding a “practice allowance” to the capitation payments
for doctors to help cover capital and recurrent expenditure, doubling capitation
payments for family doctors practicing in remote or low-income areas, and permit-
ting doctors to charge for vaccinations to children not on their “lists.”
Source: Vladescu (2002).
Several additional lessons can be drawn from the PHC experiment: the proposed
reforms create the potential for improved primary care, but the success of reforms de-
pends not only on establishing appropriate incentives in the payment system, but also
on developing adequate capacity within the purchasing authority (DHA) for regulation
and monitoring of general practitioners; therefore changes in the payment and delivery
system should be accompanied by adequate training for the staff of health authorities.
Both national and especially local-level changes in employment and payment system
of GPs should be accompanied or preceded by intensive training for family doctors,
to allow them to adapt to their new roles and increase credibility for reforms among
patients and the medical profession. The training needs generated by reforms outstrip
available training capacity, especially if not properly planned from the beginning of the
reform program. While the PHC approach to primary care had the potential to succeed
in urban areas, nearly half of the Romanian populace lives in rural areas, where many of
the stated aims of the project cannot be achieved for “objective” reasons: lack of adequate
coverage with medical personnel and therefore lack of choice and competition between
providers; difficulties in accessing health facilities; inadequate basic medical facilities, etc.
Some of these problems could be overcome by using new approaches which can maximize
the existing scarce resources; for instance encouraging group practice (where possible)
holds promise for addressing a number of issues, including pooled use of equipment
and administrative assistance and improved coverage for after-hours care
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3.1.4 The Health Insurance Law
The Law on Social Health Insurance was approved by the Senate in 1994 and the
Chamber of Deputies in July 1997. The introduction of health insurance was expected
both to increase resources available for health (through compulsory health premiums)
and serve as a catalyst for further system reforms, including improving system efficiency.
At the beginning, this reform commanded wide in-country support, but for different
reasons: the Ministry of Finance, for example, hoped for increased efficiency and cost
control, while doctors expected higher salaries.
The financing based prevalently on general taxation was replaced with one based on
mandatory insurance premiums. The latter are calculated according to income and paid
in equal proportion by the insured person (the employee) and the employer, as a fixed
percentage of the income (the salary and the wage fund respectively). In the first year, i.e.
1998, employee and employer contributed five percent each; afterwards, from January
1999, each contribution amount to seven percent, and starting with 2003 the employee
contribution was 6.5 percent; the size of the contribution is matched by a corresponding
reduction in income tax. Children and young people, disabled persons, and war veterans,
as well as dependents without income, have free access to health insurance. For conscripted
soldiers and people serving prison sentences, insurance contributions are paid from the
budgets of the Ministry of Defense and Ministry of Justice. The key provisions of this law
regulate the revenues of the health sector and the allocation of funds across health services
and healthcare providers. These include hospitals and their outpatient units, diagnosis
and treatment centers, health centers, dispensaries and medical offices). Through this
social insurance-based system, healthcare providers are contracted by the district health
insurance funds (DHIFs) to deliver health services to the insured.
All the funds are collected locally with the DHIFs. In order to improve equity across
districts in resource allocation, up to 25 percent of funds collected by the district health
insurance houses are redistributed through the National Health Insurance House between
districts, according to their resources and needs. In the first year (January 1, 1998 to
January 1, 1999) the DHIFs operated as components of the district health authorities,
and afterwards as independent bodies. In the same year, the Ministry of Health acted as
the National Insurance Fund; the latter was set up as an independent body on January
1, 1999. Figure 1 illustrates the finance flow within the new structure.
There are another two special health insurance houses: one for military structures
(Ministries of Defense, Interior, and Justice, as well as intelligence structures) and one for
the Ministry of Transport. They act—according to the special laws which complement
the Health Insurance Law—as district health insurance houses, collecting money from
their staff and redistributing up to 25 percent of their incomes to the national health
insurance house. An analysis of the implications of these special funds will be made in
the last section of this report.
459
The new system grants insured people’s rights to health services, medicines, and
health implements, as stipulated by the “frame-contract,” which includes: the list of
health services to be provided by health units, the services quality and efficiency pa-
rameters, the method of payment, the hospital length of stay, criteria, and medication.
The insurers are allowed to choose health services providers, and family physicians play
a gatekeeper role
The framework contract is the basis of the contract to be concluded between the
DHIFs and health organizations: hospital and their outpatient units, diagnosis and
treatment centers, health centers, family doctors’ practices, etc.
Screening, prevention, and early detection of diseases in medical practice are re-
imbursed by the DHIFs; health programs are financed by the state budget, the health
insurance budget, and other sources. The packages of services financed by the DHIFs
do not include health services provided for occupational hazards and diseases, labor ac-
cidents, a number of highly specialized health services, a number of dentistry services,
and high-rank hotel services. All this shall be paid for directly by the patients or through
other methods of payment.
Quality is assured, according to the HIL provisions, by selective contracting (meaning
the DHIFs shall only conclude contracts with the health units which meet the quality
criteria approved by the National Insurance Fund and the College of Physicians); control
is provided by physicians employed by the DHIF medical division together with the
representatives of the College of Physicians specialty boards.
The Law on Social Health Insurance stipulates a variety of methods of payment,
such as capitation (pay-per-insured person) and fee for service—for primary healthcare
and specialized outpatient care; global budget for hospitals—calculated to various rates
(hospitalized patient, day of hospitalization, health service, and other formulae to be
negotiated).
A more detailed discussion on the health insurance system in Romania and its re-
cent developments will be made in the last section dealing with the country case-study
(see Figure 1).
460
Figure 1.
Relationships between Actors in the Social Health Insurance System
Controller for
Public Fund
College of National Health Ministry of Ministry of Ministry of Labor

Physicians and Insurrance House Health Finance and Social
College of Security
Pharmacists
District College District Health District Health District Director District Director of
of Insurance House Authority for Public Labor and Social
Pharmacists Finances Protection
CP HIH
DHA Control
Commission
Control
Subordinate
Contract
Hospitals Specialist GP Cabinets
cabinets
461
3.2 Policy Actors and The Decision-making Process
In the last 14 years Romania witnessed a great number of individuals, groups, and in-
stitutions with political interests in health sector reform. Among them we can mention:
the government (MoH, MoF, local and regional governments, etc.), health insurance
houses, Parliament, the presidency, the professional associations (CoPh, CoP), political
parties, pharmaceutical companies and dealers, trade unions, NGOs, multilateral and
bilateral external agencies (the World Bank, EU/Phare, UNICEF, WHO, UNAIDS,
USAID, the German government, Swiss government, DFID, JEIKA-Japan, CIDA-
Canada, OSI-Soros, etc.). Given the great number of these players in health policy
arena and the inevitable space restrictions, we will focus only on the most prominent
of these actors, i.e. the MoH, NHIH, CoPh, and the World Bank
The Ministry of Health (and Family, from 2001 to June 2003—the MoHF)
To a large extent the governmental system in Romania continues to operate as a central-

