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BH health system: an orchestra without a conductor

CIN's team goes looking for the 987 million KM spent last year on BiH health care. Auditors and health officials say they cannot find it.
Foto: CIN

When the Federation of BiH (FBiH) and Republika Srpska (RS) auditors took a look at last year’s spending of just under 1 billion KM in Bosnian health funds, they found some interesting details.

For example, one item was a cell phone for 627 KM purchased by Tomoslav Lučić, the FBiH minister of health.

When asked about the purchase, which equals approximately three times the average monthly FBiH pension, Lučić protested that he needed a high quality phone with an advanced power supply that could last a week because he was a busy man.

But whether he needed the phone or not, Lučić admitted that his buying decisions, from cell phones to travel costs, were not subject to review.

Lučić has to answer to no one for his spending of FBiH health ministry funds.

‘The auditor’s comment was that my travel requests should be approved by the government, that is by the prime minister (office), but as far as I know no one (else) is doing so’ Lučić said.

Lučić’s phone and other details may be minor, but they are indicative of a much larger financial black hole found by auditors in health care spending in the FBiH and the RS.

Despite the fact that 987 million KM was spent on public health care last year, most of the health funds are owed millions from government agencies and private companies. The auditors could not find where the spent money had gone because of incomplete or non-existent bookkeeping within the funds and health agencies.

But many health officials believe that millions have been wasted to finance the cell phones and other needs of the bloated administration of 13 health insurance funds, 13 health ministries and 264 health institutions that employ 36,500 medical and non-medical employees in Bosnia-Herzegovina.

The auditors’ reports also discovered evidence of misdirected funds and sweetheart deals that made determining how health funds were being spent all but impossible.

For a month a team of nine reporters from the Center for Investigative Reporting in Sarajevo (CIN) talked to patients, experts and health officials to find out why the country’s health funds spend millions but do not have a reputation for quality health care.

The reporting team found that the Bosnian health system is really not a system at all.

The two entities and the Brčko District have separate systems with different types of organization.

The RS has a centralized fund administered through eight branch offices, which together spent 235 million KM last year.

In the FBiH, the system is decentralized. There are 10 independent cantonal insurance funds and a Federation fund, which includes the Solidarity Fund for special costs such as sending children abroad for treatment and paying for patients from poorer cantons. Together those funds spent 712 million KM in 2003.

In the same period the Brčko District Ministry of Health spent 40 million KM.

Among the various funds, there is no centralized source of budgeting or spending data, according to fund directors.

‘A health care system in Bosnia and Herzegovina does not exist’ Dr. Bakir Nakaš, director of the State Hospital in Sarajevo, told the reporting team. ‘There are entity health care systems, a health system of the Brčko District and cantonal health systems, but they function as an out-of-tune orchestra because they have no conductor.’

Between the entities there are no agreements on sharing facilities, information or the costs of health care between entities, health officials said.

Meanwhile, there is no doubt that the country desperately needs better health care.

BiH citizens’ health has been constantly deteriorating since the war, according to the FBiH Public Health Bureau statistics. The World Health Organization ranks BiH 79 out of 191 countries in the quality of their health care systems.

The most affected are pensioners. Božo Knežević from East Sarajevo, who, at age 67, is supposed to get free health care, still has to pay for some of his drugs after an operation. The drugs cost him 40 KM on a meager working man’s pension.

‘That is making further treatment more difficult’ Knežević said. ‘But health is the most important thing and I have to buy these drugs.’

Circles of indebtedness

Part of the reason that the multiple health care systems in the two entities can’t deliver on their promises to Knežević and others is a pyramid of debt that is bankrupting medical care.

Auditors found that the funds that pay for direct medical care services are being starved by other agencies that do not deliver promised funding. Finally, the health funds have to run at a deficit because they never receive the funds they have budgeted to maintain the system.

For example, the FBiH Insurance Fund has bad debts from both of its funders.

The fund is waiting for 300 million KM it is owed by the FBiH Pension Fund.

The FBiH ministry of health owes the fund another 2.6 million KM in promised funds. This could explain why the fund spent 3 million KM more than it received last year. That amount almost equals the entire health ministry budget last year for the purchase of medical equipment for all institutions in the FBiH health system.

The individual canton funds are also responsible for contributing 8 percent of the money they collect from companies in employee taxes to the Solidarity Fund.

