Welfare in the Mediterranean Countries REPUBLIC OF MACEDONIA (FYRM) Simon Maurano

Transcription

1 Welfare in the Mediterranean Countries REPUBLIC OF MACEDONIA (FYRM) Simon Maurano 1

2 C.A.I.MED. Centre for Administrative Innovation in the Euro-Mediterranean Region c/o Formez - Centro Formazione Studi Viale Campi Flegrei, Arco Felice (NA) Italy Tel Fax gpennella@formez.it nvolpe@formez.it The views expressed do not imply the expression of any opinion whatsoever on the part of the United Nations and of Italian Department for Public Administration, Formez and the Campania Ragion Administration 2

3 1. Health system 1.1. Institutional framework Legal framework The Republic s Constitution of 1991 states the principle of universality of health care access. Much of the framework of the health care system is set out in the Health Care Law of 1991, setting the basis of an independent care system, with norms on health insurance system, on the rights and responsibilities of service users and service providers, on the organizational structure of health care and the disposition of funding streams. The state is responsible for providing a healthy living environment and for the provision of preventive care for the population through the activities of the Institutes for Public Health and for ensuring that health services are available. The law of April 2000 underscores the basis of the health services funding process and confirms independence of the Health Insurance Fund and its board of management Health care system structure When Macedonia was part of the Republic of Yugoslavia, the health system was highly decentralized, owned and operated by 30 local municipalities, with only large capital projects being centrally executed. Although offering universal accessibility, it was fragmented, with little central governance or strategic overview. Local health services were managed and commissioned by the local municipality; financing was, for the most part, local. In 1991 this health care system was replaced by a more centralized structure with the institution of the Ministry of Health, building the independent Macedonian state. The central capacity remains weak. The Ministry of Health is responsible for the national health care system, it provides central health planning and develops health policy and health care law. It also has responsibility for the assessment of the impact of other areas of law on the health sector and for the assessment of the infrastructure of hospitals. There is no regional health system: efforts have been concentrated on building a centralized structure and not decentralization. 3

4 The following bodies are involved in health care: the Health Insurance Fund; the Institute of Health Protection, that has responsibility for preventive care through the institutes for public health; the Ministry of Labour and Social Policy; the Ministry of Defence, with its military hospitals; the voluntary sector, limited but in expansion; three chambers of professional group; only one single trade union. The health system organization is insurance based: everyone is covered by a compulsory health insurance scheme for a basic health care package, on top of which out-of-pocket fees are paid. The Health Insurance Fund was established to coordinate health insurance for the population and to oversee health services. Initially subordinate to the Ministry of Health, it is now freestanding and accountable to parliament. It has some 30 branch offices around the country. It is responsible for compulsory health insurance and coordinates health insurance and contracts with health providers. It is also indirectly responsible for the professional supervision of health care workers. 4

5 Source: European Observatory on health care system, Health care system in transition, The FYRoM, Delivery system The delivery system is formally divided in three terms of care, Primary, Secondary and Tertiary, although many institution provide both primary and secondary care without a clear distinction. In the primary level of care there are five separate streams with their own specialist physician: general medicine, children s medicine, school medicine, women s medicine, and occupational medicine. Over 1200 separate facilities deliver primary health care, of which 294 are rural units. There are 10 regional institutes of health protection with their 21 branch offices across the country belong to the Institute of Health Protection. They develop some health prevention programme. The secondary level of care is supplied in medical centres which also include polyclinics and general hospital clinics that provide specialist treatment, diagnostic services and rehabilitation services, and some primary health care, but not emergency service except for the clinical centre in Skopje. These centres come under the managerial control of a director appointee of the Ministry of Health. Tertiary care institutions are only in Skopje, with more than half of its patients from outside the capital. They provide research and teaching function, apart from secondary care. Tertiary care institutions also provide services which, in other countries would be considered secondary care or even primary care Private sector The 1991 Health Care Law legalized private outpatient practice, while still maintaining the dominance of the public sector. There are no private structures, but by 1999, the number of private health organizations had increased to More than 300 private institutions, for the most part medical practices, have contracts with the Health Insurance Fund. Even as there is strict monitoring by the Health Insurance Fund and a detailed inspection of premises by the Ministry of Health is required to obtain a license and a contract, there is no further control, so it is unclear if the high standards required at initial licensure are maintained. In the same year the pharmaceutical sector was privatized and replaced with a system of licensing supervised by the Ministry of Health. This has led to 5