ized bureaucratic command and control system. This focuses important political power
at the top levels in the ministerial hierarchy. In the case of the MoH, the minister and the
high level technocracy have originated a number of reforms or taken on board reforms
suggested by the World Bank and groups of parliamentarians. The MoHF maintains the
responsibility for developing national health policy and dealing with public health issues;
at the local level the MoHF acts through district public health directorates and plays a
major role in the decision-making process in health policy. Almost all the major health
policy documents were initiated by the MoH. Starting November 2002, the MoHF
also coordinates the functioning of the National Health Insurance House. It should be
mentioned that since health reform tends to involve changes in public finances, almost
all the decisions required the approval of the Ministry of Finance. Thus, in the last sev-
eral years the MoF has been in a position to heavily influence the budget approved by
Parliament for the NHIH; in this way the MoF can be seen as an important (indirect)
player in the field of health policy.
The National Health Insurance House
The NHIH sets the rules for the functioning of the social health insurance system and
coordinates the 41 District Health Insurance Houses (DHIHs). The NHIH negotiates
the framework contract which sets up, together with accompanying norms, the benefit
package to which the insured are entitled to. The NHIH also controls the redistribution
mechanisms between districts and the resources allotted between specialties (primary
care, hospital care, ambulatory care, emergency care, dental care). The NHIH has the
right/power to issue implementing regulations (rules, norms, and standards) mandatory
462
to all DHIHs, in order to insure the coherence of the health insurance system. The
annual budget for the NHIH is based on a framework contract, agreed upon annually
by the NHIF and the College of Physicians. This framework contract is approved by
the government and defines the benefits package, conditions for service delivery, and
payment mechanisms. There are co-payments required for drugs and allowed for other
services. Family physicians play a gatekeeper role. The framework contract sets the general
terms for provision of healthcare services and is the basis of the contracts between the
District Health Insurance Funds (DHIFs) and healthcare providers (hospital and their
outpatient units, diagnosis and treatment centers, health centers, and medical offices).
The budget for the NHIF and its forty-one DHIFs is designed to cover ambulatory
(primary and specialist), inpatient, and dental care, including clinical preventive services
and drugs. The insured are entitled to prescription drugs and healthcare materials needed
to correct eyesight and hearing; prosthesis of the limbs is also either partially reimbursed
by the insurance funds or free. The Ministry of Health and Family and the NHIF, us-
ing recommendations from the College of Physicians and the College of Pharmacists,
compile a list of prescription drugs on a yearly basis with reference prices. Pharmacists
must sell the cheapest available drug, if only the generic name is on the prescription,
and must mention potential substitutes
Starting from November 2002 NHIF is coordinated by the MoHF, and the presi-
dent of NHIF became deputy minister in the MoHF (see also the specific section on
HIS).
The College of Physicians and Medical Personnel
The CoPh registers doctors as provided by the 1995 law. The CoPh has important and
extended responsibilities in all areas of concern for physicians. This involves most fields
of the healthcare sector, including the health insurance system in which the CoPh is
involved in negotiating the framework-contract that forms the basis of all individual
contracts between DHIHs and providers. By virtue of this, the CoPh has an influence
on the contents of the benefit package for the insured population, the type of reimburse-
ment mechanisms in place for health service providers, what drugs are compensated,
and in what proportion. After the change of government following the 2000 elections,
new legislation initiated by the MoH considerably reduced the responsibilities of the
CoPh in areas related to health policy (the CoPh has now only a consultative role in the
majority of the health policy decisions in which it was before involved).
Physicians have been particularly concerned about their relative lack of official status
in the old system, their low official income, and the limited technological environment
in which they work. With a view to improving their income the profession supported
a health insurance system and increased private medicine in the early 1990s. Different
opinion surveys indicate, however, that this initial reformist zeal has now weakened
463
(CPSS 1999, 2000) It is possible that physicians (especially in hospitals) have come
to realize the benefits of under-the-table and untaxed payments from patients. Also,
in the present system they are largely unaccountable for their work, a situation which
could change with the introduction of a more coherent health insurance system. At
the same time, the first years of health insurance did not bring spectacular improve-
ments in their social and financial status, and for some physicians more administrative
work was required at incomes similar to what they earned before the introduction of
health insurance system. It also should be mentioned that medical professionals are
not well-organized politically, but are individually important due to their links with
Parliament (approximately 50 members of Parliament were/are medical professionals,
including the president and vice president of the health commission), political parties,
and particularly in their occupancy of important positions in the MoH hierarchy. This
raises another issue related to the analysis of health sector reform: healthcare reform was
planned and implemented by the medical elite who have a vested interest in scientific
research and high technology medical activities; numerous studies signaled that in Ro-
mania the medical profession maintains almost exclusive influence on policy making
and strategic decisions (World Bank 2001). Referring to the CEE in general, the WDR
(1996) is clear: “The medical lobby is well placed to steer policy in CEE countries and
the NIS because, in contrast with most market economies, the health minister is often
a physician, as are many parliamentarians. As a result, the Ministry of Health can easily
become the ministry of the health profession” (World Bank 1996).
The Role of the World Bank
First, it should be mentioned that the two major reform projects—primary healthcare
and health insurance—show a clear influence from health systems of other countries.
The introduction of capitation payments and contracting draws on UK experiences
in this field, while the health insurance system draws on the German experience in
this field. Both projects relied heavily on consultants from these respective countries.
Second, there is a growing presence of international agencies involved in the health
field—USAID, EU (through PHARE and other specific programs, especially after
Romania was invited to join the EU and started the pre-accession procedures), the
governments of Germany and Switzerland, British Council, UNFPA, and UNICEF,
etc. Third, the World Bank has been an important player in the process of health sector
reform in Romania.
The World Bank project started in 1992 and involved a loan of US $150 million.
Originally designed to terminate in June 1996, it was extended to 1999 to allow the
government to spend the remaining monies. The project has the following major aims:
1) upgrade rural dispensaries; 2) improve reproductive health; 3) train health practi-
tioners; 4) procure and distribute drugs and consumables; 5) improve management of
464
emergencies; 6) strengthen health promotion; 7) develop a national health strategy;

