How Do Italians Pay for It?

October 10, 2008 -- I am living in Italy and learning a lot. Italy has much to be proud of, including a health care system that in recent years has improved in quality to match that of nearly any western country. In addition to its quality of care, the Italian system is commendable for its equality of distribution; for all Italians (and often foreigners, too) most procedures are covered. Tests and prescription drugs demand copayments but primary care and inpatient care are free.

The Italian National Health Service was established in 1978 by law number 833 (the Riforma Sanitaria) whose preamble states that health care is a human right and is to be delivered equally to all citizens.

However, the way public health care in Italy is paid for is less fair. Most of its funding comes from a payroll tax that is regressive; regular employees bear a disproportionate burden. The other sources of funding are the income taxes and value-added (VAT) sales taxes collected by the federal and regional (regioni) governments. Equity of taxation is one of the most contentious issues in Italian public life and is, in my judgment, the one most responsible for the resurgence of power of the right wing and Berlusconi.

From the provider standpoint, too, the medical system is far from generous. Compensation received by physicians and other providers is based on capitation and is low relative to that of providers in most western countries and also relative to workloads. Doctors here work hard!

Neither is the economics of Italian health care kind to hospitals. Public funding of health care is doled out by the regioni. The Lazio regione (which includes Rome, where I live) has for the past decade run an annual health care budget deficit of 1 billion Euros. Hospitals are paid according to diagnosis-related group (DRG) formulae, as is done by Medicare in the USA. Today, hospital budgets are shrinking and several of Rome's most prominent are closing for lack of funding. 9/25/2008 police presence at a sit-in protesting the closure of San Giacomo hospital in central Rome For example, Forlanini hospital, one of Europe's most technologically-advanced and, in recent years, the recipient of substantial infusions of capital for equipment, is slated to close in 2009 for lack of operating funds. My friend Maura who is a nurse on a respiratory rehab unit there says she no longer has most of the drugs in the usual formulary to dispense to their patients; patients are receiving inferior care due to the cutbacks.

Another is San Giacomo hospital (including its reknowned orthopedics unit) in the center of Rome, which just last year had a 15 million Euro upgrade. (In the photo: 9/25/2008, police presence at a sit-in to save San Giacomo. Note the protest banners.) There is considerable outcry in the Italian press but recent changes in governmental priorities make these and other closures appear inevitable. This is a great detriment to the healthcare options available to Romans and Italians nationwide.

For an even less sympathetic view than mine, see Tanner (Cato Institute), The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World (but see below for my opinion on those Cato whack jobs.)

For overviews of the economics of health care in other countries, see Healthcare Economist.

For Italy in particular, see Health Care Around the World: Italy.

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