The Health Insurance Fund (Tervisekassa) faces a shortfall of nearly €190 million in next year's budget, and discussions are ongoing within the government about how, and to what extent, to cover the deficit.

ERR reported last week that Minister of Health Riina Sikkut (SDE) plans to amend the law so that funds could be drawn from the Health Insurance Fund's reserves, which amount to nearly €700 million. However, Minister of Finance Jürgen Ligi (Reform) is skeptical of this plan and expects all sectors to reduce their expenditures.

"It's very convenient to say that we have a reserve, let's just spend it," Ligi commented.

Sikkut has stated that at least part of the deficit must be covered, as it is not feasible to cut the Health Insurance Fund's budget by the full €190 million. The question now is to what extent the deficit will be covered.

Pille Banhard, a member of the Health Insurance Fund's management board, said the fund hopes that no further cuts will be necessary. She noted that the share of healthcare funding in the budget is already lower in Estonia compared to most other European Union countries. Additionally, the Health Insurance Fund has already saved €21 million in next year's budget.

The out-of-pocket healthcare costs for Estonian citizens are also significantly higher than in other parts of Europe. According to the Health Development Institute's (TAI) annual report, in 2022, out-of-pocket expenses accounted for 23 percent of healthcare costs in Estonia, compared to the EU average of 15 percent.

Banhard mentioned that while the Health Insurance Fund's leadership has discussed potential cuts with the ministry, there are no clear plans yet, as they are waiting to see if, and to what extent, cost-cutting will even be necessary.

The specifics of the cuts will depend on how much of the deficit the government decides not to cover. Primarily, efforts would be made to save money without reducing the volumes of healthcare service contracts. Reducing these contract volumes would mean, for instance, that less funding would be allocated for doctor visits, ambulance calls or hospital procedures.

Healthcare service volume would stay the same if minor cost-cutting needed

If the cost-cutting task were smaller, say €10 million, the Health Insurance Fund would primarily focus on reductions that would not involve cutting healthcare service contract volumes, according to Pille Banhard.

One potential way to save money, she noted, would be to fund fewer new services. For example, the list of healthcare services for next year will be submitted to the Health Insurance Fund's council for approval this fall, and then forwarded to the government for final confirmation. The total annual budget impact of all the services currently planned for inclusion is around €9 million, Banhard said.

The healthcare services list includes all treatments, procedures, necessary hospital medications and other items covered under the health insurance package, along with their prices and payment conditions. The Health Insurance Fund covers these services for medical treatments provided to insured individuals.

In January, ERR reported that the Ministry of Social Affairs envisioned expanding healthcare services to include more psychosocial services, such as spiritual care or creative therapies, as well as preventive activities like consultations at pharmacies or nutrition counseling.

"Right now, new services are prepared for next year that we would like to add to the list. However, one option would be to decide not to include all of these services," Banhard explained.

Another area where savings could be found is by canceling planned prevention projects. "For example, we have been piloting lung cancer screening in Tartu County, which we intended to expand to additional counties next year," Banhard said.

Banhard also mentioned that family doctors and specialists should increasingly be encouraged to conduct e-consultations and remote appointments, as these options are more cost-effective for taxpayers.

Additionally, a review of the family doctors' quality system could be another way to reduce costs without cutting contract volumes. This system is designed to incentivize family doctors to be more proactive in disease prevention and to monitor patients with chronic illnesses more effectively.

"This wouldn't have a significant impact, but it's one of those areas where we are going to scrutinize every million within the larger system. These individual millions might ultimately allow us to avoid cutting service providers' contract volumes," Banhard explained.

Banhard mentioned that another option could be not covering the 2 percent VAT increase for service providers, which is set to take effect in the middle of next year. This would save the Health Insurance Fund nearly €6 million over the following six months.

"However, if the service price doesn't cover the service providers' costs, they will have to find that money elsewhere," she explained.

Banhard also discussed with the minister the possibility of increasing the doctor visit fee, which could help hospitals manage better if the Health Insurance Fund does not fully cover certain price increases. Currently, the visit fee is set at €5 by ministerial decree.

She acknowledged, however, that the higher the visit fee, the less access people with lower incomes would have to medical care.

"One possibility would be to differentiate by keeping the visit fee the same for children and pensioners, while raising it for the rest of the population," Banhard suggested.

In the case of more significant cuts, non-emergency planned treatments would be reduced

Pille Banhard explained that in the case of larger budget cuts, a realistic savings measure would be to reduce contract volumes with healthcare service providers. Healthcare services account for nearly 80 percent of the Health Insurance Fund's budget, amounting to a little over €1.9 billion next year.

Healthcare services are provided by family doctors, specialists, dentists, hospitals, midwives, school nurses and emergency services, among others. The remaining portion of the budget largely goes toward subsidized medications and sickness benefits.

"In such a case, planned treatments that are not deemed urgent by medical professionals would be postponed. These are situations where not seeing a doctor within two or three days does not pose an immediate threat to a person's life, such as knee or hip surgeries. It would certainly reduce the patient's quality of life, but it wouldn't be life-threatening. These are the budget lines where doctors and hospitals would likely consider extending waiting times if necessary," Banhard said.

The Health Insurance Fund has estimated that reducing specialist care contract volumes by €10 million would increase waiting times for about 10,000 people. This would affect around 8,000 outpatient visits and between 1,500 to 2,000 hospital visits.

Banhard did not specify which services would be reduced first, as much remains uncertain. She noted that decisions on which services to cut would ultimately be made in collaboration with service providers.

"In fact, service providers' contract volumes already decreased this year. While our budget grew, the number of treated cases dropped by 1.8 percent. This indicates that service prices have already risen at a faster pace this year," Banhard added.

Pille Banhard refrained from speculating on how large the Health Insurance Fund's budget cuts would need to be before healthcare service volumes, such as planned treatments, would have to be reduced. She explained that this depends on multiple factors, including inflation and salary increases for doctors, nurses and caregivers.

"There are several key factors to consider – how much of the cost increases in service prices will go unfunded, or how many new services will be left off the service list. The collective bargaining agreement between healthcare workers and employers will also play a significant role, as we must account for wage increases in our pricing," Banhard noted.

Healthcare workers and employers met for the first time at the end of August to discuss wages, with another meeting scheduled for September 12. Urmas Sule, chairman of the board of the Estonian Hospital Association, has stated that personnel costs make up 60 percent of hospital budgets.

"At the same time, healthcare services cannot be provided without doctors, nurses or caregivers. If their salaries don't meet expectations, there is a greater likelihood that they will move to the private sector, and we will lose healthcare workers from the system," Banhard emphasized.

Health Insurance Fund reserve totals €700 million

The current balance of the Health Insurance Fund's reserve stands at approximately €700 million, of which €500 million consists of undistributed profits from previous periods.

According to the current state budget law, the Health Insurance Fund is facing a shortfall of €147 million in next year's budget. However, based on the Ministry of Finance's summer economic forecast, the deficit is expected to increase by an additional €60 million due to lower-than-expected tax revenues, bringing the total shortfall to nearly €210 million.

Through decisions already made or by adjusting its operations, the Health Insurance Fund is set to improve efficiency by €21 million next year. However, covering the remaining €189 million deficit would require additional government funding or the use of the Health Insurance Fund's reserves.

Nearly one-third of the Health Insurance Fund's budget shortfall is due to services transferred to the institution from the state budget in recent years, which either lacked financial backing or were underfunded.

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