8) develop a health information system; 9) establish a school of health services and
management. On a six -point scale (“highly unsatisfactory, unsatisfactory, moderately
unsatisfactory, moderately satisfactory, satisfactory, and highly satisfactory”) the project
outcome was rated as moderately satisfactory. As a comparison the US $34 million Estonia
Health Project was rated highly satisfactory and the US $56 million Hungarian project
was rated moderately unsatisfactory.
A second loan project of US $40 million was approved and started up in 2000. The
six-year, two-phase Adaptable Program Loan seeks to further strengthen health reforms
while supporting additional investments, especially for district hospitals and emergency
medical services. The project retains a strong focus on infrastructure and is not provid-
ing direct project support for strengthening health insurance—the European Union has
emerged as the primary donor for insurance. But the project seeks to combine invest-
ments with support for systemic reforms (for example, piloting an integrated approach
to emergency services).
The impact of the World Bank on health sector reform in Romania has been impor-
tant. The primary care project outlined above follows from the World Bank-sponsored
Kings Fund/NIH report and comes within its program of health sector reform (see also
Box 1, for more details). Although the World Bank was not involved in the initial devel-
opment of the health insurance system, they have played an important role in reshaping
the structure of the health system (see also the case-study section on HIS).
In Romania, the World Bank has looked to restrain and guide the process of health
insurance reform. A clue to its reservations here is offered in the WDR (1996) which
expresses three concerns over health insurance reforms: the tendency towards structural
deficits given the need to subsidize the unemployed population; the increase in the
cost of labor and the incentives to work informally; the lack of control over spending.
An additional concern in Romania was that the health insurance scheme should be in
accordance with other reform projects, such as pensions, and that these should be seen
and considered together.
World Bank involvement in Romania should be seen in the context of its overall
approach to the transition process in FSE. This is put forward in the WDR in which a
prescription of freeing up economies, fiscal discipline, and control over inflation is put
forward. In the social policy field, attempts should be made to “ease the pain of transi-
tion,” but also push the transition process forward. Health policy options proposed
include the need to: a) focus on health improvements through changes in lifestyle and
affecting pollution and occupational risks; b) improve healthcare delivery through more
effective resource allocation, provider competition, and involvement of the private sec-
tor; c) achieve the correct funding balance between taxation and social insurance in
addition to the correct balance between provider payments through fee-for-service and
capitation payments (WDR 1996). A more detailed description of the role played by
465
the World Bank in the development of the HIS in Romania is given in the case study
section of this report.
3.3 Policy Debates and the Pace of Reform
In comparison with some other CEE countries, the pace of reform in Romania has been
relatively slow. In attempting to explain this, one can find both political and technical
arguments.
Major changes in an area that concerns every member of a society cannot be achieved
unless major politicians are involved, appropriate information is disseminated, and
citizen support is secured (both from providers and recipients of healthcare). Major
health policy changes have historically benefited from the direct involvement of im-
portant public figures: in the 19th century Germany, the new social security system was
introduced under the leadership of chancellor Bismark, and the second modern health
system was introduced in England after WWII by Lord Beveridge, both system types
now named after the two politicians. While in other countries, changes in health poli-
cies led to extensive analyses and debates by institutes and professional analysts, with
wide media coverage, in Romania the debates involved only peripheral issues and the
discussions were usually triggered more by “spectacular” episodes related to the day-
to-day aspects of the systems’ (non-)operation and less by the causes and possibilities
to solve such deficiencies. What we witness in Romania is the concern of both popula-
tion and specialists with the continuous deterioration of health indicators and medical
care quality, reflected by many opinion polls and statements, coupled with an almost
complete lack of debates on this issue in the media; even the discussion and passing in
Parliament of the Social Health Insurance Law went almost unnoticed by the public.
Political involvement was minimal, and all discussions on health reforms were at the
level of the Ministry of Health, with isolated involvement of actors like the College of
Physicians or certain unions, whose approach is rather reactive and strictly limited to
the interests of their own members.
In this context, the lack of a body of professionals in political analysis and the lack
of interest from the government for such assessments caused important decisions to be
taken without proper justification. Also, the provision of health services in the “command
and control” system, where the Ministry of Health and the local bureaucracy played a
part in almost every decision of the health units, severely limited the ability of manag-
ers and political decision-makers to gain experience in using information, incentives
and competition to achieve the desired results. In this context, the call for an increase
in the managerial efficiency of the health system has very little support from the facts,
both at the macro level and at the local and health-unit level.
466
4. COUNTRY-SPECIFIC EXPERIENCE
4.1 Case-study on the Development of the

Health Insurance System in Romania
In this section the new health insurance system introduced in Romania will be presented
and analyzed. The topics that will be discussed will deal with: the regulatory and insti-
tutional history of the HIS, the new process of resource allocation in the health sector
and its impact on performance indicators, and the way in which the new health policies
linked with the introduction of the HIS in Romania fulfill the declared objectives and
expectations of health reform. It will conclude with authors’ recommendations on the
development of the HIS in Romania
Regulatory and Institutional History
Discussed for the first time in the Romanian Parliament in 1994, voted and promulgated
in the summer of 1997, the Law on Social Health Insurance initiated the transformation
of the health system from a state-financed model to a social insurance-based model. The
Health Insurance Law was intended to begin partial operation on January 1, 1998, and
complete operation from January 1, 1999. Due to the lack of political stability (four
ministers in less than two years) and lack of decision-making capacity, 1998 was not a
preparation and “training” year, as was intended. Thus, instead of the insurance system
entering into force on January 1, 1999, it was necessary to make several modifications
to the Law on Social and Health Insurance (LSHA) by government ordinances. The
system starting functioning legally only in April 1999. The same reasons (lack of politi-
cal stability—four presidents in less than two years—and lack of managerial capacity)
produced a situation where the NHIH did not produce any new forms of reimbursement
for the main providers of medical services (ambulatory clinics and, especially, hospitals)
which function in practice, according to previous administrative patterns. In spite of the
contracts being signed with insurance houses, almost all the mechanisms for resource
allocations at the outpatient and hospital level remained unchanged.
The introduction of the Law on Social Health Insurance was strongly supported at
the beginning by the population, physicians, and also by decision makers, especially the
health committee of the Romanian Parliament. This massive endorsement of the law, and
implicitly a public health insurance system, had two motivating sources. First, a political
source: after the changes of 1989, with everything associated with the old regime being
challenged, the Soviet-imported Semashko system of healthcare could not keep itself
off of the chopping block. In the given conditions a replacement had to be chosen, and
the options were not very numerous. Taking into account the fact that European tradi-
467
tion and reality, both Western and Romanian, made the adoption of a private system
practically impossible; the only options remaining were a Bismarck-style public health
insurance system, like in Germany, France, or Austria, or, a Beveridge system, based
on general taxes, like in England, Italy, or Sweden. The option for a Bismarck system
was determined in this case by arguments connected with politics and tradition; this
kind of system being close to that existing in Romania prior to the Second World War.
Another factor was ideological factor—most of the debates on this topic were between
supporters of a free market and supporters of government planning. In this context the
health insurance system was positioned somewhere in the middle of these two options,
and therefore acceptable to both sides.
The second motivation was technical, meaning how to implement the chosen system
and with what conditions. Many documents and statements by decision makers and
providers promoted the idea that social health insurance model is technically capable of
providing many of the desired and requested healthcare features: more resources allotted
to health, increased earnings for health professionals, greater financial independence,
an increase in transparency a better match between patients’ needs and the services
provided, improved quality of care, and an increase in service-provider accountability.
The result is that the reformed Romanian healthcare system has not yet fulfilled the
expectations created in 1997, although health insurance did succeed in increasing the
revenues available to the sector, as is shown in Table 8.
Table 8.
Trends in Healthcare Expenditure, 1997–2000
1997 1998 1999 2000
Public expenditure as share of GDP (percent) 2.8 3.1 3.8 3.8

