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Cablegate: Romanian Healthcare Part 3: Private Healthcare Struggles

VZCZCXRO0025
PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBM #0607/01 2130706
ZNR UUUUU ZZH
P 310706Z JUL 08
FM AMEMBASSY BUCHAREST
TO RUEHC/SECSTATE WASHDC PRIORITY 8546
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEAUSA/DEPT OF HHS WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 BUCHAREST 000607

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ECON ELAB EINV PGOV SOCI AMED RO
SUBJECT: ROMANIAN HEALTHCARE PART 3: PRIVATE HEALTHCARE STRUGGLES
TO ESTABLISH A BEACHHEAD

REFS: A) Bucharest 601 B) Bucharest 604

Sensitive but Unclassified; not for Internet distribution.

SUMMARY

1. (SBU) While the public healthcare system remains the primary
source of medical care for the majority of Romanians, it is
under-funded, and the unpredictable quality of care has begun to
lead some wealthier consumers towards the growing private healthcare
sector. Revenues from this private sector are expected to more than
double in the next three years, and the many small players in the
market are expected to consolidate over the next five to ten years.
Prepaid medical service plans are growing in popularity, but they
remain unregulated. Private health insurance growth remains
sluggish due to unclear legislation, the willingness of many private
healthcare users to pay cash, and limited access to facilities that
accept private insurance. Nevertheless, while some clinics and
healthcare plans may expand more rapidly than others, in general,
the use of private insurance, pre-paid medical plans and private
healthcare facilities is expected to continue to grow.

2. (U) This is the third in a three-part series on the Romanian
healthcare sector. Part 1 (reftel A) examined troubles within the
public healthcare system, and Part 2 (reftel B) looked at the
pharmaceutical market. End Summary.

THE GROWTH OF PRIVATE CLINICS

3. (SBU) In light of the dilapidated state of Romania's public
healthcare system, over 30 private clinics and hospitals have sprung
up throughout the country and many more are under construction. The
market for private medical services is expected to reach 350 million
euros in 2008, and 890 million euros by 2011. Compared to the
public healthcare sector, the private sector remains tiny and
heavily concentrated in Bucharest. However, according to a July 3
media report, this is projected to change, so that by 2011, up to 70
percent of private healthcare revenues will be generated outside of
the capital.

4. (SBU) The rapid growth in the private healthcare sector has
attracted investment funds and entrepreneurs. In a meeting with
EconOffs on July 11, Catalin Popa, Chief Operations Officer of
Euroclinic (a well-regarded private facility in Bucharest),
predicted that in five to ten years the small private clinics
cropping up all over the country will consolidate into four or five
national brands. Popa added that safety is the number one reason
patients choose his hospital over a public one. (Comment:
transparent pricing and the absence of "gratuity payments" - more
crudely referred to as bribes - follow closely behind as reasons to
use a private clinic. End Comment.) With regard to safety, clients
perceive that public health facilities do not maintain a sterile
environment, making patients vulnerable to contracting infections.


5. (SBU) According to a study recently conducted by the Euroclinic,
the demographic profile served by private healthcare facilities is
60 percent female, typically between the ages of 25-40, with
salaries of more than 1,000 euros per month. Approximately 30
percent of Euroclinic patients use private insurance. The majority
still pay cash for services, as only 4% of Romanians hold private
health insurance policies.

PRE-PAID PLANS VS. TRADITIONAL PRIVATE INSURANCE

6. (SBU) Along with private healthcare services, pre-paid medical
service plans have entered the market. These are a sort of
quasi-insurance offered through private healthcare clinics and
hospitals. Pre-paid plans are growing more rapidly than private
health insurance in the current market. Essentially, private
healthcare providers market a package of services to employers who
are already required to pay for their employees' occupational
medical checkups (these mandated checkups determine physical
suitability for work). Employers can purchase tax deductible
pre-paid medical services plans for their employees, often for less
than 20 euros per month. The plans include a package of basic
services such as unlimited general practitioner visits and lab tests
at the company's facilities, but only very limited specialist care
and no catastrophic care. Such plans are ideal for private
healthcare providers in that they typically receive payment from
patients twice, first during the monthly pre-payment, and again when
a patient pays out of pocket to receive specialist or catastrophic
care at the company's private clinic. However, while these plans
offer great deals for employers and advantages for private
healthcare companies, employees are often unaware of the limits of
the care offered under the plans. For now, such plans remain
entirely unregulated by the Government.

7. (SBU) Meanwhile, private insurance is expanding at a much slower
rate. The primary reason is that although private insurance is

BUCHAREST 00000607 002 OF 002


legal, its exact role vis-a-vis the public system has not been
distinctly defined. For now, public and private health insurance
schemes run in parallel. For private health insurance providers
this has created uncertainty, while for would-be consumers it has
dampened their enthusiasm to enter the market. Euroclinic's Popa
foresees that in the next three years, the legislation will be
clarified and private insurance will most likely be used as a
supplement for an individual's public health insurance coverage.

8. (SBU) A second reason for slow growth is that, for current
private healthcare users, it is still reasonably inexpensive to pay
out-of-pocket for services. This will begin to change, as
healthcare costs are expected to rise faster than the rate of
inflation. As costs increase, private healthcare users will be
forced to carefully evaluate alternatives, which include either
returning to the public healthcare system or acquiring sufficient
private insurance to cover higher costs. Thirdly, because private
healthcare networks are so small, many would-be clients have no
access to an in-network clinic near home and thus no real reason to
purchase private health insurance.

COMMENT

9. (SBU) As improvements continue to lag in the public healthcare
sector, rising incomes will encourage more and more urban Romanians
to seek treatment in private facilities, where most clients still
pay out of pocket. As healthcare costs rise faster than inflation,
however, Romanians will be forced to seek other payment
alternatives. For now, pre-paid plans serve as a distraction from
comprehensive private health coverage and as a stop-gap measure
compensating for the poor quality of the public system.
Increasingly, demand for private insurance will rise in a market
frustrated by poor quality care.

10. (SBU) A key competitive question for the future is whether the
demand for better care will result in an expanded and improved
public delivery system that fulfills its stated goal of providing
non-discriminatory care, or whether the demand will be met by the
market. Efforts by the Government to decentralize public systems by
empowering local jurisdictions to run hospitals may be a first step
toward a more market-oriented solution in the future for Romania.
EU attention to the problem may help as well, but for now Romania
appears to be trying to do too much with too few resources and
failing to provide care at the appropriate level. While on paper
there are no gaps in the public health insurance system, in practice
the goal of universal coverage is not being met. End Comment.

TAUBMAN

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