Macedonia's Healthcare Committee

POINTS FOR THE AGENDA OF THE STEERING COMMITTEE FOR THE
ADVANCEMENT of HEALTHCARE in the REPUBLIC OF MACEDONIA

Presented to the Plenum of the Committee on June 15, 2009
By: Sam Vaknin, Ph.D., economist
GENERAL
Healthcare legislation in countries in transition, emerging economic, and developing
countries should permit - and use economic incentives to encourage - a structural reform
of the sector, including its partial privatization.
KEY ISSUES
Universal healthcare vs. selective provision, coverage, and delivery (for

instance, means-tested, or demographically-adjusted)
Health Insurance Fund: Internal, streamlined market vs. external market
competition
Centralized system or devolved? The role of local government in healthcare.
Ministry of Health: Stewardship or Micromanagement?
Customer (Patient) as Stakeholder
Imbalances: overstaffing (MDs), understaffing (nurses), geographical
distribution (rural vs. urban), service type (overuse of secondary and tertiary
healthcare vs. primary healthcare)
AIMS
To amend existing laws and introduce new legislation to allow for changes to
take place.
To effect a transition from individualized medicine to population medicine, with
an emphasis on the overall welfare and needs of the community
Hopefully, the new legal environment will:
Foster entrepreneurship;
Alter patterns of purchasing, provision, and contracting;
Introduce constructive competition into the marketplace;
Prevent market failures;
Transform healthcare from an under-financed and under-invested public good
into a thriving sector with (more) satisfied customers and (more) profitable
providers.
Transition to Patient-centred care: respect for patients values, preferences, and
expressed needs in regard to coordination and integration of care, information,
communication and education, physical comfort, emotional support and

alleviation of fear and anxiety, involvement of family and friends, transition and
continuity.
The Law and regulatory framework should explicitly allow for the following:
I. PURCHASING and PURCHASERS
(I1) Private health insurance plans (Germany, Czech Republic, Netherlands), including
franchises of overseas insurance plans, subject to rigorous procedures of inspection and
to satisfying financial and governance requirements. Insured/beneficiaries will have the
right to apply contributions to chosen purchaser and to switch insurers annually.
Private healthcare plans can be established by large firms; guilds (chambers of
commerce and other professional or sectoral associations); and regions (see the
subchapter on devolution under VI. Stewardship).
Private insurers: must provide universal coverage; offer similar care packages; apply
the same rate of premium, unrelated to the risk of the subscriber; cannot turn applicants
down; must adhere to national-level rules about packages and co-payments; compete on
equality and efficiency standards.
(I11) Breakup of statutory Health Insurance Fund to 2-3 competing insurance plans
(possibly on a regional basis, as is the case in France) on equal footing with private
entrants.
Regional funds will be responsible for purchasing health services (including from
hospitals) and making payments to providers. They will be not-for-profit organizations
with their own boards and managerial autonomy.
(I12) Board of directors and supervisory boards of health insurance funds to include:
-
Two non-executive, lay (not from the medical professions and not
politicians) members of the public. These will represent the patients and
will be elected by a Council of the Insured, (as is the practice in the
Netherlands)
Municipal representatives;
Representatives of stakeholders (doctors, nurses, employees of the funds,
etc.).
(I13) The funds will be granted autonomy regarding matters of human resources
(personnel hiring and firing); budgeting; financial incentives (bonuses and penalties); and
contracting.
The funds will be bound by rules of public disclosure about what services were
purchased from which providers and at what cost.
Citizen juries and citizen panels will be used to assist with rationing and priority-setting
decisions (United Kingdom).
(I2) Procurement of medicines to be done by an autonomous central purchasing
agency, supervised by a public committee (drug regulatory authority) aided by outside
auditors.
All procurement of drugs and medications will be done via international tenders.
The agency will submit its reimbursement rates for drugs on the PLD to external audit in
order to accurately reflect pharmacists overhead costs. At the same time, the profit
margins on all drugs, whether on the PLD or not, will be regulated.
This agency should be separate from the Health Insurance Fund and the Ministry of
Health. This agency will also maintain national drug registries. It will secure volume
discounts for bulk purchasing and transparent, arms-length pricing.
(I21) Use of reference prices for medicines. If the actual price exceeds the reference
price, the price difference has to be met by the patient.
(I3) The Approved (Positive) List of Medicines will be recomposed to include generic
drugs whenever possible and to exclude expensive brands where generics exist. This
should be a requirement in the law. Separately, an Essential Drug List will be drawn up.
(I31) Encourage rational drug prescribing by instituting a mixture of GP and PHC
incentives and penalties, or a fundholding system: budgets will be allocated to each GP
for the purchase of drugs and medications. If the GP exceeds his/her budget, s/he is
penalized. The GP gets to keep a percentage of budget savings. Prescription decisions
will be medically reviewed to avoid under-provision.
(I4) Payments and Contracting
Payment to providers should combine, in a mixed formula:
BLOCK CONTRACTS
Capitation - A fixed fee for a list of services to be provided to a single patient in a given
period, payable even if the services were not consumed, adjusted for the patients'
demographic data and reimbursement for fee-for-service items.
Inflation-adjusted Global budgeting (hospitals) and block (lump sum) grants
(municipalities)
COST and VOLUME CONTRACTS

Provide incentives and reward marketing efforts which result in an increase in
demand/referral beyond the limit set in a block contract.
COST PER CASE CONTRACTS
Apply Diagnosis Related Group (DRG)/ Resource-based Relative Value (RBRV) /
Patient Management Categories (PMCs) / Disease Staging/Clinical Pathways
Levels of reimbursement, case-mix adjusted to be decided by external auditors.
Contracts with providers should include:
Waiting Times Guarantee

Single Contact Person (Case Officer) for the duration of a stay at the hospital
Hospital benchmarking (individual-level data on costs, diagnoses, and
procedures during entire case episodes: inpatient admissions and outpatient visits;
cost-effectiveness of services.
Performance targets in performance agreements with all healthcare facilities,
both public and private.
All payments - wages included - will be tied to these targets and their attainment
as well as to healthcare quality as determined by objective measures (internal,
external, and functional benchmarking), clinical audits (sampling), as well as
customer satisfaction surveys and interviews and discussions with patients.
Provider and Staff Bonuses and penalties tied to exceeding/under-performing
targets and contract variance
Patients rights, including their rights to litigate
Selective contracting will be allowed on all levels (including specialist ambulatory care
and hospitals), although all providers, private and public, will be permitted to apply for
contracts with health funds and insurers. The funds will choose from among private
providers either following a process of deliberation, or via an auction, or public tender
(United Kingdom).
(I5) Commissioning preference will be given to the purchase of Primary Healthcare
over secondary, or tertiary Healthcare.
II. PROVIDERS
(II1) Hospital Management
(See separate document)
The law should allow:
I. Co-location of a private wing within or beside a public hospital
II. Outsourcing of non-clinical support services
III. Outsourcing of clinical support services
IV. Outsourcing of specialized clinical services
V. Private management of public hospitals
VI. Private financing, construction, and leaseback of new public hospitals
VII. Private financing, construction, and operation of new public hospitals
VIII. Sale of public hospitals as going concerns
IX. Sale of public hospitals for alternative use
X. Consolidation of redundant public healthcare facilities by merging them or closing
down some of them
XI. Privatization of Primary Healthcare (PHC) clinics within medical centers
XII. Healthcare institutions will be granted autonomy regarding matters of human
resources (personnel hiring and firing); administering financial incentives or penalties,
budgeting; and contracting.
XIII. Privatization pharmacies inside medical centers and hospitals.
(II2) Primary, Ambulatory, and Secondary Care and General Practitioners (GP)
(II21) Limit the number of patients per GP
(II22) Stimulate and financially incentivize the following activities, which should be
declared national priorities within a National Needs Assessment:
Group practices and networks (for continued, around-the-clock services)

Day and minimally invasive surgery
Dispensaries
Home and day care services
Long-term care (nursing homes, visiting nurses, home I.V. and other services
provided to chronically ill or disabled persons)
Patient hotels
Rehabilitation facilities and programs
Provision of merit goods (also through mass campaigns)
Conversion of hospital units to outpatient services, and day-care centers
Example of such financial incentives:
Physicians will be entitled to see patients who receive services free-of-cost

in the public sector in the morning, and private patients who pay the full
cost of the medical consultation in the afternoon.
Allow private beds in public hospitals and private financing of hospital stays
(NHS, UK)
Subsidize or fully cover transaction costs (legal fees of contracting, compliance,
accounting, etc.)
(II23) Allow hospitals to administer packages of outpatient services and be reimbursed

by the Health Insurance Fund (or funds).
(II24) Impose an admission quota on medical schools; reduce the obligatory number of
doctors per 1000 population; and make GP a medical specialty.
(II25) Strengthen the gatekeeper function of GPs and healthcare provision in outpatient
settings.
Encourage gatekeeping by instituting a mixture of GP and PHC incentives and
penalties, or a fundholding system (United Kingdom, Estonia, Spain):
Budgets will be allocated to each GP for the purchase of secondary and tertiary
healthcare (as well as to cover salaries, premises, diagnostic tests). If the GP exceeds
his/her budget, s/he is penalized. The GP gets to keep a percentage of budget savings.
Referrals will be medically reviewed to avoid under-provision.
(II26) Introduce GP target income and adjust services and fees to reach it (perhaps by
using tax credits).
(II27) Provide GPs and other types of primary and secondary healthcare providers with
financial incentives to relocate to remote and rural areas
(II28) Render clinical and best practice guidelines mandatory (not merely
recommended)
(II29) Encourage managed care (peer review panels, pre-approval procedures for
surgery, case management for the chronically ill, formularies limiting pharmacy
reimbursement to an approved list, and other contractual provisions).
III. PRIVATE SECTOR
Risks of privatization and private non-managed, imperfect competition: market
failure, as patients received too many unnecessary services, due to fee-for-service
reimbursement and information asymmetry.
(III0) Allow private primary healthcare physicians to offer preventive care, treatments
and interventions after office hours, emergency dental and medical care, emergency
home treatment, preventive checkups for preschool and school children, patronage and
polyvalent patronage services, and all other elements of comprehensive healthcare.
(III1) Arrangements with the private sector and Private-Public Partnerships (PPP) for
the provision of healthcare:
(III11) Service Contract (Dominican Republic), or Contracting-out
The government pays private entities - including doctors - to perform specific healthcare
tasks, or to provide specific healthcare services under a contract. The private service
providers can make use of state-owned facilities, if they wish, or operate from their own
premises.
Payments by the government are usually based on capitation (a fixed fee for a list of
services to be provided to a single patient in a given period, payable even if the services
were not consumed) adjusted for the patients' demographic data and reimbursement for
fee-for-service items.
(III12) Management Contract Outsourcing (Cambodia)
The government pays private entities to manage and operate public health care facilities,
like clinics, or hospitals.
(III13) Lease (Romania since 1994)

