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Health funds ready to pitch in

While some say that voluntary health funds should find their strategic role in the Hungarian healthcare system in order to avoid being abolished with a swift move, others believe that the sector functions well in its current form. Nobody doubts the great strategic potential of the funds, but what is needed to realize it?

Though they lack in popularity, voluntary health funds have significant potential in alleviating burdens from the state-run healthcare system as well as improving the general quality of services, a sore point for any Hungarian who has ever needed treatment.

While health expenditures make up 8.5% of Hungary’s GDP, the sum held on voluntary health fund accounts amounted to HUF 55 billion in 2010, meaning that such savings practically remained the same as in 2008.

But the importance of voluntary health funds is clearly acknowledged by the state, reflected through tax benefits that currently provide for a 20% tax deduction after individual deposits. As a result, the funds raised the total number of their members by a notable 10% over the past two years, the latest data of financial authority PSzÁF show. Together with the relatives of the 900,000 members, Hungary’s voluntary health fund sector affects some 2 million people.

Still, due to the stagnation in asset volumes, serious concerns about voluntary health funds gradually losing their assets have recently appeared. Some papers even went as far as to express worries about some funds going bankrupt within three years.

Not that bad

However, considering the nature of the funds and the economic environment of the past years, citizens’ unwillingness to keep their savings in health funds might not be that surprising. Besides a low proportion of individual members, the voluntary health funds since their very first appearance in 1993 have always practically served as part of the cafeteria allowance employers provide their workers.

Fund savings can be spent on the preferential purchase of pharmaceuticals, medical aids and also some services such as rehabilitation treatments or spa therapy. But as the world economic crisis broke out in late 2008, many people lost their jobs and along with it, the continuity of their payments to health funds. Also, as austerity packages follow one another, people are more likely to use up the money kept in their health fund accounts.

“These numbers only show that nowadays people typically use the funds to quickly finance instant demands,” Péter Váradi, executive of the AXA Health Fund told the BBJ. “These data are not worrisome,” agrees László Lehoczky, the head of the health funds task force at Stabilitás Pénztárszövetség, a fund association that represents 90% of the health fund sector.

“Voluntary health funds were not created to serve as long-term savings,” he explained. Instead, the funds function as a tool in the hands of employers to help their workers come by the family’s monthly medicine demand at a lower cost. “It is a big help in itself,” Lehoczky added.

Room for improvement

Still, opinions that health funds have to redefine their role in order to guarantee their existence as part of the Hungarian health care system have also appeared. “This simple accounting function must be replaced with a more complex health management,” Zsombor Kovácsy, a lawyer specialized in healthcare told the BBJ.

To do so, health funds should take over some state-run tasks that cost the state budget heavy billions while running on low efficiency, a strategic plan for the health funds made by advisory company KPMG in September 2010 suggested. As such, the idea of the health funds taking part in the family doctor service came up in the sector but, due to the shortcomings of the regulatory environment, was thrown overboard right away. Still, some existing services such as AXA’s evaluation system that enables consumers to rate the suppliers are steps in the right direction.

Widening the portfolio of the health funds would indeed have significant economic importance. If they could provide high-quality services that are currently available only at private practices or via under-the-table “parasolvency” at state hospitals, at least a part of this “gratuity money” as it is generally called in Hungary – which totals up to HUF 70–100 billion per year – could be redirected to legal paths and financed by health funds.

What is everybody’s business . . .

Taking over such services is purely a question of regulation, but as health funds are somewhere in between the jurisdictional boundaries of the ministries overseeing economy, finance and health issues, this fact does not make things easier. “The competencies are not clear and there is hardly anyone who sees through the entire sector,” an insider wishing to remain unnamed told the BBJ.

Still, market players expressed their strong confidence in Hungary’s government while hoping that a predictable and practical regulatory environment will be established soon. “We have to wait for the big things such as the Semmelweis Plan [the government’s healthcare plan made public on June 1] to set first,” Lehoczky said. “It is only a question of patience.” (The article originally appeared in the June 3rd issue of the Budapest Business Journal)