Healthcare Reforms Hit Financial Snag

The shortcomings of Iran’s Health Reform Plan were not limited to international sanctions and lower crude prices. As it turned out, domestic policymaking also played a big role.

In 2014, HRP, which embodied a series of reforms, was launched under President Hassan Rouhani in the health system of Iran.

HRP came as a groundbreaking move to reshape Iran’s health sector after it had been grounded under harsh international sanctions during the previous administration around 2010.

At that time, drugs became unprecedentedly scarce and a black market raged, reads an article published by Trend News Agency. Excerpts follow:

HRP was mainly based on the Fifth Five-Year Development Plan (2011-2016). It included different interventions to increase population coverage of basic health insurance, increase quality of care in the government-affiliated hospitals, reduce out-of-pocket payments for inpatient services, increase quality of primary healthcare, launch updated relative value units of clinical services and update tariffs to more realistic values.

 General Public Satisfaction

The reforms resulted in extensive social reaction and different professional feedback.

The official monitoring program shows general public satisfaction. However, there are some concerns about the program’s sustainability and equity of financing. Securing financial sources and fairness of the financial contribution to the new program were the main concerns of policymakers. Some members of the parliament opposed the plan from the outset.

Whatever good intentions legitimized HRP, there are many people in the private sector who are bearing the brunt of its deficiencies.

One of Iran’s oldest drug bottle manufacturers is facing a huge crisis and is struggling to prevent bankruptcy, which the management associates with HRP.

The company has already exhausted all the banking facilities that it could acquire directly or through its subsidiary factories, and is now changing its molds to produce bottles for uses other than drug packaging.

An official with the company, speaking on condition of anonymity, told Trend that the crisis follows a liquidity crisis in Iran’s healthcare sector.

“Drug manufacturers can no longer produce, because they have been facing a liquidity crisis after the government failed to pay its outstanding debts to hospitals and pharmaceutical companies,” the source said.

 Held Back by Decline in Oil Revenues

HRP was implemented right at a time when international sanctions against Iran were at their peak, hard pressing the government whose main source of income was oil export.

Later, when sanctions were lifted following Iran’s nuclear deal with world powers, a huge plunge in oil prices followed, leaving the Iranian government with little improvement of oil revenues.

Just before HRP was introduced, the government had allocated 160,000 rials (about $4.8) to each patient as health subsidy to be given via the Ministry of Cooperatives, Labor and Social Welfare’s Social Security Organization to insurance companies. However, HRP authorized 320,000 rials (about $9.7) for each insured person. Shortage of resources left the government with a huge debt to the health sector.

“Instead of liquidating the debts, the government proposed that it will provide pharmaceutical companies with low-interest loans, which will drive them deeper into liquidity crisis in the long run,” the source in the packaging company said.

“Now, as they have cut down on production, the drug manufacturers would naturally no longer place orders for packaging.”

This drug bottle factory now faces at least 1.8 billion rials (about $54,000) worth of surplus product that it is not optimistic to be able to sell within the current fiscal year (ending March 20, 2018), and therefore sees no need to produce drug bottles anymore, the source observed.

“As a result, it is changing its molds from drug bottles to food bottles.”

 Policymaking Flaws

In July 2016, Minister of Cooperatives, Labor and Social Welfare Ali Rabiei admitted the flaws, saying the way the plan was implemented resulted in a huge liquidity crisis.

“First I thought there were 5 million people in Iran who did not have insurance coverage and were to be covered under HRP. But later, as the country’s statistics infrastructure improved, the number was found to be 11 million. Also, the per capita health insurance allocation had improved from 160,000 to 320,000 rials. As a result, 3.52 trillion rials of fiscal load appeared out of the blue, whereas we had planned for 1.1 trillion. That is why we hit a liquidity crisis,” he said.

The minister had elsewhere said that about 80% of the fiscal load of HRP lay on the shoulders of insurers.

A few days after Rabiei’s remarks, Health Minister Hassan Qazizadeh Hashemi admitted the fact and said insurance companies did not possess sufficient resources to pay up, noting that in the preceding fiscal year, insurance companies faced an 8-trillion-rial deficit.

Also, Farzad Firouzi, a South Khorasan Welfare official, said in January 2016 that HRP had increased the fiscal burden on insurers by four or five times.

Head of Food and Drug Organization Rasoul Dinarvand last December said if debts owed to drug manufacturers were not paid, a “crisis” would sweep the country’s drug market.

In July, there were reports that some private hospitals had quit accepting patients under HRP, as they were not being paid by insurance companies.

In June, Deputy Chairman of Majlis Health Commission Homayoun Yousefi also rang the alarm bells over debts hospitals owed to drug manufacturers.

“The Ministry of Health faces a huge amount of debt,” he said. This September, Chairman of the Pharmaceutical Association of Iran Mohammad Baqer Zia said the pharmaceutical industry in Iran had been crippled because companies were not receiving their dues from insurers.