Private entities - including doctors - pay the government a lump sum or monthly fees to
use specific state-owned equipment, state-employed manpower, clinics, or complete
public health care facilities.
The private entity is entitled to all revenues from its operations but also bears all
commercial risks, is responsible for management and operations and liable for
malpractice and accidents.
The state is still responsible to make capital investments in the leased facility or
equipment, but maintenance costs are borne by the private entity.
(III14) Concession and Build-Operate-Transfer (BOT) (Costa Rica)
Concession is exactly like a lease arrangement (see above) with one exception: the
private entity is responsible for capital investment. In return, the contract period is
extended and can be voided only with a considerable pre-advice.
In BOT (Build-Operate-Transfer) and ROT (Rehabilitate-Operate-Transfer) the capital
investment involves the construction or renovation/upgrade of new healthcare facilities.
The private entity uses the constructed facility to provide services. After a prescribed
period of time has elapsed, ownership is transferred to the government.
(III15) Divestiture and Build-Own-Operate (BOO) (Texas, USA)
The law should permit the outright sale of state- owned health care facilities to a qualified
private entity, including physician groups who band together to purchase previously
state-run facilities.
Another possibility is a BOO scheme, in which the private entity contractually undertakes
to add facilities, improve services, purchase equipment, or all three.
(III16) Free entry
The law should allow qualified private providers to operate freely. Though regulated,
these private firms will have no other relationship with the state.
Such entities would have to be licensed, certified, overseen, and accredited for expertise,
safety, hygiene, maintenance, track record, liability insurance, and so on.
The state may choose to encourage such providers to locate in specific regions, to cater to
poor clients, or to provide specific healthcare tasks or services by offering tax incentives,
free training, access to public facilities, etc.
(III17) Franchising (Kenya, Pakistan, Philippines)

A private firm (franchisee) acquires a license from and shares profits with the franchisor
(a domestic, or, more often, foreign firm). The franchisee uses the brand name,
trademarks, marketing materials, management techniques, designs, media access, access
to approved suppliers at bulk (discounted) prices, and training offered by the franchisor.
The franchisor monitors the performance and quality of service of the franchisee.
This model works mainly in preventive care, family planning, and reproductive health.
The World Bank ("Public Policy for the Private Sector", Note number 263, dated June
2003):
"Franchisers in the health sector, often supported by international donors and
nongovernmental organizations (NGOs), establish protocols, provide training for
health workers, certify those who qualify, monitor the performance of franchisees, and
provide bulk procurement and brand marketing."
(III18) Allow Charities and Not-for-profit organizations to run health insurance funds
and a variety of providers (including full-scale secondary and tertiary healthcare
institutions).
(III9) Voluntary Health Insurance (substitutive; complementary; and complementary),
subject to open enrollment periods and mandatory coverage of dependants (to prevent
cream-skimming and adverse selection).
IV. FINANCING
(IV0) Institute co-payments for examination by a GP, emergency medical care, and
certain preventive programs.
(IV01) Introduce negative co-payments: rebates or credits (to be deducted from future
contributions) to insured persons who, in the preceding year, did not use services and did
not consume interventions or drugs from the positive list above a level determined by the
Ministry of Health.
(IV02) Introduce provider co-payments for hospital stays above the European Union
average. Whenever the length of stay exceeds the EU average, the provider (hospital)
will make a co-payment to the Health Insurance Fund or to the insurer.
(IV1) Voucher System (Nicaragua)

The law should allow for experimenting with novel payment and resource allocation
techniques, such as vouchers or prepaid health cards distributed to needy populations
and guaranteeing free basic service packages provided by a limited list of clinics or other
healthcare facilities. Such schemes can also be managed by the private sector.
(IV2) Medical Savings Accounts (Singapore)
Allows or mandates people to place money in (tax-free) savings accounts to be used only
for medical expenses, usually in conjunction with the purchase of a catastrophic stop-loss
health insurance plan.
Contributions by employers and employees accumulate over time and are used, tax-free,
to pay for hospital expenses in public and private hospitals, national supplementary
health insurance premiums, special procedures (including abroad), and expensive
outpatient treatment and drugs for the saver and his immediate family.
(IV3) Consumer Organizations and Community Healthcare Financing
Consumer organizations in the healthcare field (such as buyers' clubs or Health
Maintenance Organizations-HMOs owned by cooperatives, NGOs, municipalities).
These groups will shop and tender for the best, most reasonably priced, and most efficient
healthcare services for their members (Switzerland).
Example: HMO in USA Integrated Model of Healthcare
(Source: WHO)
Health maintenance organization (HMO) is US health care sector term. It is an
organization that contracts to provide comprehensive medical services (not patient
reimbursement) for a specified fee each month.
The term health maintenance organization arose because doctors under this arrangement
have a financial incentive to keep their patience healthy, since they are not paid more for
providing more services.
Health maintenance organizations, which focus on providing patients comprehensive
medical care and pay doctors a specified monthly fee, have become increasingly popular
in the United States, prompted by high costs from the previous fee-for-service, traditional
indemnity health insurance plans.
In this model, doctors are typically paid by salary and hospitals are typically funded by
global budgets. Benefits are supplied to patients in-kind, often free of charge. The public
version of this model involves government financing and provision of health care and is
often funded mainly out of general taxation. In the US, the voluntary form of this model
is better known as the staff model of the health maintenance organisation. Integration
as such is not only used for integrated model, but also for types of care provisions in
which providers offering differing services (e.g., ambulatory care, inpatient care,
rehabilitative care) provide them in an integrated way.
(IV4) Voluntary Health Insurance (substitutive; complementary; and complementary)
with the right to apply ones contributions to pay the premium and the right to switch
insurers annually.
(IV51) Earmark a percentage of vice (sin) taxes, customs duties, VAT, and excise (on
alcohol and tobacco; drugs and medications) for healthcare purposes.
(IV52) Reform healthcare budgeting. All healthcare budgets (including the budgets of
the Ministry of Health; of hospitals, clinics, and primary healthcare facilities) will include
amortization (and capital investments), goodwill and intellectual property, and
intangibles (such as environmental externalities).
(IV6) Allow providers to retain a percentage of the user-fees they collect.
(IV7) Means-tested system: affluent and certain constituencies will be excluded from
coverage (Netherlands, Germany) or pay much higher co-payments, co-insurance, or
deductible (cost-sharing).
In such a system, private insurers administer compulsory insurance for the excluded
groups (e.g., civil servants in Netherlands).
(IV8) Introduce VAT on hospitals to encourage investment, the purchase of
medications, the retention of external services (e.g. training, skilling, continued
education, management consultancy, auditing, etc.), where the hospitals can deduct VAT
and retain it as an addition to their own budget.
(IV9) Community rating system vs. Demographically-adjusted or experience-rated
premiums (e.g., the old and sick pay more than the young and healthy or vice versa;
people with dependants pay more than insured or subscribers without dependants, etc.)
(IV10) Blind Fundholding: Financial resources for health care are allocated on a per
capita basis; financial resources are held in a fund; and the general practitioner is usually
the decision-maker for allocating the funds to purchase hospital and community services
(with the patient choosing the providers, not the GP as was the case in the United
Kingdom).
V. E-HEALTH
(V1) Citizen-centered and Mobile Healthcare
(V12) Provide a legal framework for health data transfer
(V13) Harmonize confidentiality and privacy laws
(V14) Establish legal liability or waiver thereof for e-treatment
(V15) Settle issues of entitlement and reimbursement
(V16) Encourage Medical e-Tourism (inbound telemedicine)
(V17) Provide for infrastructure and interoperability
(V18) Permit and licence Web Health and (outbound) Telemedicine (laws, regulations,
forms)
(V19) Establish early warning systems
(V110) Foster patient-driven comparative indicators (e.g., online rating of
professionals and providers) and empower patient organizations
(V111) Electronic European Health Insurance Card
(V112) Each citizen (or his/her custodian) will have full access to a personal Health
Home Page with his EMR (Electronic Medical Records)/EPR (Electronic Patient
Record)/EHR (Electronic Health Record)
VI. STEWARDSHIP
(VI0) The Benefits Packages (basic and supplementary) to be decided by a conference
of all stakeholders: Ministry of Health, patient groups and advocacy groups, and medical
doctors associations, assisted by healthcare economists and experts.
(VI01) Consider the introduction of a Negative Benefits Package, listing only the
interventions and services that are excluded from coverage. The interventions and
services not on the Negative List are automatically covered.
(VI02) Consider exclusion of dental and oral care from the Benefits Package.
(VI03) Make preventive occupational health and safety measures, equipment, and
training in the workplace mandatory. Re-establish occupational dispensaries in all
workplaces with more than 100 workers.
(VI04) Generate annual National Needs Assessment reports (including technological
needs assessment), including prioritized allocation of funding and foreign aid.
(VI05) Transform teaching hospitals into publicly-owned independent trusts (Italy,
United Kingdom): the corporate type of hospital (hard budget; autonomous managers
accountable to board; board accountable to government).
(VI1) Licencing and accreditation (including periodical renewal and relicencing by the
doctors, dentists, and pharmacists chambers) will depend on continuing medical
education (CME) and on education in management and finance for certain jobs (such as
ward, clinic, and hospital directors).
All positions from ward doctor upwards will be subject to periodic review and open,
public tenders.
(VI2) Private Sector Healthcare Monitoring and Regulatory Agency
The law should provide for the establishment of an agency to monitor and regulate
private sector healthcare provision: compliance with contracts, servicing the indigent and
the uninsured, imposing sanctions or "step-in" rights, and dispute resolution.
This agency will also maintain and supervise the operation of internal open-markets in
the public sector; the outsourcing of primary care functions; and the purchase of primary
care packages from private providers.
(VI3) Devolution (Finland)

Responsibility for the provision of some types of healthcare services (health promotion;
preventive care; occupational health; mental health) and the allocation of inputs should be
devolved to local authorities (municipalities), which will be required to produce budgets
of needs vs. costs.
Consider possibility of turning municipalities to purchasers of secondary and tertiary
healthcare from providers of their choice.
Local government will cover primary healthcare capital expenditures out of municipal
taxes and fees and weighted capitation-based transfers from the central budget
The MoH will maintain a Fiscal Equalization Fund to ensure consistent quality and
availability of healthcare provision across regions and localities.
(VI4) Health Academy
The Ministry should establish an Academy to train healthcare administrators with
emphasis on systems administration and reform. The Academy will invite foreign
experts as guest lecturers and teachers.
In conjunction with the Republic Institute for Health Protection, the Academy will comaintain databases of case studies and evidence-based practices (feeding into the
Cochrane Network) and the Medical Map of Macedonia.
(VI5) Campaign to encourage the public to consume generic drugs will be launched.
(VI6) External audit and cartel (antitrust) investigation regarding tertiary healthcare
facilities.
(VI7) Wait Time Reduction Fund (Canada, 2004)
(VI8) National Waiting Times Guarantee
(VI9) Minister of Health Award of Excellence, presented annually to individuals and
institutions of outstanding merit and excellence among healthcare professionals,
purchasers, and providers of all types.
(VI10) Appoint a Health Ombudsman and consumer advocates in each major healthcare
facility. Strengthen patients rights and the Patients Charter. Provide all patients (Or
their custodians) with full access to their medical records; compensation for iatrogenic
diseases; a statutory role for patients associations; and the establishments of
commissions with patient representatives in all hospitals (France).
(VI11) SPECIFIC PROJECTS

Uniform Emergency Number
Neonatal Emergency Ambulance
Health cabinets in schools
Health Tourism
(VI12) National Inventory of Medical Assets
Extend the current central registry of all medical equipment in publicly-owned healthcare
facilities to include private healthcare facilities.
The Inventory should also profile medical personnel, real estate, fixtures,
infrastructure, and other capital assets.
(VI13) Coordinative Council for Social and Health Services: to plan and guarantee
inter-sectoral action (together with the ministry of Social Welfare and Labor).
(VI14) Publish standardized contracts, forms, and performance criteria (including
qualitative clinical pathways and benchmarks) to reduce transaction costs.
Example: the National Health Service Frameworks in the United Kingdom provide a
health strategy; list priority interventions, treatment guidelines and performance targets;
and proffer model contracts.
(VI15) Medical and Health Technology Assessment Board (examples: NICE in United
Kingdom or SBU is Sweden) to decide all purchases of technology in secondary and
tertiary facilities; to publish Positive Lists of technology for GPs and PHC facilities;
and to obtain discounts on bulk purchases.
The WHO defines Health Technology Assessment as:
Comprehensive evaluation and assessment of existing and emerging medical
technologies including pharmaceuticals, procedures, services, devices and equipment
in regard to their medical, economic, social and ethical effects.
The systematic evaluation of properties, effects and/or impacts of health care
technology. Health Technology Assessment defines a multidisciplinary activity that
systematically examines technical performance, safety, clinical efficacy and
effectiveness, cost, cost-effectiveness, organisational impact, social consequences, legal
and ethical aspects of the application of a health technology (European Commission,
1999, from EUR-ASSESS 1997).
(VI16) National Health Accounts Institute