6 increased competition in the pharmaceutical sector, with the large public producers moving into the private sector Finance The major revenue source (95%) is the Health Insurance Fund derived either from contributions channelled through the compulsory health insurance fund or from user charges. Of the remaining 5%, half is derived from the state budget, and the rest from other sources such as aid. Public revenues for the health sector in the period declined by 40%, because of a variety of factors. The health sector has received extensive humanitarian assistance. Compulsory health insurance covers the employed in the public or private sectors, the retired, students, the disabled, and their dependants. For the unemployed, the contribution is paid by the Institute for Employment. For those in social care, veterans from the National Liberation War and the disabled, payment is provided by the appropriate national authority. Source: European Observatory on Health Care System, Health care system in transition, The FYRoM, 2000 Most fund incomes (63%) are from the contributions of insured individuals, with the rest from transfers from other state agencies such as the pension fund or the employment institute on behalf pensioners or the unemployed. Co-payment from the patients was introduced in 1994 as an attempt to reduce over-use of service, and to rise health fund, but this form of fee contributed less than 4% to the revenue; moreover it rose potential equity problems. 6

7 1.2. Structural problems The main problems of the Macedonian health care system are in the organization of the services, where there is a blurring of responsibility between different structures and an absence of incentives and a shortage of skills (technical and managerial) that determine a lack of efficiency and effectiveness in the delivery services. Relatively low salaries (with protected employment) and lack of pharmaceuticals may create additional strain. Physicians are driven to seek alternative sources of income, that, in some cases, could consist in informal payments for public service, while funding systems provide perverse incentives to service rationalization. Moreover the recent financial stress makes Health Insurance Fund unable to exercise effective expenditure control such that the quality of health care has declined and large arrears to suppliers have accumulated. As a consequence, medical equipment and vehicle stock are often old and in a poor state of repair. The health problem become also social problems: differences in income levels of the population have serious effects on the level of accessibility and quality of health services for the poorest group of population. Financial inequalities bring easier access to the services only for those who choose to pay. This is a problem correlated with the not only with the service health system, but also with the geographical inequality of provision with the sanitary condition of the marginal groups (with a particular mention for the Roma group) that live in poor rural areas or in some poor urban areas Health sector reforms The first (and a minimum) objective achieved in the troubled period in which Macedonia implemented its stability was the maintenance of some form of basic health system. The national health care plan reform priorities concern quality of care, service efficiency, cost containment and equity of provision. Its overall strategy is to develop fiscal incentives linked with managerial autonomy and to strengthen central planning and to shift from a service dominated by secondary care to one led by primary care. 1 UNDP, 2001, National Human Development Report 2001, Social Exclusion And Human Insecurity In Fyr Macedonia. 7

8 Changes were made especially in the structure of the system, once independence was obtained from Yugoslavia, moving from a disjointed system of municipality-funded health services to a social insurance funded model with central coordination and planning. The overall strategy now is to develop fiscal incentives linked with managerial autonomy and to strengthen central planning. Through the introduction of the Health Insurance Law 1998/2000 (implemented with the technical assistance of the World Bank), there was a revision of the basic benefit package, of the contributions, awards and penalties for non-payment to the health insurance fund, and a revision of the nature of user fees moving from co-insurance with multiple exemption categories to co-payment with fixed charging scales to a system of fixed tariffs with ceilings on total charges. Tariffs in secondary care vary and are levied from all patients, including children. People over 65 years pay reduced copayments for drugs. Cash payments are required for services outside the basic health care covered by insurance and from non-insured patients. On drugs, there was an implementation of reference pricing based on generic products, and a adoption of essential drugs lists for public sector reimbursement Changes concerning the introduction of co-payment could improve the service, but could raise questions of equity too: payments have eliminated overuse of services, but have collected fewer funds than expected, contributing less than 5% of the revenues of health care providers. Other aim of the reform is to move from a secondary care led service to a primary one, with better functional separation between these and strengthening of Primary and Preventive care refurbishment and the reconstruction of rural primary care units that has commenced, as part of a World Bank project, with 70 units having been brought up to the defined standard in two pilot districts. This programme is being extended into urban primary care. In the area of specialist care, reform was applied since 1999 with loans of World Bank, to fighting perinatal mortality, improving perinatal services through hospital equipment renewal, specialist training and audit policies especially at tertiary level. Attention is given to physicians with a programme of continuing education: in 1998 a World Bank loan was used to establish a school, where courses include not only medical topics but also an introduction to health reform and management. An incentive and recruitment programme was intended to attract physicians into primary care in rural areas, where there are historical problems of lack of services and professionals. In the pharmaceutical sector, the aim of reform was directed at the development of competition and the revision of systems of public 8