The cantons could owe millions to the FBIH Solidarity Fund but no one can really know because the cantons’ bookkeeping is so inaccurate and incomplete that no one can determine accurate numbers for the debts, according to the 2003 FBiH fund’s financial report.

At the bottom of the pyramid are those employee taxes that pay for most of the health and pension systems. The tax money is supposed to go directly from the employers to the canton’s funds. The canton is then supposed to supplement the taxes with funds from the canton’s own budget.

The canton funds claim they are owed millions of KM in unpaid canton government budget contributions. But the largest source of debt comes from the public and private companies, which avoid paying the contributions for their employees, said directors of many of the funds.

For example, the Zenica-Doboj Canton fund could increase its health care budget by approximately 50 percent if BH Steel would pay their tax debts to the canton, according to the fund’s director, Sulejman Muminović.

But Muminović can only guess at how much the taxes could help the budget because he doesn’t really know how much the steel company owes.

‘I don’t have any mechanism to track down the debts’ Muminović said.

But a phone call to the mill’s deputy director general, Aziz Mujezinović, produced an immediate response: 20 million KM for health and pension benefits accumulated over the last 10 years.

‘We never kept a secret of that debt’ Mujezinović said. ‘If money existed it would have been transferred, we have never been avoiding to pay health taxes.’

Muminović said collecting the money was the Revenue Administration’s job.

‘If they (BH Steel) say it’s 20 million, then it is’ Muminović said. ‘According to law, we can’t keep a record of how much they should pay us.’

Public companies in FBiH are also supposed to owe millions to the health funds. The government recently sent a law to parliament that would require companies to pay their debts. The problem is no one knows how much is owed, said Tiđa Dimić, a finance ministry official.

‘We tried to get the data when we were working on the law’ she added. ‘But we gave up because the companies haven’t accounted for what they owe.’

In the RS there is even less trustworthy data on what money is owed. The situation is being further complicated by squabbling between the government and the health fund over numbers. Hospitals and clinics are also suing the health fund for 27 million KM in promised funding they need to pay bills and their medical personnel.

Auditors could not precisely determine the amount owed because of a lack of paperwork and conflicting claims by the government and the health fund.

The RS government said that the health fund is owed 18 million KM. But the fund claims an amount three times larger, 58 million KM.

The director of the RS Health Fund claims that the large discrepancy is a technicality, a difference in the way the data is viewed. But he admits no one wants to find the money.

‘Over the years the issue has been tossed like a hot potato from one authority to another and nothing has happened so far’ said director Nebojša Zgonjanin.

Like the FBiH, the RS is also suffering from non-payment of employee taxes by employers. Zgonjanin estimated that the RS fund would have been richer by over 100 million KM if all private employers in the RS paid health insurance for themselves and their employees.

As if internal disputes over money did not cause enough problems, both entities are sending patients, and their insurance money, out of the country.

The auditors question whether the patients could not have been treated in BiH far less expensively.

FBiH owes at least 60 million KM to Croatia, according to Croatian authorities. The RS owes 42 million for sending patients to Serbia-Montenegro over the last three years, according to the RS auditors.

Auditors and fund officials have warned both entities that no one has been checking receipts from foreign providers to see if the trips were really even necessary.

Tracking the money

If the funds and their governments do not know exactly how much they owe each other, they apparently know less about how and why they are spending what they have.

For example, the FBiH health system, including both entity and cantonal funds, spent 712 million KM in 2003, according to the 2003 FBiH fund’s financial report.

Meanwhile, the cantonal funds spent 2.5 million KM more than they received from employee taxes and the canton government contributions.

Likewise, the report shows, the FBiH’s clinics and hospitals had a negative balance of 7.3 million KM for the year.

Only the private clinics showed a profit of 3 million KM, the report said.

The problem is that the system is too big and inefficient, according to the director of the FBiH Bureau of Health, which does statistical analysis of the system.

But there is no plan for how many hospitals and clinics are actually needed and no information on how to finance such a plan, bureau director Zlatko Vučina added.

‘Making the health system more efficient is a policy matter, but we do not create health policy at the state level’ Vučina said.

Tomislav Lučić, FBiH minister of health, disagrees.

‘The system is not unwieldy and according to parameters we are doing just right with regard to the number of doctors per 1,000 inhabitants, and with regard to the number of beds’ Lučić said.

‘The only problem is about the efficiency’ he said.

The problem of the lack of efficiency starts with the fact that the health systems have no centralized way of knowing what they are spending, according to Anka Pudar, an FBiH senior auditor. Each fund and health institution keeps its own records and cannot exchange information with the others. As a result, there is no way to make a complete financial report for the funds and institutions, Pudar added.