(Sources: WHO, OECD, USAID)
Will publish the Healthcare PPP (Purchasing Power Parity), taking into account prices
of imported healthcare inputs. Indicators may include total health expenditure, public
expenditure, private expenditure, out-of-pocket expenditure, tax-funded and other public
expenditure, social security expenditure, public expenditure on health.
The National Health Accounts will also provide the following annual data, analyses,
and indicators:
Sectoral opportunity costs, the value of benefits foregone by failure to apply the
resources to the most productive alternative cost;
Sectoral marginal costs, the extra cost of increasing output by one unit;
Sectoral variable costs: costs that vary with changes in output volume, such as the
material required to provide a service versus
Sectoral fixed costs: costs which do not vary with quantity or volume of output provided,
at least in the short run (e.g. rent for space).
Sectoral direct costs: all the goods, services and other resources that are consumed in the
provision of a particular service or area (e.g. hospital supplies), including medical costs
(e.g. payments to providers, material) and non-medical costs (e.g. transportation to
hospital);
Sectoral indirect costs: total sum of morbidity costs (goods and services not produced by
the patient because of the illness), mortality costs (goods and services the person could
have produced had the illness not been incurred and the person not died prematurely),
and productivity cost (related to lost productivity incurred by an employee who leaves
work to provide care for the patient);
Sectoral intangible costs: usually used in economic evaluation, to indicate features like
pain, anxiety or grief, which cannot be directly quantified in monetary terms.
Sectoral resource costs are the resources used in the production of goods and services;
user cost: cost to the user of purchasing or making use of a product.
Sectoral cost-effectiveness analysis (CEA), a type of analysis that compares
interventions or programmes having a common measurement of health outcome in a
situation where, for a given level of resources, the decision maker wishes to maximise the
health benefits conferred to the population of concern;
Sectoral cost-utility analysis (CUA), a type of analysis that measures benefits in utilityweighted life-years (QALYs) and which computes a cost per utility-measure ratio for
comparison between programmes;
Sectoral cost-benefit analysis (CBA), a type of analysis that measures costs and benefits
in monetary units and computes a net monetary gain/loss or a cost-benefit ratio.
Outcomes research: the Institute will evaluate the impact of health care on the health
outcomes of patients and populations, including an evaluation of economic impacts
linked to health outcomes, such as cost effectiveness and cost utility. Outcomes research
emphasises health problem- (or disease-) oriented evaluations of care delivered in
general, real world settings; multidisciplinary teams; and a wide range of outcomes,
including mortality, morbidity, functional status, mental well-being, and other aspects of
health related quality of life.
Total expenditure on health: Total (or national) expenditure on health based on: Personal
health care services + Medical goods dispensed to outpatients = Total personal
expenditure on health + Services of prevention and public health + Health administration
and health insurance = Total current expenditure on health + Investment into medical
facilities = Total expenditure on health.
Another formula is: total expenditure on health = * private health care expenditure + *
public health care expenditure.
(VI17) Hospital League Table and star ranking (like with hotels and restaurants) to
include information made publicly-available in various media: number of patients
treated; complication rates; waiting times; data about procedures; food and amenities;
other quality measures.
(VI18) Annual National Health Survey: will measure attitudes; customer satisfaction;
emerging trends among purchasers and providers; and the increase or decrease in quality
and performance standards as well as in capital investments.
Sam Vaknin
(,//e-mail)
070-565488
Samvsaknin@gmail.com
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Health academy within Public Health Institute: training, research, medical map
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No such Academy exists, although some of its functions are carried by the Public Health institute
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Health Systems in Transition: Macedonia (2006)
Can be found in the eLibrary section of the Website:
http://sc-healthreform.org.mk
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The Ministry should establish a Health Academy with the following functions:
1. To train healthcare administrators with emphasis on systems administration and reform.
The Academy will invite foreign experts as guest lecturers and teachers.
2. In conjunction with the Republic Institute for Health Protection, to co-maintain databases
of case studies and evidence-based practices (feeding into the Cochrane Network)
3. To update and maintain the Medical Map of Macedonia.
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http://asr.regione.emiliaromagna.it/wcm/asr/aree_di_programma/cdf/gr_ist/pr_whole/whole_ingl/WHOLE_ing.pdf
http://www.nationalacademies.org/opportunities
http://www.who.int/healthacademy/countries/pilot_jordan/en/index.html
http://www1.aston.ac.uk/about/news/releases/2008/march/080314-1/
:
National health academies exist in many countries, including the United States and the
United Kingdom.
The European Union is establishing a Virtual Health Academy.
The WHO is running pilot projects for the establishment of health academies (for instance,
in Jordan).
, July 24, 2009

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Sam Vaknin
(,//e-mail)
070-565488
samvaknin@sc-healthreform.com.mk
( ):
Ministerial inter-sectoral council for healthcare

(
, , , ,
( .), .)
The Ministry of Health provides the stewardship function of the entire health system of Macedonia. But
the sector is very fragmented. Various healthcare functions are performed by the Health Insurance Fund
(nominally under the Ministry, but, actually, a semi-independent institution); Ministry of Social Welfare
and Labor; the ministry of Defense; the Ministry of Education; and the Ministry of Local Selfgovernment.
()-
Conversations with office-holders in the Ministries of Health and Social Welfare and Labor as well as
the management of the Health Insurance Fund and the Prime Minister.
Health Systems in transition: The Former Yugoslav Republic of Macedonia (2006), available in
the eLibrary: http://sc-healthreform.org.mk
( ) ,
, , , ( .),
.
To establish an Inter-Ministerial Council for Health with the following members:

Minister of Health - Chairman
Minister of Finance
Minister of Defense
Minister of Education
Minister of Local Self-government
Director of the Health Insurance Fund Consultative Role
The Council will meet periodically. Its functions will be:
-
To coordinate health-related activities that require the input or collaboration of more than one
Ministry
To exchange information regarding health issues
To share data and coordinate activities in times of health emergencies
To resolve inter-Ministerial disputes
To secure financing, manpower and resources
The Council will have a standing Secretariat.
()-
For examples from other countries, see the next section.
:
Most countries (as well as supranational bodies, such as the EU and the Commonwealth) have
such councils in place.
Examples:
http://www.phac-aspc.gc.ca/aids-sida/publication/ministerreport/interministerial/app3-eng.php
http://www.arr.ro/cisr/cisr_eng.ppt
http://www.ambafrance-uk.org/Joint-press-conference-after.html
http://gateway.nlm.nih.gov/MeetingAbstracts/102280351.html
http://www.lsblog.org/blog/?tag=guardian-newspapers
http://www.emro.who.int/lebanon/reports/IntroductionforAnnualReport2001.pdf
, 01.09.2009
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Sam Vaknin
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1 4 .
Sam Vaknin
(,//e-mail)
070-565488
( ):
National health legal forms and contracts

(
, , , ,
( .), .)
Currently, in Macedonia, there are no published standard contracts, forms, or performance criteria in
the health sector.
()-
( ) - ,
, , , ( .),
.
The Ministry of Health should publish online and in print form:

1. Sstandardized contracts between all those involved in the health system: providers,
purchasers, patients, unions, etc.
2. Standardized forms to be used by providers, patients, purchasers, government, etc.
3. Benchmarks and performance criteria (including qualitative clinical pathways and
benchmarks) to be incorporated into contracts between purchasers and providers and
in processes of accreditation and re-licensing.
()-
http://www.nhs.uk/chq/Pages/1080.aspx
http://www.dh.gov.uk/en/Aboutus/OrganisationsthatworkwithDH/Workingwithstakeho
lders/FAQ/DH_091943
http://www.dh.gov.uk/en/Managingyourorganisation/Commissioning/Systemmanagem
ent/DH_085048
:
The more complex the healthcare system, the more is it rendered competitive, the more
patient choice it offers the higher the transaction costs involved (for example: the costs of
preparing contracts and monitoring compliance).
Experience throughout the world and especially in the United Kingdom demonstrates that
the publication of standardized documents (forms, contracts, performance criteria) saves a
lot money and makes the system far more efficient.
Example: the National Health Service Frameworks in the United Kingdom provide a
health strategy; list priority interventions, treatment guidelines and performance targets;
and proffer model contracts.
, July 24, 2009
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Sam Vaknin
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1 4 .
Sam Vaknin
(,//e-mail)
070-565488
( ):
National inventory of healthcare resources

(
, , , ,
( .), .)
There is a current central registry of all medical equipment in publicly-owned healthcare facilities
()-
( ) - ,
, , , ( .),
.
Extend the current central registry to include:

1. All medical equipment in publicly-owned healthcare facilities and in private
healthcare facilities (in both secondary and tertiary healthcare.)
2. To maintain a register of all medical personnel.
3. To maintain a register of healthcare-related real estate.
4. To maintain a register of healthcare-related fixture, infrastructure, and capital assets.
5. To interface and collaborate with other state organs (UJP, Customs, municipalities)
in order to verify the accuracy and up to date status of the registers.
6. To feed information into the Medical Map of Macedonia (in conjunction with the
Public Health institute or the Health Academy).
()-
http://www.google.com/search?hl=en&q=National+inventory+healthcare
http://www.google.com/search?hl=en&q=National+inventory+health
:
Many countries maintain national healthcare inventories, but these are usually partial.
In the USA, for instance, there is a National Health Provider Inventory (NHPI), National
Inventory of Materials, of hospital trauma centers, etc. These are maintained by the
government (Department of Health and Human Services HHS), or by universities and think
tanks.
The United Kingdoms NHS maintains what is, in effect, a national inventory.
Australia has a National Inventory of Health Facilities. Canada has national inventories of
various types of equipment (e.g.: imaging
There are national inventories in many countries of Southeast Asia and in some countries in
Europe (example: France and Spain).
, July 24, 2009

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Sam Vaknin
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1 4 .
Sam Vaknin
(,//e-mail)
070-565488
samvaknin@gmail.com
( ):

Defining the basic benefits package via consultations with all stakeholders
(
, , , ,
( .), .)
The Basic Benefits Package is largely determined by the Health Insurance Fund (HIF) and the Ministry
of Health.
()-
Discussions with Minister of Health and Ministry of Health officials.
Can be found in the eLibrary:
( ) - ,
, , , ( .),
.
Recommend to establish a public, permanent Committee to recommend what should be

the composition of the Basic Benefits Package and to review it on an annual basis.
The Committee should include all stakeholders as well various experts in law, economics,
medical ethics, and finance.
The Ministers of Health and Finance should send representatives to the Committee.
()-
Israeli experience with such a Committee since 2007:
http://www.health.gov.il/pages/default.asp?maincat=1&catid=6&pageid=4549
:
Israel has established such a public Committee to recommend to the Ministry of Health and
the Ministry of Finance the composition of the Basic (or Uniform) Benefits Package.
Israel has developed detailed procedures regarding this Committee which can be adapted to
fit Macedonias needs and particular circumstances.
, July 29, 2009

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SAM VAKNIN
(,
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20. , ,

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1 4 .
Sam Vaknin
(,//e-mail)
070-565488
samvaknin@gmail.com
( ):
-
E-health
(
, , , ,
( .), .)
Macedonia has signed a contract with a Croatian company to install a comprehensive Information
Technology software in Macedonia, including basic forms of EMR/EPR (Electronic Medical
Records/Electronic Patients Records), inventory and cost control, and HMS (Hospital Management
System).
()-
Review of ISIS documents (ISIS is the country-wide software mentioned in Step 2 above).
( ) - ,
, , , ( .),
.
A special Law should be authored.