Total expenditure as share of GDP (percent) 3.5 3.9 4.6 4.6
Source: Ministry of Finance.
Still the amount of spending on health, both as a percentage of GDP and also
as net figures, places Romania at the lower end of the spending distribution among
countries with a similar per capita GDP, as well as among most other countries in the
CEE region.
However, some of the most striking outcomes of the evolution of the health insur-
ance system in Romania are linked with the way in which the current legislation and
functioning of the HIS match and fulfill the initial aims of the Social Health Insurance
Law, and this debate will be made below.
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Box 2.
The Principles of the Romanian Health Insurance System according
to the Law on Social Health Insurance
Universality: all citizens should be equally eligible for certain medical care goods
and services, totally or partly financed by social health insurance.
Solidarity: health insurance contributions are based on a percentage of income,
regardless of the amount of the income or the health condition of the insured
person. Those with higher incomes finance those with lower incomes, the healthier
finance the sicker, the younger finance the older, the more developed counties
finance the less developed.
Subsidiarity: certain entities (pension funds, other social funds, or the state budget)
pay health insurance contributions (or their equivalent) for those: a) unable to pay
(the poor) or b) excepted from payment.
Non-discrimination and equity: equal access to certain healthcare services regardless
of payment. In other words: “to equal health needs equal medical services.”
Autonomy and decentralization: the independence of the health insurance fund
from the central government and the interested parties, as well as decisions being
made as close as possible to the place where funds are used (district level).
Specialization: the health insurance fund is a financial institution specializing in
purchasing healthcare goods and services.
Financial independence coupled with increased transparency in the process of re-
source allocation, both geographically and regarding different types of medical
units.
Source: World Bank (1998).
In other words, the expectations were that the new health system would: a) deliver
more and better healthcare services to the population, b) rationalize provision of health-
care goods and services, c) make more cost-efficient allocation of resources, and d) build
a public/private mix in the provision of healthcare goods and services.
Following numerous amendments to the HIL, coupled with other decisions for
reforming the health system, resulted in the annulment and/or diminishing of some
fundamental objectives covered in the original text of the HIL passed by the Romanian
Parliament. Even this is not a negative aspect per se; it raises the issue of legislative co-
herence and the accountability of the decision-making process. Below we will analyze
the existing structure and health policy of the HIS from the point of view of coherence
and successful achievement of the initial aims of the Health Insurance Law.
469
But first we will notice the important role played by international bodies, especially
the World Bank. Immediately after the adoption of the Health Insurance Law by the
Senate, the World Bank commented on the financial implications of the law, a fact
that delayed voting in the Chamber of Deputies. The bank sought—with mixed suc-
cess—to influence the process through analytic work and policy dialogue. It should be
mentioned here that its advice evolved over time. The World Bank sponsored a 1993
sector study, which called for the establishment of national health insurance, but of-
fered few caveats regarding feasibility or adapting the model to the Romanian context
(Kings College Fund 1993 ). While social insurance had little support from the MoH
initially (the government never formally responded to the recommendations in the
study) social insurance commanded growing support in Parliament. By the mid-1990s,
the bank began to regularly raise concerns in its policy dialogue regarding the viability
and advisability of national health insurance for Romania, but the political momentum
was already established. The project also supported a study on health sector financing
(1998), carried out by the Health Insurance Commission of Australia. This was initially
intended to assess whether the government should establish national health insurance,
but Parliament passed a health insurance law before the study was launched. The study
instead focused on assessing policy options under health insurance. It is specifically
credited with raising the problem of equity among the various district health insurance
funds, which led MoH and Parliament to amend the law to allow up to 25 percent of
funds to be transferred to poor districts. In practice, however, the reallocation formula
is not transparent, and has benefited districts on the basis of revenue shortfalls, rather
than equity criteria. Although the bank’s current project (see previous section) does
not provide direct support to national or district health insurance funds (the European
Union has taken the lead in this area) the bank has sought to maintain engagement in
these issues through its macroeconomic and sector dialogue.
Immediately after the adoption and promulgation of the Health Insurance Law, the
World Bank made some recommendations, this time more precise, shown in Box 3.
The greater part of these recommendations were adopted through different norma-
tive documents by the end of 2000. The arrival of the new, left-oriented government,
which came to power at the end of 2000, brought a stated intent to continue the im-
plementation of health insurance and some of the previous reforms, in accordance with
the government health program (see Box 4).
What our case-study discovers is an important gap between general policy and im-
plementing reality, almost in all the enumerated health areas (decentralization, new and
efficient mechanisms of resource allocation, autonomy of health institutions, etc.).
Therefore, almost all the legal amendments made in the last 4 years have brought
significant changes to the Social Health Insurance Law (SHIL) as compared to the first
text and the first purposes. This important aspect has to be analyzed not only regarding
SHIL but also from the point of view of other laws that function in the same field.
470
Box 3.
World Bank Recommendations Concerning the Amendment
of the Health Insurance Law
• Establish a single health insurance house with 41 district branches (instead
of 42 autonomous district insurance houses, with responsibility in collecting
and managing local financial resources).
• Increase the seven percent for redistribution among districts to 25 percent,
in order to decrease the inequities between available resources and healthcare
needs.
• Elaborate a financial plan for the years 1998–2000, which should consider
variations in financing stipulated by the Health Insurance Law.
• Give up elections as a mechanism of establishing the leading structures for
insurance houses in favor of direct appointment of a board president by the
prime-minister.
• Alter the role of the College of Physicians to prevent a conflicts of interest.
• Merge the collection agencies for the health, pension, and unemployment
funds to improve collection of all social funds.
Source: World Bank (1998 and 2002).
Box 4.
The Government Health Program
The government program proceeds from the principle that healthcare must
be a collective social asset, accessible to all Romanian citizens, irrespective of their
solvency, on the background of free and balanced access to healthcare services.
In establishing the actions and measures to be taken toward the strategic goal
of “a healthier Romania with low morbidity and less premature deaths,” account
was taken of the discrepancy between the population’s healthcare needs and the
structure and orientation of healthcare services. Also considered was the fact
that the current healthcare system has too many units where certain services are
overstrained while others are inefficient, and there is an overemphasis on hospital
services to the detriment of outpatient and community care services. In this context
the following goals will be pursued:
Develop integrated medical services (primary care, specialized outpatient,
inpatient, and emergency care) so as to enhance the quality of medical care and
determine a more efficient response to consumer demand, and achieve an adequate
cost-efficiency ratio.
471
To the end of improving the mortality and morbidity indicators of the gen-
eral population, 32 national programs will be applied and the network of public
healthcare services will be developed by altering the inpatient-outpatient care
ratio. The state, through its representatives, must guarantee the development and
monitoring of healthcare in Romania for all population segments (urban and
rural, children, old people, employees, jobless people, disadvantaged persons, and
low-income or no-income persons).
The Ministry of Health and Family will issue and apply normative acts to
replace the centralized command system by a decentralized and efficient one ben-
efiting the citizen. This new system should also define the relationship between
the central and local authorities. The growing autonomy of healthcare services will
stimulate competition and improve the quality of medical services. The Ministry
of Health and Family will be firm and correct, restoring the authority of the state
institution, developing a strategy and applying government policy in the field of
healthcare employing modern principles to protect and maintain collective and
individual health.
The Ministry of Health and Family retains the responsibility of manag-
ing funds for: budget allocations for healthcare; healthcare programs of national
importance; public and private healthcare regulation systems; research regard-
ing healthcare policy; financing buildings and high-tech equipment; developing
managerial capacity; creating a pluralist system to finance medical activity made
up of public and private resources.
The gist of the system will be equal opportunities for medical services and
equitable solutions to problems of payment for services supplied. Payment modali-
ties will be made known to the entire population. The healthcare system will be
financed from social insurance funds and the payments made by patients. The state
budget will fund national medical programs and investments in hospitals, buildings,
and high-tech equipment. Health insurance funds will finance healthcare services
(primary care, outpatient, inpatient, emergency care, dental care, rehabilitation,
and compensated pharmaceutical products). The patient will contribute part of
the payment for certain medical services and the whole payment for other medical
services, as well as part of the payment for compensated medical drugs.
The National Health Insurance House, the main provider of financial resources
for medical services, will clearly define the package of healthcare services supplied
to the population, will establish the rights of patients, will enhance the quality of
medical care by imposing quality standards, establish a quota of universal medi-
cal services in view of the limited budget, and support the decentralization and
improvement of central and local management.
472
There are plans for developing a model to objectively allocate the funds to
hospitals, dependent on the characteristics of the hospital and of the pathology of
the patients treated. The financing system proposed will use a method—tested and
utilized in many developed countries—based on diagnostic-related groups.
Source: Governmental program 2001–2004.
One of the first aims of the new SHIL was to promote a system with equal op-
portunities for healthcare for all Romanian citizens; one of the first major changes that
occurred several months after the SHIL was approved was the introduction of a two-tier
system, by permitting the existence of parallel health insurance houses.
One can estimate that the principle of solidarity in financing and supplying medi-
cal services is altered by these regulations, which result in the creation of parallel health
houses, based on professional principles. They are targeted at socio-professional categories
with low risk and high income in relation to the national average—namely personnel
working in the military structures, justice, and transport. These houses, then, do not
contribute to the redistribution of resources to those who have greater needs and lower
incomes: the elderly, the unemployed, the chronically ill.
The structure of the insured is different between district houses and the two spe-
cial/parallel houses, both as far as sickness risk and incomes are concerned. It is difficult,
then, to build up a truly equitable redistribution mechanism in the whole HIS. While
the shortcomings of the redistribution formula are not important when applied to the
population of districts (where variations are smaller) the main determining factor of service
consumption is population number. In the case of those insured by the two houses, these
differences are much bigger. Thus the average income per insured person is approximately
3 times higher in the CAST (the Health Insurance House for Transport) and 30 percent
higher in CASOPSNAJ (the Health Insurance House for Military Structures) compared
to the average income per insured person in the district houses (Table 8).
Expenditures on medical services per insured person are almost 30 percent higher
in CAST and almost 30 percent lower in CASAOPSNAJ compared to the average
expenditures per insured person in the district houses (Table 8). The situation of the
expenditures in CASAOPSNAJ can be explained by a more favorable risk structure
(healthier insured persons) or, more probably, by the services obtained by the insured in
hospitals, which have a contract with the district houses. As a matter of fact, the house
where the patient is insured does not cover expenditures. This is a consequence of the
shortcomings in the determination of insured status, the circulation of this information,
and the difficult mechanism for reimbursement.
Even after contributing 25 percent to the redistribution fund—in the case of CAST
with higher average expenditures per insured person—the budget surplus of CAST
473
and CASOPSNAJ is very high; 30 percent higher than the surplus of all the other
district houses together or 57 percent of the total excess in the insurance system (Table
9). This shows the major discrepancies in the enforcement of the equity and solidarity
principles, very difficult to avoid under the special structural conditions of the insured
in the two houses.
Table 9.
Rectified Budget 2000, EGO 155/2000, in Thousand Lei
Military Transport District Houses Total
Income prior to 3,100,000,000 1,246,882,300 24,656,114,200 29,002,996,500

