Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

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Chapter 2: Composition of Public Expenditure and
Key Sources of Fiscal Pressure
delivery is financed through the Health Insurance Fund (HIF) (see Box 2.1), whereas an
unknown share is paid for out-of-pocket funds through private sources.
2.18 The current public health financing system may not be financially sustainable for
several reasons. The financing system relies on relatively high payroll contribution rates (13.5
percent of gross salary compared to 6-8 percent in most of EU-15), which will have to be
reduced in a planned manner in the medium term to encourage employment. In addition,
contribution evasion, a limited contribution base, and inadequate budget transfers from the
republic treasury for uninsured erode the revenue base. On the expenditure side, a generous
benefits package as well as the insufficient link between access to benefits and contribution
payments has underpinned the high and growing health expenditures. Financial sustainability
requires revenue and expenditure management, while ensuring equity in access and efficiency in
the delivery of care.
2.19 There is a need to improve equity and efficiency in health care. 23 Concerns about
equity in access to care are caused by insufficient information on out-of-pocket payments and
informal payments. An unknown proportion of private spending is used to finance care in a
growing and uncontrolled private sector. Inefficiency in the provision of care are related to
relatively long average lengths of stay in hospitals that keep occupancy rates high, low patientloads
per staff, sub-optimal distribution of staff across health facilities, and a weak referral
system that undervalues the role of Primary Health Care (PHC). The resulting oversupply of
beds and staff should be adjusted to increase productivity levels, as is currently being done in
Serbia. 24
2.20 Governance in health policy needs to be strengthened as well as the monitoring and
evaluation function to support evidence-based policy making in health. Key governance
measures to reach overall health goals include: monitoring and control the flow of private and
public funds throughout the health system by institutionalizing international accounting
standards and National Health Accounts (NHA); validation and resolution of the arrear situation
and tightening policies to prevent the accumulation of new arrears; strengthening the purchasing
function of the HIF; regulate private practice; improving the quality of service delivery in the
public sector; and ensuring efficiency and equity in health care.
23 The efficiency, equity and governance issues in health will be analyzed in great depth in the second phase of this
programmatic PEIR.
24 See Serbia Ministry of Health Action Plan, September 2005.