(V1) Citizen-centered and Mobile Healthcare
(V12) Provide a legal framework for health data transfer
(V13) Harmonize confidentiality and privacy laws
(V14) Establish legal liability or waiver thereof for e-treatment
(V15) Settle issues of entitlement and reimbursement
(V16) Encourage Medical e-Tourism (inbound telemedicine)

(V17) Provide for infrastructure and interoperability
(V18) Permit and licence Web Health and (outbound) Telemedicine (laws, regulations,
forms)
(V19) Establish early warning systems
(V110) Foster patient-driven comparative indicators (e.g., online rating of professionals
and providers) and empower patient organizations
(V111) Electronic European Health Insurance Card
(V112) Each citizen (or his/her custodian) will have full access to a personal Health Home
Page with his EMR (Electronic Medical Records)/EPR (Electronic Patient Record)/EHR
(Electronic Health Record)
()-
Towards Interoperable eHealth for Europe (Telemedicine Alliance/European
Commission)
:
The Ministry should set up an eHealth Committee to review experience in other countries.
The EU has funds available for the implementation of telemedicine and eHealth projects. So
do many other countries (Norway, Finland) and even private companies such as Google, Inc.
, IBM, etc.
, July 29, 2009

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1 4 .
Sam Vaknin
(,//e-mail)
070-565488
samvaknin@gmail.com
( ):

Measures fr reducing waiting times
(
, , , ,
( .), .)
Currently there are no national measures, or plans in place to reduce waiting times.
()-
( ) - ,
, , , ( .),
.
To introduce Waiting Times Guarantees as part of contracts with hospitals and other
providers in both secondary and tertiary healthcare. Providers to be penalized and rewarded
according to their success or failure in curbing waiting times for specified interventions.
Hospital League Table and star ranking (like with hotels and restaurants) to include
information made publicly-available in various media: number of patients treated;
complication rates; waiting times; data about procedures; food and amenities; other quality
measures.
National Waiting Times Guarantee The state will guarantee specified maximum waiting
times for specific interventions. It will compensate patients who had had to wait longer than
the national waiting times guaranteed. To this effect, the state will establish a Wait Time
Reduction Fund, managed by the HIF or MoH. Hospital and other secondary and tertiary
healthcare providers will pay monthly premiums to the Fund and will be rewarded or
penalized according to their success or failure in reducing waiting times.
()-
Various publications by WHO, available in the eLibrary:
Canadian experience:
http://www.parl.gc.ca/information/library/PRBpubs/prb0582-e.htm
:
Canada has the most extensive experience regarding this issue with its Patient Wait Times
Guarantee Trust and other steps adopted since 2004.
, July 29, 2009

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SAM VAKNIN
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26.
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1 4 .
Sam Vaknin
(,//e-mail)
070-565488
( ):

Hospital ranking system
(
, , , ,
( .), .)
Currently, Macedonia has no publicly available or public-driven system of ranking and rating hospitals.
()-
Conversation with relevant hospital administrators and heads of clinics in the Clinical Center in Skopje.
( ) - ,
, , , ( .),
.
OPTION 1
Government-administered Plan
Hospital League Table and star ranking (like with hotels and restaurants) to include information made
publicly-available in various media: number of patients treated; complication rates; waiting times; data
about procedures; food and amenities; other quality measures.
OPTION 2
Public-driven Plan
Annual National Health Survey: will measure attitudes; customer satisfaction; emerging trends among
purchasers and providers; and the increase or decrease in quality and performance standards as well as
in capital investments.
Will foster and include patient-driven comparative indicators (e.g., online rating of professionals and
providers, similar to eBay) and empower patient organizations.
OPTION 3
Peer-driven Plan
Doctors, nurses, and administrators will rank their colleagues and institutions in anonymous surveys.
These will be compiled to yield to an index and rate and rank the hospitals and clinics.
All three options can be implemented by the Ministry of Health or by an independent, commercial polling
firm, chosen in a public tender (recommended).
()-
Purchasing to improve health systems performance (Open University Press)
(available in the eLibrary here: http://sc-healthreform.org.mk )
http://www.telegraph.co.uk/health/3354787/Hospital-league-tables-Overall-experience.html
http://www.guardian.co.uk/society/2001/sep/25/hospitals.nhs1
http://www.usnews.com/besthospitals
http://www.netdoc.com/hospital-rankings/
http://www.huliq.com/25361/new-hospital-rankings-by-government
http://www.consumerreports.org/health/doctors-hospitals/hospital-ratings.htm
:
The United Kingdom has had a Hospitals League Table. It was run by the NHS (National Health Service).
In the United States, a variety of organizations offer hospital rankings and ratings: state governments,
consumer associations, the media, insurance companies, HMOs (health Maintenance Organizations), and
patients organizations.
, 01.09.2009
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Sam Vaknin
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7.
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8.
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9. ,
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1 4 .
Sam Vaknin
(,//e-mail)
070-565488
samvaknin@gmail.com
( ):

Funding sources
(
, , , ,
( .), .)
Macedonia has a social insurance system with a single, statutory Health Insurance Fund (HIF).
Deficits are periodically covered by transfers from the central budget, but these transfers are
unpredictable, minimal, and politically-motivated.
()-
Available in the eLibrary:
Discussions with officials of the Health Insurance Fund and Ministry of Health.
( ) - ,
, , , ( .),
.
(See the Notes zabeleski - section for reasons)

Macedonia should maintain its social insurance model, but with a clear commitment
by the state to cover the deficits of the Health Insurance Fund.
This commitment should be embedded in the law. The central budget should make an
annual transfer to the HIF to cover its operational deficit in a transparent manner.
Many workers go undeclared, or are self-employed, or have no permanent jobs, or are
foreigners and illegal immigrants. It is only logical and just for tax money to fund the
HIF which pays for healthcare for these individuals, too.
Another option is for the central budget to transfer matching funds to the HIF equal to
a fixed or escalating percentage of the HIFs revenues with a cap-guarantee equal to a
fixed percentage of GDP.
All transfers from the central budget to the HIF should be linked to the cost inflation
in the healthcare sector.
Investments in maintenance and capital goods should come from the central budget
and be based on a multi-annual needs and technology assessment.
()-
See: Funding Healthcare: Options for Europe
See: Purchasing to Improve Health Systems Performance
Available in the eLibrary:
:
Both tax-funded and social insurance health systems are less regressive and more equitable
than private, market-based alternatives and more progressive than systems heavily
dependent on user-charges. But tax-based systems are more progressive that social insurance
based ones.
Both tax-funded and social insurance health systems are better at cost containment than
market-based alternatives.
Tax-funded systems are vulnerable to political pressures and shifts in political priorities.
Expertise in purchasing and contracting accumulates in social health insurance funds (but
transaction costs tend to increase).
Social insurance adversely affects job mobility and economic competitiveness. Tax-based
systems adversely affect the costs of doing business and, therefore, competitiveness.
, July 19, 2009

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Sam Vaknin
(,//e-mail)
070-565488
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Health care provider
(
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( .), .)
Hospitals and clinics in Macedonia are allowed to charge clients for certain goods and
services and even keep some of the proceeds. They are not allowed, however, to offer
insurance plans and to tie these plans into their services.
()-
BOOK: Health Systems in Transition: Macedonia (2006)
Conversations with hospital and clinic administrators and with members of the Steering
Committee for the Advancement of the Health System in Macedonia.
( ) - ,
, , , ( .),
.
To allow the formation of managed care organizations:

-
HMOs (Health Maintenance Organizations);
Health co-ops
Other group healthcare management organizations
(For details, see articles below)
()-
http://en.wikipedia.org/wiki/Hmo
http://en.wikipedia.org/wiki/Managed_care
http://en.wikipedia.org/wiki/Health_insurance_cooperative
, 30.09.2009
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1 4 .
Sam Vaknin
(,//e-mail)
070-565488
samvaknin@gmail.com
( ):
Indirect taxes ("Sin taxes" earmarks, and taxes on medications)
( , )
(
, , , ,
( .), .)
5 MKD per box of cigarettes collected and transferred to the general budget of the MoH.
()-
( ) - ,
, , , ( .),
.
OPTION 1
To levy a special tax or surcharge on:
(i)
(ii)
(iii)
All tobacco products

All alcoholic drinks (including beer and wine)
All prescription and over-the-counter (OTC) medication
The revenues from this surcharge or tax will go to a special fund and used to finance dedicated programs and
activities (e.g.: public health; drug and alcohol rehabilitation centers; anti-drug and anti-drinking campaigns;
encouraging rational prescription and usage of medication; medical map and national medical inventory, etc.)
OPTION 2
The central budget will transfer a fixed percentage of all incomes (customs duties and taxes) on:
(iv)
(v)
(vi)
All tobacco products

All alcoholic drinks (including beer and wine)
All prescription and over-the-counter (OTC) medication
The funds will be transferred directly from the central budget to a special fund and used to finance dedicated
programs and activities (e.g.: public health; drug and alcohol rehabilitation centers; anti-drug and anti-drinking
campaigns; encouraging rational prescription and usage of medication; medical map and national medical
inventory, etc.)
()-
Sin taxes and earmarked income from taxes (also known as hypothecated revenues
or hypothecated taxes) are very common in many countries.
See: Funding Healthcare: Options for Europe in the eLibrary:
:
Sin taxes and earmarked income from taxes (also known as hypothecated revenues
or hypothecated taxes) are very common in many countries.
Hypothecated or earmarked taxes/revenues are unstable and not conducive to long-term
planning, policies, and objectives. They have to be supplemented from the MoHs general
budget.
I, therefore, recommend the establishment of a countercyclical Equalization Fund.
In years where income from earmarked taxes exceeds the outlays on the dedicated programs,
the surplus will go into the Equalization Fund. In years where income from earmarked taxes
falls short of the outlays on the dedicated programs, money will be withdrawn from the
Equalization Fund.
Earmarked or hypothecated revenues should not go to the general budget. They should be
used exclusively to finance dedicated program: specific programs which carry specific
functions and have specific objectives.
, July 19, 2009

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Sam Vaknin
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1 4 .
Sam Vaknin
(,//e-mail)
070-565488
samvaknin@gmail.com
( ):
Other insurance funds (medical savings account)

( )
(
, , , ,
( .), .)
Does not exist.