redistribution
Income per 1,608 3,659 1,221 1,292
insured
25% redistribution 775,000,000 311,720,575 6,164,028,552 7,250,749,127
Total expenditures, 1,572,766,950 497,308,486 23,191,003,579 25,261,079,015
without redistribu-
tion
Medical services 1,479,216,000 450,550,400 21,995,077,475 23,924,843,875
expenditure
Medical services 767 1,322 1,090 1,065
expenditure
per insured
5% reserve 116,250,000 46,758,086 924,604,283 1,087,612,369
Excess 880,108,050 418,588,910 993,070,700 2,291,767,660
Number of 1,927,440 340,778 20,187,267 22,455,485
insured persons
Source: Ministry of Finance and National Health Insurance House.
The average expenditures for each insured person suggest a different profile related
to access to services for the insured in both houses and/or major deficiencies as regards
the accurate distribution of related services costs (and implicitly their bearing from the
district houses’ funds). Therefore:
In 1999 average expenditures for drugs in ambulatory services were significantly greater
for CAST and CASAOPSNAJ in comparison with the country’s average (only three district
houses having increased expenditures—see Table 9). The situation completely changed in
2000 (Table 10) as regards CAST and CASAOPSNAJ expenditures. These expenditures
were considerable in light of the country’s average expenditures. This means either fewer
drugs were administered due to a better checking mechanism regarding the insured, with
the help of drug stores (with possibly limited access) or information about insured patients
was incomplete and expenditures have been met by district houses.
474
In comparison with all other houses, CAST has the highest ratio of expenditures
per person for ambulatory-specialized services (Tables 10 and 11). This ratio was two
times higher in comparison with the national average for 2000—a fact that suggests a
more facile access to these services for persons belonging to CAST.
CASAOPSNAJ had nine times less expenditures for primary assistance in 2000 in com-
parison with the national average, begging the question concerning the access the insured
had to primary care services (situations where an individual insured by CASAOPSNAJ is
registered on the list of a “civil” GP are frequently cited).
Table 10.
Average Expenditure per Insured Person, 1999, Effective Expenditures
(Achievement), in Thousand Lei
Medical Services District Minimum Maximum Army Transport
Average
Total 689 266 2,022 443 655
Primary 63 38 99 57 54
Ambulatory specialized 43 15 77 28 77
Dental care 17 8 49 21 44
Hospital 440 101 1,476 200 359
Ambulatory medicine 56 6 132 99 74
Prostheses and 2 0 22 10 22
sanitary devices
Ambulance and therapy 25 8 50 13 8
Reserve fund 2 0 22 10 22
Source: National Health Insurance House and Ministry of Finance, 2000.
The contributions collection and their situation is more complicated and presume
supplementary costs met by economic agents (who must determine if an employee
selected a house other than the district house) or district houses. At the same time,
for the suppliers, supplementary costs appear regarding determination of the secured
quality of a person and the administration of some additional agreements with CAST
and CASAOPSNAJ.
In fact the continuing presence of parallel houses violates the Law on Social Health
Insurance in other conceptual aspects as well. The organizational system was intended to
be national with district representation; the existence of parallel houses made this goal
very unlikely to be achieved, given the fact that almost two million people registered in
those two health insurance houses are excluded from district representation.
Decentralization was also severely amended. Inside the parallel systems it is obvious
that this principle cannot operate because of closed systems of command and control. The
475
same thing may be said about the transparency process regarding resource distribution.
Without such data, the efficiency and performance of the system cannot be evaluated,
and consequently, cannot be improved.
The maintenance—and even development—of parallel systems is paradoxically
harmful not only to the public system, by decreasing revenues and increasing the risk
average of the insured; they are also harmful to new parallel systems. In this respect,
the personnel in the army, transport, etc. cannot be treated or checked free of charge as
per the “civil” system, as they are subject to agreements signed by the respective insur-
ance houses.
The principle of the insured person’s free choice must be critically examined, espe-
cially considering the Romanian economic situation, where total expenditures related
to health are lower than other European countries—a level set higher because of dimin-
ished economic support. A system with multiple and parallel insurance houses spends
a higher amount on administration to the disadvantage of direct expenditures related
to medical services. Does this supplementary expenditure happen simultaneously with
higher efficiency in services for the parallel health insurance houses provided by real
competition? Or is there only a parallel bureaucracy with supplementary efforts and
expenditures both for insurance houses and for the providers of these services? One
cannot confirm that the existence of CAST and CASAOPSNAJ respects the principle
of free choice for the insured. Persons in the field of transport and defense have no real
option beyond CAST or CASAOPSNAJ.
It must be underlined that to dissolve parallel houses does not influence the character
of the ownership or the organization of the units belonging to the respective ministries
and structures (Defense, Interior, Transport, Justice, the intelligence agencies, etc.). In
practice, these ministries may keep their present structure unaltered and receive sup-
plementary funds from the state budget—funds designated to investments and specific
medical services, expenses not covered presently by insurance houses (spatial medicine,
specific medical services connected to transport insurance, etc).
To sum up, parallel houses were organized for socio-professional categories with low
risk and above-average income. They do not participate in redistribution of resources,
but rather impoverish the rest of the system. Parallel systems also violate the principles
of autonomy, territorial distribution, and transparency. The dissolution of parallel houses
may aid in implementing the overall national strategy for healthcare.
Resource Allocation in the HIS
Another important area is resource allocation in the health sector, as the improvement
of this mechanism was considered of utmost importance when the new system started to
be developed and implemented. As noted earlier, the HIS was designed to allow a better
match between patients’ needs and the services provided by making the allocation of
476
health insurance funds responsive to the demands of the insured, to improve efficiency in
the allocation of resources, and to increase service provider accountability to the insured.
In practice, however, the system has operated as a hybrid between social insurance and a
publicly managed system, where revenues are collected as health insurance contributions,
while the government still exercises a considerable amount of discretion in allocating
funds, through the interference of the Ministry of Finance in defining expenditure
ceilings. This happens because the Pension Fund has statutory payment obligations
that exceed its revenues and, as a result, has been running large deficits. The Ministry
of Finance has therefore been imposing spending limits on the Health Insurance Fund
so that its surpluses help offset the consolidated budget deficit. This means that each
year the health insurance budget is set with a considerable surplus; for instance in 2001
expenditures were set at 91 percent of revenues and in 2002 at 95 percent of revenues.
This has created tensions within the system, weakening accountability and financial
control, as the practice of having expenditures still defined by the central government
is inconsistent with the contributory social insurance model adopted by Romania in
1997. Excessive control reduces the funds’ ability to develop stable, rational funding
agreements with providers. This in turn leads many providers to develop mechanisms
to deal with budget uncertainty (including substantial arrears), with the perverse effect
that the overall level of financial control of the health system is reduced and weakened,
so increasing transaction costs lead to a situation where one of the most poorly-financed
health systems in the CEEC carries the highest cost for healthcare (for drugs, medical
consumables, etc.).
These distortions in budget design stage have also meant that budget implementation
is marked by the accumulation of substantial arrears, and the need to reduce funding