9 procurement. It is planned that further rational prescribing measures be introduced, such as hospital formularies and generic substitution. Criteria for exemption from co-payment have been revised; free ambulatory prescriptions are now only available to those meeting eligibility criteria on grounds of poverty Conclusions In comparison with the previous fragmented system, with parallel provision and infrastructure poorly aligned to population need, the current system offers the potential to be more efficient. Public health and hygiene services have been strengthened and are moving, even if slowly, from simple data collection towards policy advice, although a major investment in capacity is still required. The reform process has increased the uptake of continuing education. Professional power remains strong, and standard setting and performance assessment are difficult to implement. The historic form of multi-stranded primary care, and an over-reliance on secondary care remain. The development of family medicine, if it can be implemented, may counter these problems. Meanwhile many sources of financing from international cooperation are implementing loans or programmes. The World Bank is financing the health sector. In 1999 the Health Sector Transition Project was financed by US$16.9 million credit from the International Development Association (IDA). The last World Bank-approved loan for the health service was in a framework of three loans approved after the recent presidential election, which are considered a guarantee of the growing strength of democratic institutions: an Health Sector Management Project (HSMP) was financed with US$10 million injection. It aims to obtain a more efficient, equitable and cost-effective health, upgrading the capacity in the Ministry of Health and in the Health Insurance Fund to formulate and effectively implement health policies, health insurance, financial management and contracting of health care providers; moreover it aims to develop and implement an efficient scheme of restructuring of hospital services with emphasis on day-care services and shifting to primary care. 2 European Observatory on health care system, Health care system in transition, The FYRoM,

10 2. Welfare and social assistance 2.1. Structure of social assistance Macedonian welfare is regulated by the Law on Social Welfare and the Law on Family; the Ministry of Labour and Social Policy is responsible, through 39 district Centres for Social Work (CSW) and Labour Offices, for employment and social welfare policy. National Employment Bureau, the Pensions and Disability Fund, the Health Insurance Fund and the Committee on Labour and Social Policy in the National Assembly are the other institution of the government that deal with social assistance Economic context and transition process The economic situation of the Republic has faced a long period of no growth in gross domestic product, exacerbated by other negative development tendencies, such as geographically unbalanced development which widened the gap between rural and urban areas, pollution of the environment at a time of growing industrialization, rising ethnic tensions etc. All of these elements raised the level of economic insecurity and social exclusion for the citizens of Macedonia even before the onset of the transition process. After that, the transition to a market economy, including privatization of state owned enterprises, faced many external political and economic pressures and negligence in the process of privatization and economic restructuring, consequently gross domestic product suffered a significantly reduction in the first few years of transition. It led to a decline in the standard of living and an increase in poverty. The privatization process also inevitably widened the social gap among the different social groups, because the transition from a socialist system to a liberalized new social and economic system, in addition to being very inelastic with respect to social security of the population, shows exceedingly bad results with respect to its economic efficiency as well. 3 3 UNDP, National Human Development Report 2001 Social Exclusion And Human Insecurity In Fyr Macedonia 10