No legal framework exists. Legislation required.
()-
( ) - ,
, , , ( .),
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Medical Savings Accounts (MSAs)

Citizens are required to save a proportion of their income every month in an earmarked
account, specifically for meeting health care costs, especially catastrophic costs (major
operations; medical treatment abroad; expensive medical devices).
The accounts will be tax-free (contributions will be deductible from taxable income and when
withdrawn, free of tax).
MSAs are available in several countries, most notably in Singapore and the United States.
()-
Funding Healthcare: Options for Europe (chapter 5) in the eLibrary:
:
Medical Savings Accounts encourage cost inflation and are inequitable (poor people cannot
effectively save). To prevent these outcomes, MSAs must be coupled with publicly-managed
cost control mechanisms and equity-restoring measures (see Singapores supplementary
institutional solutions below).
The most famous example of a successful implementation of a Medical Savings Account is
Singapore where it is called Medisave.
Note the following features:
1. At death, any account balance can be bequeathed to relatives. The account holders
have free choice of provider.
2. Medishield is catastrophic illness insurance created in 1990. Premiums are deducted
from medical savings accounts and there are high deductibles, co-insurance and lifetime
limits to reduce moral hazard.
3. Medifund is an endowment fund created in 1993. Interest can be used to fund care for
poor people based on means tests. Care is only available in open wards, and only 3 per
cent of patients used this in 1993. Government
subsidizes public hospital beds and outpatient facilities on a scale that diminishes in
relation to luxury.
, July 19, 2009

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Sam Vaknin
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Sam Vaknin
(,//e-mail)
070-565488
( ):
National health accounts unit

(
, , , ,
( .), .)
Macedonia has no dedicated unit for national health accounts. The Bureau of Statistics and some
departments of the Ministry of Health and the Health Insurance Fund issue their own statistics.
Statistics in Macedonia are not regularly updated. Many data are withheld or even kept secret owing to
issues of privacy and national interest.
()-
Conversations with the WHO, World Bank, Ministry of Health officials and former workers of the
Bureau of Statistics.
Review of the data incorporated in the medical map.
( ) - ,
, , , ( .),
.
To establish a National Health Accounts Institute.

The Institute will be in charge of all health statistics and will supervise the work of the Bureau
of Statistics in this field.
To amend the relevant laws to mandate the disclosure of anonymous and aggregated data on a
periodical basis.
The National Health Accounts Institute will publish the Healthcare PPP (Purchasing Power
Parity), taking into account prices of imported healthcare inputs. Indicators may include total
health expenditure, public expenditure, private expenditure, out-of-pocket expenditure, taxfunded and other public expenditure, social security expenditure, public expenditure on health.
The National Health Accounts will also provide the following annual data, analyses, and
indicators:
Sectoral opportunity costs, the value of benefits foregone by failure to apply the
resources to the most productive alternative cost;
Sectoral marginal costs, the extra cost of increasing output by one unit;
Sectoral variable costs: costs that vary with changes in output volume, such as the material
required to provide a service versus
Sectoral fixed costs: costs which do not vary with quantity or volume of output provided, at
least in the short run (e.g. rent for space).
Sectoral direct costs: all the goods, services and other resources that are consumed in the
provision of a particular service or area (e.g. hospital supplies), including medical costs (e.g.
payments to providers, material) and non-medical costs (e.g. transportation to hospital);
Sectoral indirect costs: total sum of morbidity costs (goods and services not produced by the
patient because of the illness), mortality costs (goods and services the person could have
produced had the illness not been incurred and the person not died prematurely), and
productivity cost (related to lost productivity incurred by an employee who leaves work to
provide care for the patient);
Sectoral intangible costs: usually used in economic evaluation, to indicate features like pain,
anxiety or grief, which cannot be directly quantified in monetary terms.
Sectoral resource costs are the resources used in the production of goods and services; user
cost: cost to the user of purchasing or making use of a product.
Sectoral cost-effectiveness analysis (CEA), a type of analysis that compares interventions or
programmes having a common measurement of health outcome in a situation where, for a given
level of resources, the decision maker wishes to maximise the health benefits conferred to the
population of concern;
Sectoral cost-utility analysis (CUA), a type of analysis that measures benefits in utilityweighted life-years (QALYs) and which computes a cost per utility-measure ratio for
comparison between programmes;
Sectoral cost-benefit analysis (CBA), a type of analysis that measures costs and benefits in
monetary units and computes a net monetary gain/loss or a cost-benefit ratio.
Outcomes research: the Institute will evaluate the impact of health care on the health
outcomes of patients and populations, including an evaluation of economic impacts linked to
health outcomes, such as cost effectiveness and cost utility. Outcomes research emphasises
health problem- (or disease-) oriented evaluations of care delivered in general, real world
settings; multidisciplinary teams; and a wide range of outcomes, including mortality, morbidity,
functional status, mental well-being, and other aspects of health related quality of life.
()-
Various publications by the WHO, OECD, USAID, including:
http://www.who.int/nha/
http://www.who.int/nha/docs/English_PG.pdf
http://www.oecd.org/dataoecd/10/53/33661480.pdf
http://nha.healtheconomics.org/2009/
http://www.healthsystems2020.org/section/topics/finance/nha
http://www.hsph.harvard.edu/ihsg/publications/pdf/No-2.pdf
Examples from other countries:
http://www.nscb.gov.ph/stats/pnha/default.asp
http://www.mohfw.nic.in/
http://www.unescap.org/aphen/asia_pacific_nha.htm
http://gateway.nlm.nih.gov/MeetingAbstracts/102280576.html
http://ideas.repec.org/p/wpa/wuwppe/0509006.html
:
Total expenditure on health: Total (or national) expenditure on health based on: Personal
health care services + Medical goods dispensed to outpatients = Total personal expenditure
on health + Services of prevention and public health + Health administration and health
insurance = Total current expenditure on health + Investment into medical facilities = Total
expenditure on health.
Another formula is: total expenditure on health = * private health care expenditure + * public
health care expenditure.
, 01.09.2009
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Sam Vaknin
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1 4 .
Sam Vaknin
(,//e-mail)
070-565488
( ):
Negative co-payment

(
, , , ,
( .), .)
Macedonia has no system of stimulating non-consumption of health products and services which are
insured by the Health Insurance Fund.
()-
Interviews of relevant functionaries in the Health insurance Fund.
( ) - ,
, , , ( .),
.
OPTION 1
Insured who do not use any health products and services in a given fiscal year (January 1
December 31) will get a refund representing a percentage of their annual contributions to the
Health insurance Fund.
OPTION 2
Insured who use less than a specified list or level of health products and services in a given
fiscal year (January 1 December 31) will get a refund representing a percentage of their
annual contributions to the Health insurance Fund.
OPTION 3
The future contributions of insured who use less than a specified list or level of health products
and services in a given fiscal year (January 1 December 31) will be adjusted downward
(reduced) in the following fiscal year.
()-
http://www.ahrq.gov/QUAL/value/incentives6.htm
http://ideas.repec.org/h/eee/heachp/1-08.html
http://www.taxpolicycenter.org/taxtopics/healthinsurance.cfm
http://samvak.tripod.com/pp150.html
:
Negative com-payments and other forms of rewarding insured who consume fewer
insurance resources are common throughout the insurance industry.
Thus, insured who made no claims on their car insurance in a given year, pay a lower
premium the next year.
Financial incentives not to consume health products and services are very common in
countries with private health insurance. There is no reason not to implement them in a
public system, too.
Negative co-payments (negative participation) has proven effective at preventing moral
hazard and supply-side over-prescription of interventions, drugs, and services.
, 01.09.2009
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Sam Vaknin
(,//e-mail)
070-565488
samvaknin@gmail.com
( ):
Commercial insurance fund

(
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( .), .)
No private commercial health insurance funds exist or allowed by law (only voluntary private health
insurance legally allowed see separate template).
()-
Various legislation
( ) - ,
, , , ( .),
.
Macedonia should go on having a single, statutory Health Insurance Fund.

Macedonia should not introduce private, commercial health insurance funds.
For my reasons, see the Notes (zabeleski) section.
()-
See: Funding Healthcare: Options for Europe
See: Purchasing to Improve Health Systems Performance
in the eLibrary:
:
Macedonia is a poor country with limited management resources; inadequate regulatory capacity;
poor information technology; and deficient statistical data gathering capabilities. The health
sectors main problem is lack of sufficient financial resources coupled with cost inflation and
rampant illegal private, out of pocket, payments.
This lamentable situation leads to under-investment in infrastructure, technology, and

continuing education; interminable waiting times owing to lack of capacity; and a relatively
poor quality of healthcare and customer experience.
With 2 million impoverished citizens, Macedonia lacks the critical mass to support private
funds. If such funds are introduced, income disparities may lead to inequity and regressivity.
Macedonias regulatory deficit and the lack of sophistication of its consumers will likely
result in confusion (on the part of the consumers); adverse selection (cream-skimming);
cartelization; risk selection; increased transaction costs; and overuse of services.
Researchers in the United States identified these problems:
Cost-unconscious demand: with the third party (insurer) paying passively for benefits,
neither providers nor consumers have an incentive to economize.
Biased risk selection as a source of profit: insurers can garner profits by product
differentiation and cream-skimming.
Market segmentation to minimize price competition: large numbers of complex
heterogeneous benefit packages segment the market, making comparison difficult and
choice based on price practically impossible.
Lack of information on outcomes relative to cost: little outcome measurement and a
reluctance to focus such investments on care packages rather than particular events.
Little choice for members of small groups: half the employed people in the United
States are in groups of less than 100 and have little choice of health plan.
Perverse public subsidies: tax breaks benefit rich employees the richer the insuree,
the greater the subsidy. Subsidies might be better targeted at poor people to facilitate their
sustained membership of plans.
Private health funds, being commercial entities face sizable risks of insolvency and
bankruptcy. In such cases, it is the public sector that bears the costs.
Finally, empirical studies demonstrate that the introduction of private health funds does
not help cost containment, which is among Macedonias top priorities.
, July 19, 2009

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Sam Vaknin
(,//e-mail)
070-565488
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Provider penalties and insolvency/bankruptcy
(
, , , ,
( .), .)
In Macedonia, healthcare providers are penalized if they exceed targets set in their contracts
with the countrys sole statutory purchaser (the Health insurance Fund HIF).
Yet, these penalties are completely academic. Since the deficits of healthcare facilities, such
as hospitals, are effectively covered by the state (either directly or indirectly), the pecuniary
punishment is borne by the taxpayer, not by the infringing institution.
Additionally, healthcare facilities and institutions in Macedonia do not go bankrupt and are not
subject to receivership in case of insolvency.
()-
Discussions with directors of hospitals and clinics and members of the Financing
Subcommittee of the Steering Committee for the Advancement of the Health System in
Macedonia.
( ) - ,
, , , ( .),
.
Contracts between the Health Insurance Fund and hospitals and clinics should include clear
penalties clauses. Healthcare facilities and institutions should pay monetary fines when certain
quantitative benchmarks are either exceeded (as in the case of over-subscription of drugs and
supply-driven interventions), or not met (as in the case of qualitative benchmarks).
The penalties could be in the form of copayment (or participation) of the healthcare provider
proportional to the cost of any intervention, procedure, or drug prescribed above the
benchmarks.
Such penalties should not be extracted from the operating budgets of the hospitals and clinics.
They should accrue as balance sheet obligations. When the penalties exceed a certain
amount, the institution or facility should be declared insolvent, its management should be fired,
and it should be placed under receivership.
A public register of such penalties should be created.
Information regarding such penalties should affect the ranking and accreditation status of the
facility/institution.
()-
Relevant literature in our e-library:
http://sc-healthreform.org
Especially the following books:
Controlling Costs and Changing Patient Care
Purchasing to improve health systems performance
Rewarding Provider Performance
:
Such penalties are common practice throughout the world.
, 30.09.2009
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Sam Vaknin
(,//e-mail)
070-565488
samvaknin@gmail.com
( ):
Introducing VAT on hospitals

