This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 VIENNA 000335 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EIND ETRD ECON BEXP AU
SUBJECT: AUSTRIAN HEALTH CARE REFORM: SMALL STEP TOWARDS 
"SUSTAINIBILITY" 
 
REF: 04 VIENNA 4451 
 
 
SUMMARY 
------- 
¶1.  (SBU) On January 1, the GoA launched the first steps of 
a comprehensive health care reform.  The reform aims to slow 
exploding costs, which now represent 9% of GDP.  The reform 
includes the establishment of centralized Health Care 
Agencies, which should reduce the complex regional 
bureaucratic health care system.  The GoA hopes the reform 
will guarantee the sector's financial sustainability through 
anticipated savings of Euro 300 million annually and an 
increase of another Euro 300 million annually in individual 
contributions.  One independent analyst opined that while 
the GoA reforms aim to reduce spiraling costs, an equally 
important aim of the center-right government is to limit the 
influence of states and labor unions in the health care 
sector.  End Summary. 
 
 
RISING COSTS WITHIN A COMPLEX, BUREAUCRATIC SYSTEM 
--------------------------------------------- ----- 
¶2.  (U) The Austrian health care system is facing increasing 
financial pressures.  Since the end of World War II, a 
complex system has evolved with a multitude of stakeholders, 
including all nine state governments and various 
governmental social security companies based on professional 
affiliations (e.g., farmers, civil servants, private sector 
employees, and self-employed).  Health care expenditures 
greatly exceed revenues.  According to figures from the 
Social Security Fund (umbrella organization for the pension 
fund and health care funds), the health care "deficit" 
amounted to Euro 320 million in 2003, and will almost double 
to Euro 580 million by 2006.  Experts maintain that the GoA 
must reduce spending by at least Euro 300 million per year 
to guarantee the system will not collapse in the near 
future. 
 
¶3.  (U) Virtually all occupational associations have to pay 
a percentage of their income into the mandatory Austrian 
social insurance system for health care funds.  These funds 
cover ambulatory care and drugs.  State governments are 
responsible for financing inpatient care.  The current 
system does not contain incentives for cost containment and 
costs are therefore exploding.  Health care costs have risen 
from 7.5% of GDP in 2000 to 9% (Euro 21 billion) of GDP in 
¶2003.  However, this figure is still only slightly above the 
EU-15 average.  Social insurance payments from the various 
occupational associations provide for 70% of the system, 
state budgets for 20%, and individual contributions account 
for the remaining 10%. 
 
 
REDUCING COSTS THROUGH CENTRALIZATION AND SAVINGS 
--------------------------------------------- ---- 
¶4.  (U) In December 2004, the Austrian Parliament 
unanimously voted to move forward with health care reform. 
However, the opposition parties -- Social Democrats and 
Greens - opposed the GoA's provisions on funding the 
reforms.  The centerpiece of the reform is the introduction 
of a federal "Health Care Agency" and state "Health Care 
Platforms" to coordinate the fragmented financing system 
between the health care funds and the federal and state 
governments.  The Ministry of Health aims to centrally 
organize all health agendas in these agencies by creating a 
single financial pool.  This centralization should also 
enhance integration of inpatient and outpatient/ambulatory 
care, and the creation of an IT-based health management, two 
key issues to achieve cost reduction.  As part of this 
effort, by the end of 2005 every Austrian will have an e- 
card that contains personal medical data to facilitate 
medical services. 
 
¶5.  (U) The GoA recognizes that structural reform alone does 
not lead to sufficient cost reduction.  To guarantee state- 
of-the-art medical care for all patients, the federal 
government and the states agreed to raise overall health 
care contributions by another Euro 300 million.  This 
includes a general increase of employer and individual 
health care contributions, a rise in hospital fees, an 
additional payment increase for high-income individuals, and 
a higher tobacco tax. 
 
 
EXPERTS: AUSTRIANS LIKE "SOLIDARITY", NO "AMERICAN APROACH" 
--------------------------------------------- ------------- 
¶6.  (SBU) Maria Hofmarcher from the independent Institute 
for Advanced Studies told post that "solidarity" is still a 
high priority for Austrian health policy.  People are still 
willing to finance state-of-the-art medical treatment for 
all Austrians through higher public expenditures and 
progressively higher individual contributions, primarily 
affecting high-income earners.  Suggestions for across-the- 
board increases in individual contributions for health care 
are extremely unpopular.  Hofmarcher emphasized the 
importance of pooling hospital financing in central agencies 
to ensure efficiency and improve allocation in inpatient 
care.  The main objectives of the reform, she opined, are to 
limit the power of the states and the health care funds, and 
to reduce the influence of labor unions within the social 
security institutions. 
 
¶7. (SBU) Christian Koeck, a Health Management Professor and 
owner of a private hospital management firm, told post he 
was not optimistic about the outcome of the reform.  Koeck 
said he did not advocate "privatizing health care on the 
American model", but he criticized Austria for having the 
"second most bureaucratic health care system in the EU."  In 
Koeck's opinion, the steady increase in health care 
expenditures as a percentage of GDP is worrisome.  According 
to Koeck, the government's reform is a step in the right 
direction, but not far enough.  The problem of "quality 
control" remains a concern despite the introduction of the 
health care agencies. Particularly in the hospital sector, 
Koeck claimed there were potential savings of around Euro 
two billion. 
 
 
COMMENT 
------- 
¶8.  (SBU) The GoA health care reform is well directed, but 
do not go far enough.  There is still potential for more 
market access in the pharmaceutical sector (reftel), and we 
see room for a more streamlined effort reform in the other 
areas of health care reform, particularly in rationalization 
of hospitals.  It will be difficult to reduce permanently 
and effectively the influence of stakeholders, particularly 
the bureaucratic maze of various health care associations 
based on occupational and regional affiliations. 
Nevertheless, health care reform is another step forward in 
the Schuessel Government's promised structural reforms.  The 
limits to reform at this stage reflect political realities, 
rather than faulty economics. 
 
BROWN