Is health care reform dead?

I know that it is dangerous to predict, but I have the distinct feeling that the Hungarian health care reform is dead. At least it is dead in its present form, and perhaps its demise is not such a tragedy. Critics of the new system liked to call it a "mule of a system" that wouldn’t generate the much needed competition among healthcare providers. The socialists insisted on so many safeguards against "profiteering" that one wondered whether any capitalist in his right mind would put money into Hungarian health care. This was especially true since Viktor Orbán and his lieutenants kept repeating that if they come into power they will scrap the whole sytem, jeopardizing the investments of foreign participants. (And it would not be the first time they broke a contract with a foreign investor.) This was true from day one, but there is now a new threat: another referendum, this time against the whole health care reform bill. And I don’t think that this is an idle threat. Viktor Orbán is riding high at the moment, and he knows that he has the Constitutional Court in his pocket. The honorable judges will allow this referendum to be held. And why not? If they allowed referendum questions that were budgetary issues (and hence not appropriate items for a referendum) to sail through, a referendum on health care reform as a whole should be a cinch.

Rather than face the devastating consequences of yet another referendum, I believe that the government will simply stop health care reform. The real problem with such a decision is that there will be no infusion of much needed capital into the health care system. However, temporarily the government could compensate: for example, without much fanfare (though I’m sure with lots of demonstrations on the other side) they could close a few more hospitals. There could be a greater effort to collect money from the hitherto uninsured. They could start filtering out those hundreds of thousands who collect disability while working on the side. An incredible amount of money could be saved this way.

Meanwhile the government might be able to gain some time to figure out how to convince the Hungarian population that the good old times of goulash communism are gone, that the rhetoric of the Fidesz echoes the bad old times of the ’50s, and that the only way to prosper is to boldly move forward into the 21st century.

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Viking
Guest
The battle of if the health care referendum actually is binding for the actual health care reform to be introduced is not over yet, so it would be a bit strange by the current Government to give up now. The Government has a legal point that the approved question does not relate to the health care reform to be implemented, but to an earlier version that MSZP struck down. So therefore the referendum, as it stands now, is only for the future 3 years of a multi-player mandatory health-care system. If the approved question does not change, the Government can use this situation to attack Fidesz for spending money on irrelevant referendums, instead of fighting it out in a General Election. I cannot see that your proposal that the Government would just cut health care spending as a better alternative for the Government. It would not make them more popular, only successfully implemented reforms can make them win the General Elections 2010. A more smarter tactical move would be to already this year dissolve Parliament and go for new General Elections, that Fidesz would win a landslide victory in. Then comeback in the EP elections 2009 and the next General… Read more »
Vándorló
Guest
I’m not so pessimistic about the market not wanting to participate in privitisation. All it will mean is that the terms of the contract will be weighted more in favour of these firms as they can now legitimately charge the cost of risks to the government. So the cost of any reforms have gone up. The firms themselves can sell this risk to other speculators who think they can predict the Hungarian people – good luck on that!. For now all there is is something like a 60 billion forint hole in the budget. It’s interesting that Orbán refuses to acknowledge that the referendum led to S&P’s down-grading (http://www.nepszava.hu/PrintArticle.asp?ArticleID=1025277). He really is a politician who takes no responsibility for his actions. And to be fair, why should he? The Hungarian people don’t, they think that they have somehow profited at the expense of others and that makes them happy. They honestly do believe that it is other people who end up paying for the services they consume and not them. As long as the costs are indirect, they like that. But all this has been/is the topic covered by HVG, Figyelő, Magyar Narancs… all with pretty much the same conclusion,… Read more »
New World Order
Guest
For all intents and purposes, health care reform as officially governemnt policy is dead. A large part of the blame can be ascribed to the MSZP itself, which has forced the government into an awful half baked reform. SzDSz also deserves some blame because I believe their focus first on establishing private insurance was misplaced. It would have made more sense to first create some competition among health care providers by offering off hospitals or departments in hospitals for long term concession, and completely privatising the “house doctors”. BTW, this process is underway in a relatively non-structured manner, and, ironically, FIDESZ politicians are at the forefront in the hospital privatisation game. In this respect, organic health care reform will continue, and the trend towards more individuals “going private” will continue as the State sector justs gets worse. As to Vandorlo’s point on voting patterns, it is obvious the votes were for many not about policy but solely politics. This was a “no confidence” vote against the PM. Gabor Horn was 100% correct. That Orban does not acknowledge the real implication of the vote is not surprising. That the media is not really capable of communicating the impact is also not… Read more »
boiled beef and carrots
Guest
boiled beef and carrots