(
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( .), .)
Hospitals in Macedonia are not VAT subjects: they cannot charge VAT for their services and cannot
claim back VAT that they pay their suppliers.
To introduce VAT on hospitals, the VAT Law has to be amended (although one Ministry of Finance
official, with expertise in VAT, claim that only the regulations have to be changed and that there is no
need to change the Law).
()-
Conversations with Ministry of Finance officials.
( ) - ,
, , , ( .),
.
Impose VAT on hospitals. This will allow them to claim VAT on payments they make to their
suppliers.
Claiming VAT at 18% will increase hospital revenues by an annual average of c. 5%. It will
improve hospital cash flows considerably and render hospitals more liquid.
()-
http://www.sum.dk/IMEVEREST/Publications/imdk%20x2D%20dansk/Sygehusmedicin/20090525125550/CurrentVersion/Country%
20report%20UK_080309.pdf
:
VAT is charged on hospitals in a few countries, including the United Kingdom and India. In
the USA, in many states, hospitals pay sales taxes.
Patient costs will increase following the introduction of VAT, but by less than the VAT rate.
Differential VAT rates can be imposed on medications and medical equipment and supplies
(perishables and
Reuseables alike).
VAT can be reclaimed over 2 fiscal years or more (as was the practice in the united Kingdom
until 1996).
This will further enhance the cash flows of hospitals.
, July 19, 2009

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Sam Vaknin
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070-565488
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Voluntary health insurance (VHI)

(
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( .), .)
Several insurance firms offer health insurance plans and policies, but these are mostly limited to health
services abroad, during trips. Few offer also coverage for treatment abroad and for complex, expensive
interventions inside Macedonia and outside it.
Demand for voluntary health insurance is very weak and the local insurance industry claims to be losing
money on VHI. This may be a result of the comprehensive coverage offered by the statutory health
insurance scheme.
()-
Conversations with insurance executives in insurance firms in Macedonia with various
ownership structures (including branches or representative offices of foreign insurance
concerns).
( ) - ,
, , , ( .),
.
To legislate to allow commercial insurance firms to offer only complementary health

insurance (according to the WHO: cover for services excluded, or not fully covered by the
state, including cover for co-payments imposed by the statutory health care system.)
To provide tax incentives to individuals and employers to purchase complementary health
insurance and, in the case of firms, offer it to their employees as part of their benefits package.
()-
Voluntary health insurance in the European Union (European Observatory on Health Systems and
Policies) Available from the eLibrary here:
:
I recommend to disallow by law substitutive VHI and supplementary VHI (see definitions
below) as these would contradict the social and cultural values of Macedonia as well violate its
Constitution.
The introduction of private health insurers and voluntary health insurance to compete with
the statutory health insurance fund or even merely to complement or supplement it would
increase inequity especially with regards to women and low-income groups. Women are
usually charged higher premiums though their incomes are often lower than men's.
For more about social and cultural values as determinants of the design and reform of health
systems, read the relevant section at the end of this document:
Healthcare Reform Checklist

http://www.narcissistic-abuse.com/health.rtf
http://www.narcissistic-abuse.com/health.pdf
WHO Definitions
Substitutive VHI substitutes for cover that would otherwise be available from the state.
Supplementary VHI provides supplementary cover for faster access and increased
consumer choice.
Licences to sell voluntary health insurance should be subject to open enrollment periods and
mandatory coverage of dependants (to prevent cream-skimming and adverse selection).
, 01.09.2009
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Sam Vaknin
(,//e-mail)
070-565488
samvaknin@gmail.com
( ):
Voucher system

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( .), .)
No such system in Macedonia.

Law needs to be amended to allow it.
Ministry of Finance needs to be involved as vouchers are a form of money and may have
macroeconomic implications.
()-
( ) - ,
, , , ( .),
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Distribute vouchers to target populations (the poor; the unemployed; the homeless; the
elderly; minorities; children; single mothers; battered women, etc.), or as a part of targeted
campaigns (e.g.: voucher to pay for drug and alcohol rehabilitation).
The key features of the voucher system are the following:
Eligibility: anyone who is eligible, get vouchers entitling them to the basic and/or
supplementary benefits package as well as to all the medications on the positive list.
Free Choice of GPs and providers
Freedom to use vouchers together with cash to Purchase Additional Services
Funding by an Earmarked Tax (see relevant template) or from the general budget of the MoH
Administration and Clearance by a Healthcare Voucher Board
()-
http://www.financialexpress.com/news/vouching-for-health-vouchers/307907/0
http://samvak.tripod.com/vouchercommunities.html
http://www.brookings.edu/papers/2007/07useconomics_emanuel.aspx
http://healthpolicy.stanford.edu/publications/health_care_vouchers__a_proposal_for_uni
versal_coverage/
:
Healthcare voucher schemes can be found in low-income countries such as Indonesia,
Zambia, Kenya and Nicaragua.
I. Executive Summary
The target populations (the poor; the unemployed; the homeless; the elderly; minorities;
children; single mothers; battered women, etc.), are allowed to use vouchers to pay for
the basic benefits package as well as for medicines on the positive list. Voucher money is
redeemed or converted to real money so it has no inflationary or fiscal effects, though it
does increase the purchasing power of the target populations.
II. The Clearing Authority
The Clearing Authority has four functions:
(1) To issue (print) the vouchers in various currency-equivalent denominations
(2) To create and maintain the project's information systems (see below).
(3) To issue laminated plastic (and, later, magnetic striped) health cards to voucher
recipients ("Voucher Beneficiary Health Cards")

(4) To provide binding dispute settlement and resolution mechanisms and forums
III. Liaison with municipal and state authorities
In some countries, vouchers issued by the Clearing Authority can be used to defray
expenditures related to health (even if they are not included in the benefits package) and
to pay health-related taxes and charges. This is subject to agreements signed between
the Clearing Authority and the relevant local and state authorities.
Government agencies provide the Clearing Authority with information about the status
of applicants (unemployed or not; level of annual income; marital status, etc.), pursuant
to the receipt of written release from the applicant.
IV. Liaison with employers
Some Clearing Authorities act together with employers who then proceed to give their
employees the vouchers. In these cases, the Clearing Authorities provides employers with
vouchers on condition that they are distributed to beneficiaries.
V. The Vouchers
The voucher is a contract between service providers. It contains the following elements
and components:
(1) It is headlined "Contract" between payer and receiver to render services.
(2) A denomination (how many currency units the voucher represents) known as "Value
Store".
(3) The serial ID or registration number of the voucher.
VI. Recipients and Beneficiaries
The vouchers are distributed to the target populations in order to enhance their
purchasing power and enable them to take advantage of healthcare services.
The total sum of vouchers distributed to any given recipient or beneficiary should not
exceed one third of his or her income from all other sources combined.
The vouchers should be distributed once every quarter and expire at the end of the
quarter in which they were distributed.
The voucher recipients or beneficiaries can use them to pay only for healthcare services
rendered by providers which have signed contracts with the Health Insurance Fund. They
should be allowed to freely negotiate transactions and agree prices where such practices
prevail in the current system.
VII. Information Systems
The Clearing Authority maintains a Central Registry in both hard, print copy and
computerized form (Excel spreadsheet).
The Central Registry contains the following data and is indexed thus:
(a) Name of recipient/beneficiary
(b) Profession of recipient/beneficiary and family status (marital record, number of
dependants, etc.)
(c) Contact details (address, phone number, e-mail) of recipient/beneficiary
(d) Number and value of outstanding, unused vouchers in any given quarter
Customers are allowed to comment online on the service provider's (the voucher
recipient's/beneficiary's) performance and conduct and to rate it.
To summarize:
Each beneficiary/recipient of vouchers has a record in bother print and computerized
forms.
The record comprises his or her name, professional qualifications, family status, contact
details, number and value of outstanding and unused vouchers.
VIII. Macroeconomic and Microeconomic Implications and Outcomes
(1) Positive
Enhancing the purchasing power of the target populations;
Guaranteeing healthcare delivery to deprived neighborhoods and regions;
Increasing the psychological well-being and motivation of deprived and dysfunctional
strata of the population;
Engendering networks of GPs/providers and customers which can later integrate into the
formal, monetized economy
No inflationary ill effects
No fiscal ill effects (no budgetary deficits)

(2) Negative
Possible hoarding of vouchers (largely prevented by the introduction of
beneficiary/recipient ID cards and by the fact that vouchers expire);
Vouchers are a form of money substitute. Not only do they subvert the money issuance
monopoly of the central bank, they also demonetize the economy and have no multiplier
effects. In other words, they create a parallel system that is detached and distinct from the
main money supply transmission mechanisms and channels. Still, this effect is minimal
as the amount of vouchers outstanding is likely to be negligible. Additionally, this can be
overcome by limiting the amount of vouchers in circulation and their duration (expiry or
maturity date). The whole operation should be carried out in coordination with the central
bank and the Ministry of Finance.
, July 19, 2009

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Sam Vaknin
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Procurement and availability of drugs
Rational perscription
(
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( .), .)
Pharmaceutical companies (manufacturers, importers, and pharmacies alike) maintain

unhealthy, corrupt, and unethical relationships with prescribing doctors (especially general
practitioners and medical doctors in hospital wards).
Medical doctors:
-
Receive financial inducements and benefits (monetary commissions, equipment) to

prescribe to their patients certain, specific (and expensive) drugs;
Go on junkets (trips fully financed sponsored - by the industry), ostensibly to
participate in conferences and other professional events;
Serve as consultants and advisors to the industry;

Get research grants from the industry.
()-
Conversations with doctors: general practitioners, doctors in hospitals, retired medical
staff, nurses.
( ) - ,
, , , ( .),
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To criminalize the receipt of financial inducements and benefits (monetary commissions,

equipment) to prescribe to their patients certain, specific (and expensive) drugs.
To criminalize the sponsorship of junkets (trips fully financed sponsored - by the industry),
ostensibly to participate in conferences and other professional events.
To establish a compulsory public register of all conflicts of interest:
To list and make public in a national register the names of medical doctors who serve as
consultants and advisors to the industry and to disclose how much money they are getting
and for which services.
To list and make public in a national register the names of medical doctors who obtain
research grants from the industry.
()-
The steps above are the accepted legal and public norm in most countries of the West
(Europe and the United States).
, 01.09.2009
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Sam Vaknin
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070-565488
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National drug registry
(
, , , ,
( .), .)
Macedonia has no national or public drug registry.
()-
Conversations with functionaries in the Bureau of Drugs in the Ministry of Health.
( ) - ,
, , , ( .),
.
To create a registry that would include the following information:

-
Trade names of all drugs and medications sold in the Republic of Macedonia
Active ingredients in all such drugs and medications
Manufacturers names and full details
Registration/licence/import licemce owners
ATC drugs and drugs in the health benefits package/basket (positive list)
Drugs on general sale (including registration/licence number and the name in
Macedonian/Albanian)
New drugs (including dosage) approved in the last 2 years
Cancelled registrations/licences
Veterinary drugs
Classification of drugs by groups (e.g.: cytotoxic drugs)
To create another registry that would include the following data:

