2.2 Historical background

The tradition of the Bismarck system of social and health insurance dates back to the 19th century. The territory of Slovakia was a Hungarian part of the Austro-Hungarian Empire until 1918. Hungary was one of the first European countries to introduce compulsory health insurance in 1891. The First World War resulted in the break-up of the Austro-Hungarian Empire and the founding of Czechoslovakia. The eastern, former Hungarian part of the country (Slovakia and Carpathian Ruthenia) was less developed than the western part. Low accessibility of health services, shortage of health workers, lack of health education, low standards of hygiene, as well as a high incidence of communicable diseases created new challenges for health policy-makers.

After Czechoslovakia became independent in 1918, the Bismarckian health system inherited from the Empire was expanded and refined. In 1919, legislation was adopted that extended compulsory sickness insurance coverage to the family members of blue-collar workers and to all wage-earners, thus including agricultural workers for the first time. In 1924, landmark social insurance legislation led to the creation of the Central Social Insurance Fund (Ústřední sociální pojišťovna; ÚSP), which consolidated the hitherto fragmented system of social insurance into a single institution. The Central Social Insurance Fund was responsible both for administering a new old-age and invalidity insurance scheme for workers and for supervising the sickness funds. The 1924 legislation also limited the number of sickness funds to approximately 300 and increased the depth of benefits, particularly with regard to sick pay (Bryndová et al., 2009). At the same time, the sickness funds were reclassified as health insurance funds, a change in nomenclature that reflected a shift in expenditure from an emphasis on sick pay to health care benefits. Although they remained self-governing in character, the health insurance funds were required by law to perform a range of duties on behalf of the Central Social Insurance Fund, such as collecting contributions for old-age and invalidity insurance (Bryndová et al., 2009). In 1925, sickness insurance, which included medical benefits, was introduced for public employees. By 1938, more than half of the population of the Czechoslovak Republic was covered by compulsory health insurance (Niklíček, 1994; Nečas, 1938). Investment in education and improvement in standards of hygiene and hygiene education resulted in a continuous decline of communicable diseases. In 1934, cardiovascular diseases became the leading cause of death in Czechoslovakia (Niklíček, 1994).

2.2.1 The period 1945–1989

The Yalta Conference on the post-war arrangement of Europe in February 1945 signified a virtual division of Europe. Following the Second World War, Czechoslovakia fell under strong economic and political influence of the USSR, which had important repercussions for the health system. Legislation from 1948 on national insurance unified all types of insurance, under the Central National Insurance Fund. The Ministry of Social Care took over the stewardship role, in cooperation with the Ministry of Health and the Ministry of Finance. Sickness and health benefits were adjusted in a Treatment Order, issued by the Central National Insurance Fund.

Legislation adopted in 1951 continued to implement a Semashko-type health care system. The state assumed responsibility for health care coverage and financed it through general taxation. Health care was no longer provided as benefits-in-kind based on SHI. At the same time, all health care providers were nationalized and incorporated into Regional and District Institutes of National Health. Every district had a District Institute of National Health, and every region had a Regional Institute of National Health. District Institutes of National Health consisted of small or mid-sized hospitals, polyclinics and health care centres for outpatient care, along with pharmacies, centres of hygiene, health care centres for the workplace, divisions of emergency and first aid services, and nurseries. Regional Institutes of National Health consisted of larger hospitals, regional health care centres and – in most cases – blood transfusion centres (Bryndová et al., 2009).

Legislation adopted in 1966 completed the process of socialist changes in the health system. Health care facilities were unified in district, regional and local national institutes of health. The state took over full responsibility for financing, planning, management and provision of health care. All citizens were granted health care free of charge.

Improving the population’s health status became a priority in health care and the focus was on combating communicable diseases, mainly tuberculosis. Preventive measures in the 1950s and 1960s proved successful due to intensive promotion and education activities, as well as strict organization of the state and society. The availability in the post-war period of new chemotherapies resulted in a significant improvement in the results of treatment (Solovič et al., 2008).

Primary care was provided by a team of health professionals, GPs, paediatricians, gynaecologists and dentists in a district allocated according to place of residence or workplace. Outpatient and inpatient care was integrated in three types of hospitals with polyclinics. Type I hospitals with a polyclinic with four basic departments (internal medicine, surgery, gynaecology, paediatrics) provided health services to populations of up to 50 000. Type II hospitals, with a larger range of services, provided care for populations of up to 200 000. Type III hospitals with polyclinics, including university hospitals, with complex medical services covered up to 1–1.5 million people.

In 1968, Czechoslovakia became a federal state of the Czech and Slovak Socialist Republics. The Ministry of Health of the Slovak Republic was established and took over responsibility for planning and managing Slovak health care. The centrally planned economy led to inaccurate resource allocation decisions in health care. During the first decades after the Second World War, the system was not able to deal with the growing incidence of lifestyle diseases resulting from improved living standards and standards of hygiene, and success in combating communicable diseases.