11 2.3. Social assistance and social problems The key social issue is to enhance access to social welfare services for vulnerable groups and to do so in a manner that will reduce poverty and social exclusion, and enhance social cohesion. The problem that exists within the social services is a lack of fiscal awareness, planning and transparency. Social protection systems have played an important role in mitigating the impact of economic restructuring. Social transfers, in the form of cash benefits, should play an important role in preventing a significant number of people from falling into absolute poverty. Social protection benefits include unemployment benefits, various forms of social assistance benefits, child protection benefits and the war veteran benefits. The main cash benefits currently operating in the country include unemployment benefits administered by the National Employment Bureau, various forms of social assistance benefits administered by the Centres for Social Work, war veteran benefits administered by the War Veterans Department, and the child benefits which until recently were administered by the Child Protection Department. Under new arrangements introduced by the Ministry of Labour & Social Policy MLSP, child benefits will be managed by the CSW. In 2002 benefits were almost 9% of government expenditure and 2.7% of GDP, while over 270,000 benefits were paid monthly to individuals and household, reaching approximately 500,000 persons (25% of population). In 2000, social transfers (including pensions) represented 22 percent of total income for families. The average monthly social protection benefits in 2002 amounted to around 2,000 MKD, which is over 10 percent of average monthly household income. The social protection programs in the Republic, which aim to alleviate a growing incidence of poverty and persistent high unemployment during transition, are costly, even compared to other transition economies in the region. The expenditure of the Pension and Disability Fund alone account for more than 10 percent of GDP, while, together with the unemployment insurance and social assistance programmes (including health expenditure), they represent an equivalent of nearly a third of GDP and comprise over twothirds of public spending. The efficiency and the effectiveness of those programs, however, remain relatively low. The programs are generally not well targeted and the inclusion errors are high and they often require additional transfers from the budget. 4 4 World Bank, 2004, Project Appraisal Document on a Proposed Loan In The Amount Of Us$9.8 Million to the Former Yugoslav Republic Of Macedonia for a Social Protection Implementation Project, April 16,

12 However, growing needs, declining resources and fragmented welfare delivery systems have made existing social policies inadequate and placed frontline social protection services under great pressure. The Government intends to improve the equality, targeting and administration of social assistance. Some steps to improve the efficiency of the targeting process and to reduce potential abuse of social assistance programs have already been taken, with the main focus being placed on better definition of households to avoid the artificial division of families in order to qualify for benefits. There is also an increase in the frequency of random audits and onsite inspections. No decision on whether a household retains, or is given, social assistance benefit is now made without a visit to the house. Site visits are made once every 3 months. This ultimately will reduce the number of households receiving social assistance benefits. Very little data is collected or analyzed, however, on the profiles of beneficiaries, their welfare situation and employment capabilities etc. As a result it is difficult to ascertain the real impact of the changes that have been introduced. To address systemic weaknesses in the targeting of social assistance, tighter controls in the enforcement of eligibility criteria will need to be introduced, budget lines streamlined, and financial controls and evaluation systems strengthened to control costs and track expenditures. Some progress is evident on the practice or implementation of labour and social protection laws but the institutions charged with the application of the laws still feature severe deficiencies in a number of key areas including correct implementation of existing laws, norms and regulations, data collection and analysis, monitoring, control and evaluation and the distribution and management of functions among the various organizations. The institutional framework of social protection benefits is based on the National Employment Bureau and the Centres for Social Work. The National Employment Bureau has evolved into a rather efficient institution in terms of data collection and data analysis, although it remains locked in its reform process by a rather awkward combination of tasks not entirely consistent with its mission to implement active labour market policies. The Centres for Social Work instead, lag behind in terms of organization and data collection with evident difficulties in coordinating different types of benefits, incapacity to correctly monitor expenditure and remain vulnerable to fraud on the part of both administrators and clients. A critical determining factor in streamlining CSW roles will be strengthening the management and administration of cash benefit programs, and the need to develop and enhance the horizontal links between the cash benefits, employment services, disability and social services. The system of child benefits is further behind and lacks basic computer equipment, monitoring and evaluation mechanisms and is generally less 12