-
The statistical results of all drug treatments as well as the outcomes of all
experiments conducted on humans.
This means that anyone could look and see what drugs are effective, which ones are not,
and which ones are known to have possibly dangerous side effects.
Publication of treatment and trial results would be mandatory. Hospitals, clinics,
importers, manufacturers, and pharmaceutical companies would all be legally bound to
make such data public.
Both registries will be available on the Internet and accessible to the public at no charge.
()-
Example of the Israel Drug Registry:
http://www.health.gov.il/units/pharmacy/trufot/index.asp?safa=e
, 01.09.2009
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Sam Vaknin
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Functions of the pharmaceutical authority
(
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( .), .)
Purchasing of drugs and medications is fragmented. Procurement used to be centralized (in the Health
insurance Fund).
()-
Conversations with the management of the Health Insurance Fund and the Bureau of Drugs in the
Ministry of Health.
( ) - ,
, , , ( .),
.
Procurement of medicines to be done by an autonomous central purchasing agency,

supervised by a public committee (drug regulatory authority) aided by outside auditors.
All procurement of drugs and medications will be done via international tenders.
The agency will submit its reimbursement rates for drugs on the PLD to external audit in order
to accurately reflect pharmacists overhead costs. At the same time, the profit margins on all
drugs, whether on the PLD or not, will be regulated.
This agency should be separate from the Health Insurance Fund and the Ministry of Health.
This agency will also maintain national drug registries. It will secure volume discounts for
bulk purchasing and transparent, arms-length pricing.
()-
Centralized procurement of medicines and drugs on the national level is common in many
countries:
http://www.nap.edu/openbook.php?record_id=11017&page=112
http://www.pharmj.com/pdf/hp/200612/hp_200612_england.pdf
http://www.haiweb.org/medicineprices/manual/medpricesAttachements/MonitoringGuideMay2008.do
c
http://health.eac.int/index.php?option=com_docman&task=doc_download&gid=13&Itemid=6
http://www.fhi.org/en/HIVAIDS/pub/guide/ecrhndbk/mod7.htm
http://www.ajhp.org/cgi/content/full/66/5_Supplement_3/s20
http://www.gov.bw/docs/oag_medical_report.pdf
http://books.google.com/books?id=YGU_Bo4950UC
http://www.whoindia.org/LinkFiles/Commision_on_Macroeconomic_and_Health_Access_to
_Essential_Drugs_and_Medicine.pdf
:
In some countries, this central agency encourages rational drug prescribing by instituting a
mixture of GP (general practitioner) and PHC (primary healthcare) incentives and
penalties, or a fundholding system: budgets are allocated to each GP for the purchase of
drugs and medications. If the GP exceeds his/her budget, s/he is penalized. The GP gets to
keep a percentage of budget savings. Prescription decisions will be medically reviewed to
avoid under-provision.
, 01.09.2009
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Ownership (and operation) of pharmacies and laboratories in hospitals and medical centers
(
, , , ,
( .), .)
While most pharmacies in Macedonia have been privatized, pharmacies in hospitals and clinical centers
still operate as units within their respective institutions and organizations.
This situation the lack of private ownership and the profit motive may be one of the reasons for
wasteful over-subscription of medications and drugs and other supply-driven practices.
Additionally, the existence of publicly-owned pharmacies may yield to misallocation of scarce
economic resources and situations involving unfair competition.
()-
Conversations with functionaries in the Bureau of Drugs in the Ministry of Health.

( ) - ,
, , , ( .),
.
To privatize all the pharmacies in all the public hospitals and clinical (medical) centers
throughout the country.
The newly-privatized pharmacies will contract with the hospitals and the clinical centers to
provide them and their patients with competitively-priced medications and drugs on a timely
basis.
Contracts will be subject to annual review, public tenders, and termination.
()-
http://jhm.sagepub.com/cgi/content/abstract/8/1/129
http://www.hotfrog.com.au/Companies/Harrisons-Darwin-Private-Hospital-Pharmacy
http://books.google.com/books?id=LuB1heiHTJsC
Opposing view (hospital pharmacies should NOT be privatized):

http://www.usm.my/dsap/journal/article/august2009/Article7.pdf
:
The privatization process should be gradual and careful and supervised by foreign experts.
Hospital pharmacies are not like street pharmacies: they carry specialized and expensive
medicines and offer special services.
, 01.09.2009
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Sam Vaknin
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070-565488
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Retail medicine
(
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( .), .)
GPs in Macedonia work in dedicated primary healthcare facilities and clinics. While there is
nothing in the law to explicitly prohibit or forbid retail medicine, the licensing and financial
requirements stipulated in Macedonias legislative and regulations are such that only sizable
outfits can actually operate and offer healthcare services.
()-
Discussions with doctors and:
Health systems in transition: Macedonia (2006)

Available in the eLibrary here: http://sc-healthreform.org
( ) - ,
, , , ( .),
.
To allow individual doctors (including retired MDs) to open one-man offices or mini-clinics
(with a maximum of three doctors) in shopping malls and other public venues. These retail
clinics can also be mobile (based in a minivan).
The mini-clinics will be licensed to offer only basic treatments and interventions as well as
preventive medicine and first aid: measure blood pressure and pulse; measure blood
glucose; administer ECG and possibly echocardiography; apply anti-smoking therapies; treat
conditions such as common cold; prescribe and dispense analgesics and antipyretics; apply
CPR and defibrillation; and so on.
()-
Retail medicine is common in many countries (e.g., the USA, India, China, Israel).
Read these:
http://www.google.com/search?q=retail+medicine
http://www.google.com/search?hl=en&q=retail+clinics
:
Retail medicine has numerous advantages and no known disadvantages:
It provides medical services at a low cost to the poor and the disenfranchised;
It reaches out to the population instead of forcing the sick to seek their GPs;
It removes the burden of routine interventions and treatments from the shoulders of
primary, secondary, and even tertiary healthcare facilities;
It provides crucial gatekeeping functions at a fraction of the cost of established
facilities;
It allocates scarce economic resources more efficiently by swiftly responding to
supply and demand pressures;
It caters to the needs of non-urban populations more effectively than the alternatives.
, 05.10.2009
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.
Macedonias Social and Cultural Values as

Guidelines for Health System Reform
By: Sam Vaknin
There are as many health systems and models as there are countries. This is because
healthcare is a public good and, thus, reflects the social and cultural values of the
societies that design and adopt them.
I. Social and Cultural Values
We should distinguish social and cultural values from economic and operational values.
Efficiency, for instance, is an economic-operational value, not a social-cultural one.
Equity (though often considered an economic criterion) is actually a normative socialcultural value whose pursuit often comes at a steep economic price and is non-efficient.
Health systems can be categorized according to which class of values they emphasize: the
American (US) health system is geared to satisfy economic-operational requirements
while European health systems place a premium on social-cultural ones.
In this paper, I deal with three social-cultural constraints: solidarity, equity (vs. inequity),
and progressivity (vs. regressivity), including the issue of redistribution. There are many
other social-cultural values that I do not cover in here: fairness, dignity, and choice come
to mind. Finally, I provide a discussion of the concept of "public good" in current
literature.
II. Social Solidarity
Social solidarity is both vertical and horizontal and both contemporaneous and intergenerational.
Members of the same society ought to strive to share the burdens of the sick, the young,
the poor, the weak, and the disenfranchised. This is usually done by transferring
economic resources among population groups and by promoting fairness. At the same
time, people should feel morally obliged to provide aid and succor to their peers and
relatives, neighbors and colleagues, compatriots and friends by encouraging social
cohesion and sharing of responsibilities (for instance, within the nuclear or extended
family).
Such attitudes cut also across generations, so that the current generation is held
answerable to future generations for their well-being and the reasonable fulfillment of
their needs. This "solidarity across time" is at the foundation of most modern pension
systems, for instance.
Some health systems are explicitly founded on social solidarity, others only implicitly so.
However, there are health systems which partly or altogether eschew social solidarity as a
defining principle and a determinant.
Health systems of the first type are usually universal, uniform, and comprehensive. They
rely on tax revenues or a social insurance scheme or on a combination of both. Health
systems of the second type depend on private insurance, are not universal, and are more
diverse in the types of medical coverage offered (albeit this diversity comes with
increased transaction costs).
Introducing means-testing (asking the rich to pay additional or higher user-fees, coinsurance, deductibles, or participation) does not affect social solidarity. On the contrary,
taxing the rich to pay for the poor is the very essence of a solidary state. Similarly,
introducing safety nets (such as voucher systems) is a solidary act. Whether such an
approach is ideal, from the economic point of view is outside the scope of this paper.
III. Equity
There are three types of equity:
1. Equity of financing (affordability): can the poor, the unemployed, the homeless, the
old, the young, the weak, the chronically sick, and the disenfranchised afford the
healthcare offered? Are the expenses they have to incur catastrophic? Do certain
expenditures (for instance user fees, or participation in the costs of medications) deter
utilization? Do the payments reflect one's income or wealth, are they "fair"?
2. Equity of utilization (accessibility) is comprised of two components:
(i) Vertical equity: Can everyone access healthcare services and facilities and make use
of them easily and equitably (on the same terms and conditions, regardless of income)?
This type of equity correlates with the progressivity of the health system (see chapter
below.)
(ii) Horizontal equity is the extent to which people with identical incomes are treated
similarly. This type of equity correlates with the redistributive aspects of the health
system (see chapter below.)
3. Equity of quality: Is the level of quality healthcare provided in all regions of the
country and in rural vs. urban settings the same?
Medical savings accounts adversely affect equity because they skew economic
incentives and the allocation of healthcare resources towards the rich and men. Women
and the poor cannot save as much and have greater healthcare needs.
User fees may actually increase equity under certain conditions: (1) That the income they
generate is targeted at the poor and the chronically ill (2) That the poor and chronically ill
are exempted from paying them and (3) That the level of funding from other sources
(taxes, contributions) is not reduced.
Devolution of healthcare services may create inequity as rich municipalities are able to
spend more on healthcare than poorer ones. The government should create an
equalization fund or use general tax revenue to transfer resources from wealthier to more
destitute regions. Pooling of funds among regional or competing funds guarantees more
equity.
Regional health insurance funds increase inequity as they are faced with the same
problems described under "Devolution" above: poorer regions cannot compete with
richer regions on the purchasing and provision of healthcare.
Social health insurance and tax-based healthcare financing maintain the same level of
equity of financing. Negative co-payments (no-claim bonuses); income caps (or ceilings)
on contributions; the inclusion of dependants in the coverage at no additional cost; and
the extent of cost-sharing determine how equitable and progressive the social insurance
scheme is.
The introduction of private health insurers and voluntary health insurance to compete
with the statutory health insurance fund or even merely to complement or supplement it
would increase inequity especially with regards to women and low-income groups.
Women are usually charged higher premiums though their incomes are often lower than
men's.
Risk-rated premiums decrease equity as they discriminate against the already ill and may
deter them from seeking care. On the other hand, exemptions granted to specific
population groups (and not based on income) increase inequity: the sick and the old may
gain better access to quality healthcare than other, equally deserving beneficiaries.
Risk-adjusted (e.g., DRG) capitation systems enhance vertical equity.
Informal payments dramatically decrease equity because: (1) Access is restricted to
those who can afford to pay (2) Payments terms and levels are arbitrary and changeable
(3) Certain services and goods are rendered unaffordable (4) Public, more equitable
services suffer (5) Lack of regulation creates variable quality of healthcare, fiscal
irresponsibility, and lack of fairness.
IV. Progressivity and Redistribution
Though progressivity (and redistribution) are often conflated with equity, these are two
separate issues. We can imagine a progressive system of health funding which is not
equitable and can conceive of the reverse as well.
We say that healthcare funding is progressive when rich people pay more (as a proportion
of their income) than poorer folk; the system is proportional when both rich and poor use
up the same proportion of their disposable income to defray healthcare costs; it is