Er hold on, much as I dislike what Fidesz has done, they are not responsible for the downgrade in the outlook for Hungary’s credit rating. Its not their fault that financing costs for Hungary’s debt is so high. That lies with the Socialist government since 2002. Its the lack of credibility in Gyurcsany’s reforms and the lack of vision of creating a modern economically competitive society and a good place for its citizens to live.

Vándorló
Guest

@boiled beef and carrots: The downgrade is *directly* a result of the referedum verdict as it shows that the country is unlikely to continue with the reforms. The market wants the reforms and likes Gyurcsány.
If you look back at the previous Fidesz government from 1998 onwards you will see why the austerity measures were and are needed. It is also the case that these should have been brought in much earlier as it was too little, too late and compound interest (on debt) waits for no man/woman.
There is also the worrying prospect of Fidesz ever trying to fulfill any of their promises in which case you can kiss the idea of a modern economy goodbye.

Odin's lost eye
Guest

What puzzels me is what is Olban Victor up to? Why does he want to stop this country from getting its self straightened up? Why is he so keen to be its new “Wise Leader” with the current down turn in the world economic system? The only answer I can think of I read somewhere in a Blog. He wants to go down in history as “The father of the Nation”. The referendum I suspect was just the ‘foreplay’ the insemination will occur later!
More seriously the government committed Hungary to a 3% cap of GDP on its increase in spending. I doubt that Europe to whom this committment was made would take kindly to this argeement being broken!
By the way as to the ‘vizitdíj’ if you had to make more than 20 visits in a set length of time there is a way to get these refunded.