13 integrated into the MLSP activities. In 2003, the legislation was amended to improve the targeting of child allowance, through limits in number and obligation to participate in the education program. There is still a need for better targeting of benefits for the poor. The existing data management system does not allow the Ministry of Labour and Social Policy to have a clear picture of beneficiaries and the expenditures on cash benefits, which are administered by the CSW. There is a need to develop and enhance the horizontal links between the cash benefits, employment services, disability and social services. The IT systems necessary for supporting the vertical and horizontal interface between the welfare institution are weak. Although there are Local Area Networks (LANs) at certain locations, there is no networking and no data communications among key departments and institutions. Social Work services are provided through a variety of community and residential care services. However, community-based care options for the elderly, children and the disabled are weak. Residential care services are provided through 11 institutions (funding for which in 2002 accounted for 0.8 per cent of GDP and 0.3 per cent of total government budget). Current practices are dominated by two extremes - leaving clients (elderly, children and people with disabilities) at home or placing them in an institution. There are not for-profit and not-for profit service provision and the absence of shortterm respite care and family outreach services. As in the economic contest, there is a gap between rural and urban areas in the provision of social assistance. 86.7% of Macedonia is rural and 40.2% of the population live in rural areas. In general, the rural population is dissatisfied by the social and local government services available. This particularly pertains to secondary schools, social welfare centres, local government, judiciary and culture. The degree of non-availability to services provided by enterprises and institutions grows with the increase in altitude and remoteness of the villages from municipal centres, and causes an uncontrolled rural exodus Unemployment Unemployment represents one of the most severe economic and social problems facing Macedonian society. Reforms to social protection benefits gained momentum in the late 1990s despite initial delays. Economic and political instability resulted in delayed government reforms in a number of areas particularly relevant for labour market functioning and social protection. The main laws on employment, unemployment compensation, labour relations, social protection and others were introduced only after 1997 and the 13

14 first approved versions of these laws contained significant inconsistencies and measures not entirely relevant or useful for labour market development. 5 The number of unemployed is exceptionally high, increasing with plans for the privatisation and/or bankruptcy of the largest Macedonian companies. In the second half of 90s and in the early 2000, according to the Labour Force Survey, the unemployment rate was on average 33.4%, while in 2003 it rose to about 37% 6. Thus no single ethnic group suffers disproportionately from unemployment with exception of the Roma ethnic group, where unemployment is twice their percentage share in the total population. Persons that have lost their jobs are entitled to monetary compensation for a limited time while unemployed, in addition to other entitlements. (Law on Employment and Unemployment, No 37/1997). Also, since 1992, in addition to the entitlement for one-time assistance and unemployment insurance, there is a new type of welfare benefit in Macedonia called welfare protection level, based on the government programme for assistance of welfare recipients (Official Gazette of RM, Skopje, No 15/1992). These benefits are utilized by those whose regular unemployment insurance had expired, but who are still unemployed. Although this entitlement has been present for ten years, it is characterized by constant reductions of the financial benefit amount, due to the growing number of recipients and smaller allocations by the state. On the other hand, higher benefits and longer periods of eligibility could de-motivate the beneficiaries from seeking employment. More control is needed to identify those who are employed but nonetheless continue to receive unemployment benefits. Agencies which fall under the remit of the Ministry of Labour and Social Policy pursue passive measures towards the unemployed and in the delivery of social welfare services. The notion of active measures, which could involve enabling, through a diverse range of community development initiatives and local nongovernment organisations, the development of partnerships with Centres for Social Work and Labour Offices is largely unknown. Reforms to the internal structures of the CSW and ensuring appropriate vertical linkages between diverse, but related social protection programs are critical to plans for the decentralization of social protection policy. There is low demand for workers in the formal sector, which can be attributed in part to the high payroll taxes required to finance the social insurance system, and to excessive regulation of the hiring and firing process 7 under the 5 World Bank, 2004, Project Appraisal Document on a Proposed Loan In The Amount Of s$9.8 Million to the Former Yugoslav Republic Of Macedonia for a Social Protection Implementation Project, April 16, Sandrine Cazes, ILO 2004, Labour markets in the Stability Pact countries of South Eastern Europe, in the 2004 Bulletin Special issue on South Eastern Europe. 7 IMF Former Yugoslav Republic of Macedonia Enhanced Structural Adjustment Facility Medium-Term Economic and Financial Policy Framework Paper, IMF 14