for key services (e.g., primary care, ambulatory specialist care, emergency services). For
instance, in early 2001 late payments by state-owned hospitals reached close to 4 tril-
lion lei, even though the accumulated surplus of the National Health Insurance Fund
amounted to 3.6 trillion lei, and there was an additional 1.4 trillion lei set aside in a
mandatory reserve fund. This placed tremendous pressure on the implementation of
the 2001 budget, leading to a reduction of expenditures in key services accompanied by
a rapid build-up of new arrears to suppliers by hospitals. The latter is estimated by the
National Health Insurance Fund to have reached 4.6 trillion lei by the end of September
2001. Furthermore, district insurance funds had more than eight trillion lei deposited
in their accounts from carrying forward the surplus from previous years and from the
difference between revenue collected in first nine months of 2001 and the expenditure
made in accordance to the budget program.
The consequence, however, has been to reduce the accountability of the management
of these social security funds, as fund managers and service providers under these funds
(e.g., hospital and other healthcare units) accumulate payment arrears to lay claim in
advance on these surpluses.
477
All the available data suggest that due mainly to budget design issues, but also to
other problems related to the distribution of power in the health system, there is in-
creasing evidence of a disconnection between resource allocation at the budget-design
and execution stages.
Thus, the policy objectives and financial plans defined in the framework contract
and approved in the budget do not match the actual resource allocation of the executed
budgets of the health insurance funds. This can be seen by comparing actual budget
provisions with the revised budget and actual expenditure by type of service during
the period from 1998 to 2000 (Table 12.). The actual expenditure for primary care,
outpatient specialists, drugs, dentistry, medical aids, and pre-hospital emergencies were
systematically lower than planned, whereas hospital services’ actual expenditures were
always higher than approved in the framework contract and budget. Indeed, despite the
stated objective of increasing expenditure in primary healthcare, actual expenditures re-
mained relatively constant as a proportion of total expenditures. Meanwhile, expenditures
on hospitalizations continued to account for around two-thirds of total expenditures,
with this share rising to just under three-quarters if one takes into account that almost
all insurance payments for drugs are made to hospitals (see Table 11).
As one of the declared intentions of the introduction of the HIS in Romania was to
improve the efficiency of the system (by shifting the demand from secondary and specialist
care toward primary care—meaning resources are allocated to services where there is greater
demand—i.e. allocative efficiency) and the equity (increasing access to healthcare services
for the poor and vulnerable) we will try to analyze how these aims where achieved.
The available data show that most of the public resources in the health system
continue to be spent on hospitals (almost 70 percent) with an increasing share now
allocated to ambulatory specialized outpatient treatment. As a result, there is a decline
in spending allocated to primary care (family doctors).
Table 11.
Functional Allocation of Current Expenditure by Level of Care, 1999–2001
1999 2000 2001
Primary healthcare 13 12 10
Outpatient care 14 19 18
Hospitals 70 68 67
Other 3 2 5
Total 100 100 100
Source: World Bank 2002.
Given the fact that almost half of the Romanian population lives in rural areas where
the only available health services are primary care facilities, the figures suggest that, at
478
Table 12.
Health Insurance Fund Expenditures: Comparison of Framework Contract Provisions, Revised Budget Provisions and Actual
Expenditures, 1998–2001 (%)
Type of Service Actual Framework Revised Actual Framework Revised Actual Framework
Expenditure Contract Budget 1999 Expenditure Contract Budget 2000 Expenditure Contract
1998 1999 1999 2000 2000 2001
Primary care 9.0 15.5 9.5 9.1 14.5–15 9.8 8.8 14.5–15
Outpatient specialists 5.8 11.7 6.6 6.1 8.75 7.8 7.5 8.75
Hospitals 67.2 40.0 61.2 64.2 59–61 64.0 65.5 50–53
Outpatient drugs 6.8 20.0 9.3 8.0 10–11 12.8 11.3 10
Dentistry 2.7 4.2 2.8 2.4 2.5–3 1.6 1.4 3
Rehabilitation 0.8 1.0 1.2 1.1 1 0.6 0.6 1–1.2
Medical aids, prostheses 3.2 3.0 0.6 0.3 1 0.3 0.3 1
Pre-hospital emergencies 4.3 4.5 3.8 3.7 3–4 3.0 3.0 3
Programs 0.1 0.0 5.0 5.2 0.1–1 0.0 7.0 8
Total 100 100 100 100 101 100 100 100
Source: World Bank 2002.
479
least for the rural population, access could have worsened in recent years. This could also
mean that people will have to use hospital facilities more frequently, as they don’t have
the choice of primary care; in turn this would increase costs, creating a vicious cycle.
Another explanation of this resource allocation pattern is linked with the distribution
of power within the system: almost all the power from the healthcare system in Roma-
nia is concentrated in the hands of people working in or linked with hospital activity.
Anyway, as mentioned earlier, the major reform, from the point of view of financing,
occurred in PHC, and the expectation was that this area would rapidly grow. One of
the reasons why this hasn’t happened is linked with the fact that no coherent training
and investment policy was coupled with the financial reform of the PHC.
However, this data also shows an increase in outpatient expenditures in recent
years. One of the areas where this increase is most evident is the area of ambulatory
medical tests, but here we have a paradoxical situation. According to NHIH regula-
tion, the hospital lab cannot be contracted to perform medical tests for patients other
than those admitted in the respective hospital. This leads to the situation when only
private laboratories can be hired to execute significant contracts with the local health
insurance houses. At the same time, in main district hospitals high-performing testing
equipment has been purchased with public money, with automated systems that can
perform an important number of tests daily with low additional costs, but they cannot
be reimbursed for outpatients.
One of the national house “explanations” was that this encourages private practice,
but the measure as such is contrary to the principles of the market economy, because one
competitor has restricted access to the medical services market. A possible explanation
would be in the new financial circuits created within the new insurance system. So, in
order to benefit from the reimbursement from insurance houses, medical testing firms
have to provide tests for patients having a prescription from the family physician, who
in turn should have a contract with the district health insurance house.
In reality, the big companies hire several such physicians who are then remunerated
by a share (percentage) in accordance with the number of patients sent to have their
tests performed. This is a widespread semi-legal practice with the following results: the
cost of the medical service increases, while public institutions in many cases cannot
investigate patients recommended by the family doctor, because they cannot offer the
same financial compensations as private companies do. One of the motivations invoked
by certain analysts is that the participation of public institutions is not correct, because
they are not supposed to cover certain expenditures, for instance the amortization of
the investments made or a future investment fund. This can be partly true, but the
regulation of this aspect fells into the attributions of other institutions than the houses
of social health insurance, and we end in a situation where a publicly funded institution
(the NHIH) is legally supporting private companies, at the same time denying the right
of public medical institutions to participate in the specific market.
480
Recent Developments in Policy Linked to the Health Insurance System
On taking office, the new, left-oriented government that came into power at the end of
2000 asserted their intention to continue implementing the insurance plan along with
several other previous reforms (see Box 2). However, it resulted in issuing normative
acts which will significantly alter the operation of the system in practice. The new PSD
government appears to favor increased centralization, increasing the power of the central
government and decreasing the power of professional associations.
Paradoxically, some decisions are more right-oriented than those of the previous gov-
ernment. An interesting example is the privatization strategy of health public services.
Here are included not only PHC facilities and/or ambulatory care cabinets but also