boiledbeefand carrots
Guest
boiledbeefand carrots
Sorry, I don’t think you have a clue what a downgrade in the outlook means. You can blame Viktor for his opportunism, but the simple fact is that while Gyurcsany may be a reformer, he has failed to convince people here that its worth it. The debt financing costs of Hungary and its indebtedness rose before the referendum, bond market yields surged prior to the referendum making it impossible for Hungary to issue long term debt. The referendum result is a symptom of the malaise, not the cause of it. Net-net, there has been no reform in Hungary, the Socialist government has merely raised taxes to reduce its budget deficit and the health fees – good in my view for cutting doctor visits – represented yet another tax. Ordinary people aren’t prepared to stomach that without seeing any return in better treatment. Read a 130 page report by the Hungarian central bank on the cut in health spending and the rise in social transfers in an economy which has the 3rd biggest tax take in the EU. The opposition may be nasty and mean, but they haven’t been in power since 2002. Anything that happens now is the sole responsibility… Read more »
Vándorló
Guest
@boiledbeefandcarrots: As I work in more than 3 currencies and have both property and business here I am well aware of what it means. I simply disagree about the root cause of the downgrade. By your own logic and reasoning the financial status you referred to has long been known and understood. What is different is seeing a plebiscite return a result where roughly 600,000 more people vote against the reforms than they did for the government at the elections. With the current status of the constitutional courts and the likelihood of the opposition wanting to exploit any weakness at any cost, then the risk is much higher now. Before the referendum the best information indicated the there simply wasn’t a will to vote against the reforms, now it is more than clear that there is. However, all you say about the conditions of the market is true. what is worse is that there is clear news today that APEH will not ask car dealers, travel firms or luxury goods dealers to have to report and customer making purchases. This is one of the main means by which most people still manage to hide a lot of their wealth. My… Read more »
New World Order
Guest
The fact is that the politics of referendums, I believe ,is irresponsible and makes Hungary virtually impossible to govern. It is also a fact that FIDESZ has made almost no (or perhaps absolutely no) positive contributions to the debate on economic reform in this country since going into opposition. It is also true that the basic premise of their economic policy would be destructive of long term economic growth. Having said all of this, BB and Carrots is correct. The primary economic problems in this country stem from a series of really bad policies implemented by a succession of MSZP led governments since 2002 (of course, the FIDESZ Govt also had a series of bad policies particulalry from 2000-2002). The “reforms” instituted since 2006 fall or really only half measures designed to avert Hungary from an Argentina style total melt down. For the time being they have worked. The reforms, however, do not yet address long term strucutural issues in a meaningful way. One can argue that the fault lies in the politics of obstruction carried out by FIDESZ. This has contributed, but the fault really lies with the Government. The real strucutral problems-low levels of employment, massive, inefficient transfer… Read more »
Vándorló
Guest
@New World Order: We have already agreed on all the points you make apart from your conclusion. These are: 1. Gyurcsány should have done more. 2. He should have done it sooner. 3. He hasn’t been able to convince his party about the reforms. 4. He hasn’t been able to convince the coalition about the reforms. 5. He hasn’t been able to convince the country about the reforms. 6. Even half-baked his reforms had the support of the EU and markets. The first 2 points are obviously Gyurcsány’s fault. The latter 3, however, he can hardly be expaected to take full blame for. The Hungarian people (MPs or no) have proven themselves selfish and ungovernable. No-one disagrees that Gyurcsány policies were in the right direction. OK, briefly looking at Orbán: 1. Orbán will not introduce economic reforms. 2. He has promised quite the opposite in terms of spending. 3. Not only this he is going to buy back any privatised assets including the airport. 4. He actions have scared the markets. This has raised the cost of borrowing. 5. His actions have the full support of his party. 6. He has encouraged the Hungarian people to believe that their actions… Read more »
vtballs
Guest
Do entity specific financial statements cause changes in entity specific unsystematic risk? No! Are changes in market values attributed to the publishing of information? No! The changes are consequence of financial data and the relative underlying economic performance of the entity (contained in the report) within the market that the entity is OBLIGED to report to competitively participate. Stating that the referendum itself is the cause of the downgrade goes against the fundamental logic of financial markets as well as democratic principles. Referendums occur in democracies just as elections and financial results and statements for governments and business entities. Timely and accurate information is the key input to solid risk assessment. The referendum just made the information official, and it is in fact an report of the underlying performance. Your implications are alarming. Don’t report economic results (accurately… Gyurcsany has already played that card), don’t exercise democratic rights (referendum) so you don’t get downgraded! WTF? I don’t have the time or the space here to address the other nonsense on this blog, but I would be willing to bet that the person that seems do display such authority on Hungarian affairs does not live in Hungary. Tell me have you… Read more »
kincs
Guest

VTBalls: You clearly don’t understand how credit-rating agencies such as S&P work. Nor capital markets. A great deal of buying and selling is driven by expectations as to the future performance of a share, a company, or a borrower or lender, such as a government.
In their assessments over the past year, at least, the ratings agencies have been stating that their ratings and outlook for Hungary would be more favourable were it not for the likelihood of increased government spending in the year or two leading up to elections. So it is not entirely about “financial data and the relative underlying economic performance of the entity”. It’s about perceptions.
The referendum result means that the government is less likely to have the will to take fiscally responsible action. So the outlook for sound finances just got worse. It’s that simple.
What “reforms that simplify and optimize processes without raising the economic burden for citizens” do you have in mind?

vtballs
Guest

What do you think your “perceptions” are based on? Information! (hopefully legitimate) My intention was to point out the fallacy in the argument that the referendum is the cause of the downgrade. The referendum itself was just a medium to convey the information to the market that the current course of reforms or the incumbent politicians who proposed them have lost the electorate legitimacy. I don’t think that I specifically addressed expected returns, economic forecasts, or the information that they are based on nor the structure of the capital markets. Why put a spin on my post? Otherwise I agree with the rest of yours. Again, the purpose was to point out the difference between the medium and the underlying information. Hopefully you can see that. Thanks for the correction on the fee.

Viking
Guest

But vtballs – The “market” does not give a sh*t about the “that the current course of reforms or the incumbent politicians who proposed them have lost the electorate legitimacy”.
The “market” does not see any alternative to the current Government in today’s Hungary, that is your and Viktor’s problem. You can always give the “market” the finger, but they will punish you by raising the interest for the loans Hungary have, etc.
Politics and “good will” alone do not rule a country, the “market”‘s influence is big, especially when the country has a bad economy.

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