15 Law on Employment and Unemployment Insurance and the Labour Relations Law. The government revised both laws in to promote greater flexibility in the labour market by reducing the amount and duration of benefits for some unemployed persons, by encouraging shorter maternity leave, easig restrictions and simplifying processes for terminating workers, and by improving the flexibility of collective bargaining to reduce rigidity in wage-setting. With the on-going support of the World Bank Social Reform and Technical Assistance Project, the government is reducing the role of the Employment Bureau and the state in matching workers to jobs, implementing several active labour market measures to tackle the problem of structural unemployment and helping those unemployed as a result of enterprise restructuring to re-enter the labour force. These include: promoting a more extensive market-driven program for training and re-training of workers, offering small business development services and incubators, and promoting community-based economic development initiatives Pension System The Republic of Macedonia, with the technical consultancy of the World Bank, is currently reforming its pension system which includes the introduction of the mandatory fully funded pension insurance to supplement the existing PAYG (pay-as-you-go) pension system. The private pension funds will be managed by pension companies whose responsibility will be to invest the pension funds assets in accordance with the investment limits stipulated in the Law on Mandatory Fully Funded Pension Insurance. The founders of the pension companies should be local or international banks, insurance companies or other financial institutions, which in Macedonia would register a joint stock company with a sole activity - managing pension funds. The pension companies will be selected through a two-stage international public tender organized by the Agency for Supervision of Fully Funded Pension Insurance in By mid-may 2004 Macedonian authorities plan to organize a bidders conference for all interested participants on the tender. 8 After completing the tender process and all other preparatory activities it is expected that the second pillar will be implemented by mid Republic of Macedonia Agency for Supervision of Fully Funded Pension Insurance, in 15

16 Further support for the pension system would be provided under the Social Protection Investment Loan and through additional financing provided by USAID, the Dutch Government and the IMF (for Government securities market development). The financial situation in the FYR Macedonia s pension system worsened dramatically during the 1990s, due primarily to: - a significant decline in the contribution base, caused by high unemployment and a large non-taxed informal economy; - a large number of beneficiaries, due to rapidly aging demographics, low retirement age and early retirement policies widely used in the first years of transition; - a generous benefit level. Pension expenditures remain high, particularly given the relatively young population structure. Initial early retirement policies for laid-off workers combined with a declining contribution base have exacerbated imbalances in the pension system, despite wholesale reforms of recent years, including a lowering of minimum benefits for new retirees at the beginning of Simulations indicate that the aging population will lead to a future destabilization in the finances of the Pension Fund unless the structure of benefits is changed further. By 2001, total pension expenditures in FYR Macedonia amounted to over 9 percent of GDP. These expenditures are financed by a payroll tax of 21.2% of gross wage, transfers from the state budget to finance special categories of pensions, and National Employment Bureau transfers for the unemployed (5%) and other revenues. One of the areas that has been identified as critical is the area of disability benefits: approximately 20.9% (52,395) of current pensioners are classified as disability pensioners with the average disability pension amounting to 6,249 MKD per month (54.1 percent of the average wage). There is a belief that, unless effective control and enforcement mechanisms are rapidly established, expenditures on disability pensions are likely to continue their upward trend. The Public Sector Management Adjustment Loan related trust fund supported the development of a comprehensive management program that includes a revision and modification of Pension and Disability Insurance Fund's accounting system, budgeting process and internal controls, as well as the preparation of an institutional capacity development plan in the areas of strategic planning, business process development, human resource management and communication. Also, although the Pension Supervisory Agency was established in 2002, building regulatory and supervisory capacities remains one of the preconditions for the beginning of the second pillar operations. The current system of records on contributions, based on a single annual report for each individual, makes the compliance control difficult and 16

17 untimely, thus creating an incentive for evasion. To address the issue, the Government intends to introduce a new system for monthly collection and record-keeping on pension contributions on individual basis International Cooperation World Bank projects The World Bank approved a total of US$ 49.8 million for three projects: the US$30 million Public Sector Management Adjustment Loan (PSMAL), the US$ 9.8 million Social Protection Implementation Loan (SPIL) and the US$10 million Health Sector Management Project (HSMP) for FYR Macedonia. These projects will assist the Government with much needed reforms in sectors that affect the lives of all citizens of the country. In their discussion of the project, the World Bank s Executive Directors considered that the Macedonian Government has made significant efforts to maintain macro-economic stability, and to proceed with structural economic reform EU projects New approaches in managing the country s social welfare system are being promoted by the EU Commission, following the launch of eleven pilot projects. Target groups include the elderly, the disabled, single parent families, drug abusers and ex-prisoners. The projects will include: de-institutionalisation (placing clients in alternative care services rather than institutions); privatisation (establishing home care services); combating social exclusion; raising citizens awareness of their rights; and developing partnerships between the public and the NGO sector. The pilot projects are part of a 1.8 million, 24-month project on reforms in the social sector. They are funded by the European Union and managed by the European Agency for Reconstruction, mirroring European Union best practices. 17