Private health financing: past, present, future in Hungary

Abstract

The analysis of health expenditure is not an end in itself, as there is a perceptible (even if not complete) positive relationship between spending on health - which provides individuals and communities with the services they need - and the health status of a given society. In this paper, we review the correlations between health care expenditures and economic development, the amount and composition of private health expenditure in Hungary and its changes over time as well as the Hungarian health financing institutional system and possible ways forward. A particular attention is paid to the voluntary health care payment and household out-of-pocket payment health care financing schemes.

According to the previously prevailing categorization, the healthcare expenditure of a given country was interpreted in terms of the dichotomy of public and private expenditures. The System of Health Accounts (SHA, 2011), a methodology introduced a decade ago to provide a systematic description of the financial flows related to the consumption of health care goods and services, takes a different but much more comprehensive approach. We will apply it to analyze the Hungarian status in this study.

In recent decades, 30% of Hungarian healthcare expenditure has been financed by private individuals and institutions. This is an extremely high ratio by European and regional standards. Within this, the proportion of voluntary health care payment, that provides an opportunity for risk sharing, portability or is paid by another organisation, is extremely low and decreasing (11%). Thus, 90% of the costs are paid out of pocket by households (OOP, direct contribution of households). Consequently, the probability that Hungarian households will face catastrophic healthcare costs is extremely high.

With a few exceptions, the steep rise in GDP in the Central and Eastern European region was not accompanied by a significant decrease in OOP. It dropped significantly in Poland, increased in the Czech Republic and Slovakia, and stagnated in Romania and Hungary.

In Hungary, the share of voluntary health care payment within current health expenditure (CHE) has been gradually decreasing since 2010 (5.5%), reaching around 3.5% in 2019. The aggregate expenditure of both non-profit organizations and insurers and/or health funds was even lower in nominal terms in 2019 than 10 years earlier.

If we want to reduce the OOP in Hungary, the additional resources can come either from the state or from employers. In the current uncertain economic and geopolitical situation, it is unlikely that the Hungarian state will be able to further increase its own expenditure, so we need to extend employer contributions and try to channel household resources into voluntary health payment schemes (health fund, insurance) to mitigate the risk of high spending through health savings and sharing.

The primary objective is to convert the available resources into health gain. To do this, we need to provide additional resources to the widest possible range of people through cost-effective channels, considering the different social service needs and all of this by increasing individual responsibility.

A feasible goal could be to reduce the OOP below 15% within a 5-year period, through institutionalized financing, pre-savings and insurance elements, bringing the proportion of households with catastrophic health expenditure closer to the V4 average.