In the second half of the 1970s, the technology of health care facilities was becoming outdated. The socialist health system sought to compensate for this by increasing the number of health workers and the number of hospital beds. In other words, focus was laid on the improvement of structural indicators, such as the number of hospital beds and graduated physicians and nurses. This resulted in a health system with a surplus of ambulatory specialist physicians. The role of the GP declined and they were reduced to dispatchers, referring patients for a specialist consultation.

Lack of a scientific base led to slower adoption of modern diagnostic and therapeutic practices. Poor accessibility of innovative pharmaceuticals was compensated by import of generics from other Eastern bloc countries, often produced while infringing patent protections. The deepening gap between health systems in western Europe and eastern Europe can be illustrated by the trend in life expectancy. While in eastern Europe (here excluding the former USSR) life expectancy stagnated for women and decreased for men between 1970 and 1997, at the same time this figure increased by an average of 4.5 years in western Europe (Marmot & Bobak, 2000).

2.2.2 After 1989

The break-up of the USSR and a wave of non-violent revolutions in central and eastern Europe in 1989 also reached Czechoslovakia. Political and social changes resulted in a transformation from a centrally planned economy into a market economy. At the same time, a reintroduction of a social insurance system was taking place, which continued after the peaceful dissolution of Czechoslovakia and the formation of Slovakia in 1993. The unsuccessful experiment with a Semashko-type health system was followed by a return to the Bismarck system.

In 1993, the National Insurance Fund was established to fund health, social and pension insurance. The Act on Health Insurance was adopted a year later. This piece of legislation introduced multiple health insurance funds and an SHI system financed through a combination of contributions paid by the working population and contributions from the state budget on behalf of the economically inactive. In 1997, the number of health insurance funds had reached 13. Subsequent mergers between health insurance funds aiming to fulfil the condition of having a minimum of 300 000 insured stabilized the market.

Most pharmacies and ambulatory physicians went into private practice during the early 1990s. The hierarchical structure of health care had broken down and so did coordination between the inpatient and outpatient sectors. The health care system became fragmented, with a high number of specialized health care providers. The payment mechanism, which was based on a German model, led to growing health expenditure and finally to the introduction of limits for health care services provided.

Until the early 2000s, nearly all hospitals were in state ownership and were established by the Ministry of Health as state contributory organizations. Hospitals suffered from lack of investment and oversupply of health personnel, as well as ineffective management. Cronyism played a decisive role in appointing people to management positions. The inherited structure of hospital beds did not reflect the needs of modern health care, such as progressive medical technologies and a shortened length of stay. The oversupply of acute beds and lack of chronic beds was difficult to correct. Any attempts to reduce the number of hospital beds were opposed by hospitals facing such a reduction as well as local politicians.

The Ministry of Health was responsible for monitoring health insurance and health care provision. The bankruptcy of the health insurance fund Perspektiva in 1999, due to insufficient monitoring, worsened the situation of indebted health care providers. Measures taken in 1999 to bring the crisis under control, such as restricting the hospitalization of non-acute patients and hospital financing based on prospective budgets with historical costs taken into account, were not enough to bridge the gap between revenue and expenditure in the system. In spring 2001, the World Bank drew attention to the unsustainable broad range of free health care in Slovakia. As pointed out in an evaluation report (World Bank, 2001), the Slovak economy could not afford general free-of-charge health care. According to the recommendations of the World Bank, Slovakia had to define a stricter basic benefit package.

Professionals were paid on the basis of age, qualifications and working years – not merit. Discontent regarding the salaries of health workers in hospitals resulted in strikes and protests. The formal increase in wages in 2001 was not backed up with sufficient resources. The economic situation of hospitals was deteriorating and the debts to suppliers and social security funds increased.

Low salaries nurtured corruption and a declining quality of health care provision. The decreasing quality in health care was reported by the Project of Health Care Modernization, prepared by the Ministry of Health in cooperation with the World Bank in order to acquire an US$ 80 million loan (World Bank, 2003). Furthermore, corruption was perceived as one of the most pressing problems in health care – 32% of respondents in December 2002 thought this was a problem (FOCUS, 2002).

In the period 1999–2002, 14 health care facilities were transformed from contributory organizations into non-profit-making organizations. This resulted in the state losing control over the management of these organizations. Well-paid medical services in state-owned health care facilities were privatized with the agreement of the Ministry of Health, mainly in the area of biochemistry and dialysis. This caused a further deterioration in the finances of public hospitals. In 2003, the management of the majority of health care facilities was transferred from the state to regional and local governments, with the exception of the biggest hospitals (type III hospitals with polyclinics and university hospitals) as well as specialized institutions.

Clearing the debts by using non-recurring resources from the privatization of national property could not help the situation. Against this background, comprehensive health reform began and culminated in the adoption of six reform acts in 2004. These acts would later form the basis of the current organization of the system (see sections 6.2 and 6.3).