the selling or concession of hospitals, which is an unusual approach in the European social
democratic area. It should be mentioned here that this privatization strategy also relies
heavily on the WB recommendation – this time the IFC was the WB structure which
made the recommendation related to privatization of the health services in Romania
A government ordinance in 2003 significantly altered the role of the NHIH. Through
modifications to the Law on Health Insurance, district autonomy was practically eradi-
cated. District houses became “branches” of the central house and have no power over
locally collected funds. Previously, districts had control over 75 percent of the funds
collected and only 25 percent were sent to the National House for redistribution. Now
all the funds are allocated by the NHIH, without any transparent formula.
The solidarity principle has also been altered by new regulations. Under present con-
ditions, when, according to the law, almost half of the insured do not pay an insurance
fee (starting from January 1, 2003, pensioners do not pay an insurance contribution
which, between 1998 and 2002, was automatically deducted form the pension fund) this
principle is difficult to enforce. The government’s argument is that pensioners cannot
afford this deduction, but the deduction came from the pension fund, not from indi-
vidual pensions. It is submitted here that this will lead to the collapse or restructuring
of the system. If neither of these events takes place, it means that the earlier allocation
of funds was incorrect, perhaps fraudulent.
Regarding decentralization, we have another paradoxical situation. Several norma-
tive acts support decentralization, while others increase centralization. Thus, the new
government ordinance that modified the SHIL practically abolished decentralization
at the district level, at least in terms of financial autonomy. Also, according to the same
ordinance, the National Health Insurance House lost its autonomy and became a part
of the MoH—its president being appointed deputy minister of health.
On the other hand, another new ordinance transfers ownership of almost all
medical facilities from the MoH to local councils. In theory this could be beneficial as
the decision related to the functioning of medical facilities would be made as close as
possible to those who need specific health services. But in reality local councils have
481
neither competent specialists in this sector, nor in many cases, the resources, in spite of
the fact that the mayor is supposed to approve the budget and the personnel structure
of sanitary units. Here we should note that basically the mayor has no decision-mak-
ing power in this respect, as both the quantity of hired personnel and its structure is
set at the MoH level. Starting in 2002 there is an order from the Ministry of Health
and Family, which establishes the number of personnel per department. The logic of
the insurance system, which introduces the contract system as a basis for resource al-
location, is to be paid according to medical services supplied and not according to the
number of personnel. It was seen as important to perform efficient medical activities,
and the management of the hospital was to decide how many people they employ, in
accordance with local needs. In order to avoid abuses or decreases in quality of medical
service, the NHIH was mandated to develop quality criteria, but this process is still in
a preparatory phase.
What, then, can be anticipated, is the dissatisfaction of the population as medical
staff are transferred from the central to the local level, even though major decisions are
still made at the central level, as the MoH maintains control over all medical aspects of
health facilities (the MoH is the only structure to set the number and variety of medical
units, personnel, investment policies, basic benefit packages, reimbursement policies, etc.).
Thus, under the present conditions, we imagine that there can be three possible
outcomes for the insurance system in Romania:
1. The National House modifies its strategy substantially, in accordance with
existing legislation, and develops its capacity related to the use of the funds
(which will be collected by a separate body starting in 2004). It will develop
performance and quality indicators for medical services and will contract with
both public and private suppliers.
2. The National House will function in the same way as up to now but will lose
its role in collecting funds. In this case the role of the house in the healthcare
system would become somewhat redundant, as the ways of paying medical
suppliers would be almost the same as before the introduction of the Law on
Health Insurance. The system is based mainly on historical budget criteria and
political influences without a direct link with performance (quality included) of
the sanitary service suppliers. There are no such criteria worked out so far at the
national level, which could be included in the contracts concluded between the
house and the sanitary service suppliers. This approach could lead to a third
option.
3. The National House, together with the rest of the health insurance system,
will be merged into the MoH structure, both at the central and the local level,
and the health system will turn into a mixture, similar to the Beveridge system,
with district health authorities in charge of purchasing health services for their
population.
482
5. CONCLUSIONS
In the context of the implementation of a social health insurance system, a central prob-
lem is that the initial solutions supported by decision makers and even the electorate
were eschewed for certain political and technical reasons. These new developments will
bring neither political nor technical benefit.
As we have succinctly presented in this paper, one of the principle technical advan-
tages of a social health insurance system is separation between health service providers,
financiers, and customers. It is less restricted than a Ministry of Finance-controlled
system based on taxes.
In fact, the present organizational structure of the NHIH has not succeeded in
bringing the split necessary to place the system on a transparent, coherent, and sus-
tainable basis from the financial and administrative point of view. As a result, certain
functions that the Ministry of Health refuses to give up are duplicated. Paradoxically,
after the development of the insurance system, at a time when two-thirds of the MoH
budget was allotted to other structures, the ministry increased its staff by 25 percent.
At the same time, it cannot perform clear and specific tasks such as defining a coherent
health strategy.
The sustenance, and even the development, of parallel insurance systems are detri-
mental not only to the public system whose incomes they reduce concomitant with an
increase in the average risk factor of the insured. These also discourage parallel systems—a
fact being in conformity with actual regulations.
Continuous and sometimes conflicting changes in health legislation increased the
lack of accountability at all levels of the Romanian healthcare system; in this context,
different attempts to decentralize the health system could be seen, in our view, more like
a measure to shift the blame for the shortfall of the system than an attempt to increase
responsiveness to local needs
With no claim of making inferences or anticipation regarding the future of the
Romanian Health System, one can assess that at least in the medium-term the SHIL
did not lead to major structural changes relative to the functioning of the health system,
and the Romanian reformed healthcare system has not yet fulfilled the expectations
created in 1997.
As a closing remark we must point out that, both the population and the medical
personnel have a negative image of the quality of health services in Romania, an image
emphasized by many studies (CPSS 1999–2003; IMSS 2001). This means that the
population and medical personnel expect and want to sustain coherent changes to the
healthcare system.
483
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Consumers and Providers Surveys (CPSS). 1999–2003. Consumer Surveys. Bucharest:
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Deacon, B. et al. 1992. The New Eastern Europe: Social Policy Past, Present and Future.
London: Sage.
Dragomiristeanu et al. 2001. Private Expenditure for Health in Romania. Bucharest:
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Institute for Health Services Management (IHSM). 2003. Consumers Satisfaction Survey.
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Jenkins, S., J. James, and C. Waddington. 1995. Evaluation of the Health Reform in Eight
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2.1 General Information on Romania