regressive when poor people pay a higher portion of their income than the affluent to
consume healthcare goods and services.
Progressivity largely determines whether there is a redistribution of resources from the
rich to the government (not necessarily to the poorer segments of the population). How
extensive and ubiquitous the redistribution from the government to the poor is depends
on how involved the state is in the economy (in other words, it depends on the tax
burden, the incidence of public spending, and on the absolute level of tax revenue, among
other factors).
Tax-funded healthcare is progressive (assuming that most of the tax revenue is
generated from direct taxes, not from consumption or indirect taxes which are
regressive). It is less progressive than social health insurance when: (1) Indirect taxes
constitute a major source of budget revenue and (2) The informal sector that does not pay
taxes is large.
Earmarked ("sin", or hypothecated) taxes on alcohol, tobacco, motor vehicles, and
medicines are regressive (though their regressivity is intentional as they are intended to
deter consumption).
Social health insurance is generally less progressive than a tax-based system because it
does not tax income from interest, rent, capital gains, and non-wage types of income.
This is especially true when there is an income ceiling (above which contributions are not
levied); when there are no exemptions for low-income groups; and when the rates are
uniform regardless of the size of the wages they are levied on.
Still, Social health insurance is more redistributive than private insurers: (1) It charges
uniform or community rates (2) It insures dependants at no extra cost (3) The length and
extent of healthcare goods and services provided is not related to previous or cumulative
contributions (4) It caters to the needs of the old (inter-generational redistribution). Still,
this type of redistribution has negative economic effects (which are outside the scope of
this paper).
The introduction of private health insurers to compete with the statutory health
insurance fund is neutral as far as progressivity goes. Only where private insurance has
supplanted social insurance as the main source of funding did regressivity increase
markedly. Risk-rated premiums, however, are regressive.
Medical savings accounts have no regressive or progressive effect as they do not
redistribute income. All types of savings are neutral as far as progressivity or regressivity
go.
User fees are highly regressive, regardless of any supplementary policy measures (such
as exemptions). Only the introduction of means-testing can reduce regressivity.
Informal payments are highly regressive as the poor are asked to pay a high proportion
of their income or assets (even when they are charged less than richer patients).
Tax deductibility of healthcare expenses is highly regressive (people with higher income
tax rates receive a higher deduction).
V. Public Goods, Private Goods
Contrary to common misconceptions, public goods are not "goods provided by the
public" (read: by the government). Public goods are sometimes supplied by the private
sector and private goods - by the public sector. It is the contention of this essay that
technology is blurring the distinction between these two types of goods and rendering it
obsolete.
Pure public goods are characterized by:
I. Nonrivalry - the cost of extending the service or providing the good to another person
is (close to) zero.
Most products are rivalrous (scarce) - zero sum games. Having been consumed, they are
gone and are not available to others. Public goods, in contrast, are accessible to growing
numbers of people without any additional marginal cost. This wide dispersion of benefits
renders them unsuitable for private entrepreneurship. It is impossible to recapture the full
returns they engender. As Samuelson observed, they are extreme forms of positive
externalities (spillover effects).
II. Nonexcludability - it is impossible to exclude anyone from enjoying the benefits of a
public good, or from defraying its costs (positive and negative externalities). Neither can
anyone willingly exclude himself from their remit.
III. Externalities - public goods impose costs or benefits on others - individuals or firms outside the marketplace and their effects are only partially reflected in prices and the
market transactions. As Musgrave pointed out (1969), externalities are the other face of
nonrivalry.
The usual examples for public goods are lighthouses - famously questioned by one Nobel
Prize winner, Ronald Coase, and defended by another, Paul Samuelson - national
defense, the GPS navigation system, vaccination programs, dams, and public art (such as
park concerts).
It is evident that public goods are not necessarily provided or financed by public
institutions. But governments frequently intervene to reverse market failures (i.e., when
the markets fail to provide goods and services) or to reduce transaction costs so as to
enhance consumption or supply and, thus, positive externalities. Governments, for
instance, provide preventive care - a non-profitable healthcare niche - and subsidize
education because they have an overall positive social effect.
Moreover, pure public goods do not exist, with the possible exception of national
defense. Samuelson himself suggested [Samuelson, P.A - Diagrammatic Exposition of a
Theory of Public Expenditure - Review of Economics and Statistics, 37 (1955), 350-56]:
"... Many - though not all - of the realistic cases of government activity can be
fruitfully analyzed as some kind of a blend of these two extreme polar cases" (p. 350) mixtures of private and public goods. (Education, the courts, public defense, highway
programs, police and fire protection have an) "element of variability in the benefit that
can go to one citizen at the expense of some other citizen" (p. 356).
From Pickhardt, Michael's paper titled "Fifty Years after Samuelson's 'The Pure
Theory of Public Expenditure': What Are We Left With?":
"... It seems that rivalry and nonrivalry are supposed to reflect this "element of
variability" and hint at a continuum of goods that ranges from wholly rival to wholly
nonrival ones. In particular, Musgrave (1969, p. 126 and pp. 134-35) writes:
'The condition of non-rivalness in consumption (or, which is the same, the existence of
beneficial consumption externalities) means that the same physical output (the fruits of
the same factor input) is enjoyed by both A and B. This does not mean that the same
subjective benefit must be derived, or even that precisely the same product quality is
available to both. (...) Due to non-rivalness of consumption, individual demand curves
are added vertically, rather than horizontally as in the case of private goods".
"The preceding discussion has dealt with the case of a pure social good, i.e. a good the
benefits of which are wholly non-rival. This approach has been subject to the criticism
that this case does not exist, or, if at all, applies to defence only; and in fact most goods
which give rise to private benefits also involve externalities in varying degrees and
hence combine both social and private good characteristics'.
VI. Is Healthcare a Public Good?
Healthcare used to be a private good with positive externalities. Thanks to technology
and government largesse it is no longer the case. It is being transformed into a nonpure
public good.
In theory, all forms of healthcare are exclusionary, at least in principle. It is impossible to
exclude a citizen from the benefits of his country's national defense, or those of his
county's dam. It is perfectly feasible to exclude patients from access to healthcare. This
caveat, however, equally applies to other goods universally recognized as public. It is
possible to exclude certain members of the population from being educated, for instance or from attending a public concert in the park.
Public goods require an initial investment by the user or consumer (the price-exclusion
principle, demanded by Musgrave in 1959, does apply at times). One can hardly benefit
from the weather forecasts without owning a radio or a television set - which would
immediately tend to exclude the homeless and the rural poor in many countries. It is even
conceivable to extend the benefits of national defense selectively and to exclude parts of
the population, as the Second World War has taught some minorities all too well.
Similarly, user-fees are required in order to benefit from certain types of healthcare.
Nor is strict nonrivalry possible - at least not simultaneously, as Musgrave observed
(1959, 1969). Our world is finite and so is everything in it (the principle of scarcity). The
economic fundament of scarcity applies universally - and public goods are not exempt.
There are only so many people who can attend a concert in the park, only so many ships
can be guided by a lighthouse, only so many people defended by the army and police.
This is called "crowding" and amounts to the exclusion of potential beneficiaries (the
theories of "jurisdictions" and "clubs" deal with this problem).
Nonrivalry and nonexcludability are ideals - not realities. They apply strictly only to the
sunlight. As environmentalists keep warning us, even the air is a scarce commodity.
Technology gradually helps render many goods and services - books and education, to
name two - asymptotically nonrivalrous and nonexcludable.
From the book "Funding healthcare: Options for Europe" (p. 216):
Substantial research shows that improving quality, efficiency and equity critically
depends on supportive policy contexts and policy measures, and government capacity to
implement policy effectively (Gilson et al. 1995; Kutzin 1995; Nolan and Turbat 1995;
Bennett et al. 1996; Gilson 1997). Mills et al. (2001) identify the following as being the
most critical:
Decentralized retention of revenue to provide incentives to collect fees and to allow
local improvements in quality.
Information systems for accounting, auditing and financial management that support
management at all levels.
Financial management skills, especially at sub-national levels where revenue is
managed.
Well-motivated staff with balanced financial incentives that encourage adopting new
charging and management practices but discourage overzealous or illegal charging.
A well-designed and appropriate exemption system, with information that permits the
target group to be reached.
Central leadership, training and guidance on implementing exemption policy and using
revenue.
Maintaining government funding levels to ensure that fee revenue is additional and can
be used to improve quality and motivate staff.
Public willingness and ability to pay.

Bibliography
Buchanan, James M. - The Demand and Supply of Public Goods - Library of Economics
and
Liberty
World
Wide
Web:
http://www.econlib.org/library/Buchanan/buchCv5c1.html
Ellickson, Bryan - A Generalization of the Pure Theory of Public Goods - Discussion
Paper Number 14, Revised January 1972
Heyne, Paul and Palmer, John P. - The Economic Way of Thinking - 1st Canadian edition
- Scarborough, Ontario, Prentice-Hall Canada, 1997
Mossialos, Elias et al. (Eds.) - Funding healthcare: Options for Europe - Buckingham and
Philadelphia, Open University, 2002
Musgrave, R.A. - Provision for Social Goods, in: Margolis, J./Guitton, H. (eds.), Public
Economics - London, McMillan, 1969, pp. 124-44.
Musgrave, R. A. - The Theory of Public Finance -New York, McGraw-Hill, 1959.
Pickhardt, Michael - Fifty Years after Samuelson's "The Pure Theory of Public
Expenditure": What Are We Left With? - Paper presented at the 58th Congress of the
International Institute of Public Finance (IIPF), Helsinki, August 26-29, 2002.
Samuelson, Paul A. and Nordhaus, William D. - Economics - 17th edition - New-York,
McGraw-Hill Irian, 2001
Samuelson, Paul A. - The Pure Theory of Public Expenditure - The Review of Economics
and Statistics, Volume 36, Issue 4 (Nov. 1954), 387-9

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POINTS FOR THE AGENDA OF THE STEERING COMMITTEE FOR THE

ADVANCEMENT of HEALTHCARE in the REPUBLIC OF MACEDONIA

Universal healthcare vs. selective provision, coverage, and delivery (for

Hopefully, the new legal environment will:

communication and education, physical comfort, emotional support and

COST and VOLUME CONTRACTS

Waiting Times Guarantee

Group practices and networks (for continued, around-the-clock services)

Example of such financial incentives:

Physicians will be entitled to see patients who receive services free-of-cost

(II23) Allow hospitals to administer packages of outpatient services and be reimbursed

(III13) Lease (Romania since 1994)

(III17) Franchising (Kenya, Pakistan, Philippines)

(IV1) Voucher System (Nicaragua)

(VI3) Devolution (Finland)

(VI11) SPECIFIC PROJECTS

(VI16) National Health Accounts Institute

, July 24, 2009

To establish an Inter-Ministerial Council for Health with the following members:

The Ministry of Health should publish online and in print form:

Extend the current central registry to include:

, July 24, 2009

Recommend to establish a public, permanent Committee to recommend what should be

, July 29, 2009

A special Law should be authored.

(V16) Encourage Medical e-Tourism (inbound telemedicine)

, July 29, 2009

, July 29, 2009

(See the Notes zabeleski - section for reasons)

, July 19, 2009

To allow the formation of managed care organizations:

HMOs (Health Maintenance Organizations);

Other group healthcare management organizations

(For details, see articles below)

All tobacco products

All tobacco products

, July 19, 2009

Other insurance funds (medical savings account)

Does not exist.

Medical Savings Accounts (MSAs)

, July 19, 2009

National health accounts unit

To establish a National Health Accounts Institute.

Macedonia should go on having a single, statutory Health Insurance Fund.

This lamentable situation leads to under-investment in infrastructure, technology, and

, July 19, 2009

, July 19, 2009

To legislate to allow commercial insurance firms to offer only complementary health

Healthcare Reform Checklist

No such system in Macedonia.

recipients ("Voucher Beneficiary Health Cards")

No fiscal ill effects (no budgetary deficits)

, July 19, 2009

Pharmaceutical companies (manufacturers, importers, and pharmacies alike) maintain

Receive financial inducements and benefits (monetary commissions, equipment) to

Serve as consultants and advisors to the industry;

To criminalize the receipt of financial inducements and benefits (monetary commissions,

Macedonia has no national or public drug registry.

To create a registry that would include the following information:

To create another registry that would include the following data:

Procurement of medicines to be done by an autonomous central purchasing agency,

Conversations with functionaries in the Bureau of Drugs in the Ministry of Health.

Opposing view (hospital pharmacies should NOT be privatized):

Health systems in transition: Macedonia (2006)

Macedonia's Healthcare Committee

Macedonia's Healthcare Committee