The funds’ financial departments have not benefited from modern database technology that can link information together to give an overview of even a sprawling health care system. The antiquated FBiH systems are clearly overwhelming bookkeepers in charge of knowing where the money is spent.

‘We have thousands of invoices and all institutions must control that part’ Novka Agić, the frazzled director of the FBiH fund said in an interview. ‘It is really hard to control everything thoroughly.’

But Lučić, the health minister, does not share the doubts about the entity’s health care bookkeeping. He insisted that the FBiH does know how and for what they are using health care funds.

However, when faced with the 2003 FBiH auditor’s report, he admitted that it is hard to establish whether cantonal funds pay the required amount of money into the Federation fund.

When questioned on the auditor’s complaints that the financial reports were unclear on spending, he admitted that there was some ‘vagueness’ on that issue.

FBiH public health office director Vučina and others have said that health care reform might have to start with trimming a surplus of medical workers in the system that account for such a large part of the budget.

Milenko Granulić, the president of the Health Workers’ Union in RS, said the problem is not overstaffing, but bad management of a work force that hasn’t been paid.

Granulić’s medical workers believe themselves to be the ones, in the entire health system, suffering the most because the funds are not collecting money and not paying their salaries. That has already caused a workers’ strike in the RS.

‘We will be forced to sue the employers, they will sue the fund, which will sue the government, and then everything will collapse’ Granulić said.

The RS fund, like the FBiH fund, also has problems keeping track of its money.

For example, the auditor found 180,000 KM of patient co-payments missing from the RS books.

‘Control and regulations are the things that definitely require improvements’ said Marin Kvaternik, RS minister of health. ‘The current practice is not the best.’

With many of the funds not knowing exactly how much money they are owed, and unsure also about how and where they are spending money, perhaps it is no surprise that taxpayers’ money has been misdirected and used in questionable business deals.

The auditors pointed to nepotism in the RS fund, where the former director of the Clinical Center issued a contract to his brother, who owns Farmaprom, a medical supply company in Banja Luka, according to the 2001 RS auditor’s report on the Banja Luka center.

In the FBiH, the entity fund pilfered one of its own accounts when it ran short of cash for salaries for its employees, according to the financial fund report for 2003.

Officials used money from the Solidarity Fund, which is primarily intended for financing severe medical cases, to pay its employees.

The Sarajevo cantonal fund decided to give 1.9 million KM in bonuses to their board of directors and all employees in the health institutions last year. The bonus was not in their budget and the payment was illegal, according to the auditors.

When the drug company Bosnalijek failed to pay back the Sarajevo cantonal fund a 2 million-KM loan, the fund allowed them to offset it with drugs instead of cash. The auditors suggested that the fund may have lost on the deal because they might have found a less-expensive supplier if they had put the drug contract out to bid.

There are three years of auditors’ reports on the out-of-control, billion-KM health care budget piling up but no one seems to be reading.

‘As far as I know, the answer is no’ said FBiH health minister Lučić, when asked if anyone in the Federation had been held accountable for lack of oversight.

FBiH criminal prosecutors recently called auditors and asked for their reports only after receiving calls from journalists and seeing articles on the reports in the press, said FBiH prosecutor Zdravko Knežević.

Knežević said the reports going back to 2001 are under review. But they haven’t found any criminal activity yet. The problems cited by the auditors are primarily civil and not a criminal matter, Knežević added.

Meanwhile, the only criminal case in either entity to come out of the auditors’ reports since 2001 is going to court in the RS.

The RS prosecutor, Zoran Lipovac said he filed charges against the former director of the Banja Luka clinic for giving out a no-bid contract for a medical machine, which allegedly cost the heath fund 62,000 KM more than necessary. Former director Risto Kozomara has denied the charges and said he is confident of winning in court.

Finally, reform in the health care system may have to come from the people who work within the system rather than from outside auditors and prosecutors. The question will be if there are enough of them who want reform.

When he looks at the system, Dr. Bakir Nakaš, director of the Cantonal Hospital in Sarajevo, said that he thinks first as an insured person in the system and then as a medical worker. What he sees is a system with the wrong values.

‘Huge savings for the patients could be done in the obligatory health insurance program’ Nakaš said. ‘Countless phones, secretaries, computers, expensive cars…should not, in any case, represent the value and professionalism of the institutions.’

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