2.2 Trends in Socio-economic and Health Indicators

2.2.1. Socio-economic Indicators

Following World Bank classiﬁcations of GDP, Romania is seen as a lower-middle-income

Indicator 1997 1998 1999 2000 2001 2002

Real GDP growth –6.1 –4.8 –1.2 1.8 5.3 4.5

2.2.2. Health and Healthcare Indicators

Acute poliomyelitis 0.56 0.05 0.03 0.13 0.08 0 0 0 0 0 0 0 0 0

2.3 Structural Background to Health Sector Reform

2.3.1 Health and Healthcare in Romania

2.3.2 Financing the Public Sector

2.3.3 Social and Political Transition and the Health Sector

The revolution of December 1989 is leading to important changes in the structure of

2.3.4 External Features of Health Sector Reform

3. AN OVERVIEW OF REFORM: POLICIES, PROCESS

3.1 Health Policy Reform Since 1989

3.1.1 Initial Policies and Demands for Change

3.1.2 General Government Decentralization and the Health Sector

3.1.3 The Primary Healthcare Reform

3.1.4 The Health Insurance Law

College of National Health Ministry of Ministry of Ministry of Labor

3.2 Policy Actors and The Decision-making Process

To a large extent the governmental system in Romania continues to operate as a central-

The National Health Insurance House

The College of Physicians and Medical Personnel

The Role of the World Bank

emergencies; 6) strengthen health promotion; 7) develop a national health strategy;

3.3 Policy Debates and the Pace of Reform

4.1 Case-study on the Development of the

Regulatory and Institutional History

Public expenditure as share of GDP (percent) 2.8 3.1 3.8 3.8

Source: World Bank (1998).

Source: World Bank (1998 and 2002).

Source: Governmental program 2001–2004.

Income prior to 3,100,000,000 1,246,882,300 24,656,114,200 29,002,996,500

Resource Allocation in the HIS

1999 2000 2001

Recent Developments in Policy Linked to the Health Insurance System

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