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Austrian Health Reform 2005: Agreement reached

Partner Institute: 
Institute for Advanced Studies (IHS), Vienna
Survey no: 
Maria M. Hofmarcher, proof reading: Monika Riedel (IHS HealthEcon), Gerhard Fueloep (OEBIG), Ernest Pichlbauer (OEBIG)
Health Policy Issues: 
Long term care, System Organisation/ Integration, Funding / Pooling, Quality Improvement, Benefit Basket, Remuneration / Payment
Reform formerly reported in: 
Health Purchasing Agencies
The Austrian Health Reform 2005
Health Quality Law
Current Process Stages
Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? no no no yes no no no
Featured in half-yearly report: Health Policy Developments Issue 4


The Austrian government has been promoting the creation of health purchasing agencies on state and federal level in order to optimise resource utilization, to enhance integration of service delivery and to pool financial resources to improve purchasing. The main task of these agencies is to purchase services according to predefined quality standards and prices. Due to strong opposition of many stakeholders the current legislation contains only rudiments of the original proposal.

Recent developments

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Characteristics of this policy

Degree of Innovation traditional rather innovative innovative
Degree of Controversy consensual highly controversial highly controversial
Structural or Systemic Impact marginal neutral fundamental
Public Visibility very low high very high
Transferability strongly system-dependent rather system-neutral system-neutral
current current   previous previous

With respect to the institutionalization of mutual decision making on resource allocation we believe that the current agreement is rather innovative as this has not been provided for in prior agreements. In addition this agreement also contains stipulations on comprehensive quality assurance which are also novel to the Austrian health care system.

We think that policies and measures drawing on the current agreement will remain controversial and it is to be seen whether states, social security and the federal government succeed in developing integrated plannig of health service provision.

Expected by the MoH to have a huge structural impact, the current agreement is nevertheless rather "teethless" when it comes to measures to execute more central power on service provision on the regional, i.e. state level. If, however, the government for instance succeeded in incentivizing visiting specialist and outpatient units in hospital to work together more closely then the structural impact may be high in the medium run.

As long as the measures stipulated are not constraining access to hospital services within reasonable time, we think public visibility may be rather low. If however, a situation occurs where hospitals are cutting back on outpatient service provision without simultaneously making doctors office times longer and more flexible, public visibility triggered by media coverage may be very high. This may even be aggravated as currently the density of contract physicians  is lower in Austria than in Germany and in France.

Even though this policy has very unique features, we nevertheless believe that the mesasures proposed are rather system-neutral, i.e. pooling resources for enhancing horizontal integration of service delivery may work everywhere.

Purpose and process analysis

Current Process Stages

Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? no no no yes no no no

Initiators of idea/main actors

  • Government: Government pushes reform within anual negotiations on fiscal equalisation

Stakeholder positions

Federal government

Launched officially in May 2005, the MoH provided an outline on the organizational aspects of regional service provions which was met with great disapproval by almost all stakeholders. Thus, the proposal on health sector reform was adjusted and much of the momentum in health policy making of the government seemed to have lost pace.

State government

State governments have successfully resisted to comply with current stipulations on regional services planning - the very heart of the current agreement; in particular, the new agreement foresees that negotiations on integrated regional service planning take place within 2005. On these grounds state governments mainly seem supportive on the current agreement.  

Social health insurance

Within the negotiations sickness funds succeeded in resisting a loss of autonomy in contractual powers and in splitting purchasing and providing with respect to service provisions in hospitals and institutions owned by sickness funds.

Doctors chambers 

Doctors succeeded in being given participation rights within the newly created state health platforms but seem not overly wellcoming this agreement.

Actors and positions

Description of actors and their positions
state governmentvery supportivesupportive strongly opposed
social health insurancevery supportivesupportive strongly opposed
chamber of doctorsvery supportiveopposed strongly opposed
current current   previous previous

Influences in policy making and legislation

Federal government

As the general agreement on organizing and financing inpatient care of 2000 expires by the end of 2005,  the MoH had a tight schedule to negotiate a renewal of the agreement for the next four years. These negotiations took part in the annual negotiations between the federal and state governments on fiscal equalization. Health sector reform issues had been on the agenda the whole year 2004 and were to some extent based on regular reform dialogs initiated by the MoH; within this participative approach, the MoH intended to initiate broad discussions on health sector issues. Launched officially in May 2005, the MoH provided an outline on the organizational aspects of regional service provisions which was met with great disapproval by almost all stakeholders. Thus, the proposal on health sector reform was adjusted.

Social health insurance

In the first drafts on organizational reform issues, the MoH had been promoting the idea of a purchaser provider split in integrated service provision within hospitals and other institutions owned by Social Securtiy. This had been strongly opposed. Furthermore, Social Security institutions were afraid of losing some of their contractual power in ambulatory care as decision making in the proposed health purchasing agencies was outlined to be balanced between states and social security, expected to lead to a loss of autonomy of sickness funds. During negotiations sickness funds succeeded in resisting to comply with the proposed changes.

State government

As an implementation of the agencies is likely to result in closing departments and even entire hospitals (this was proposed again and again, but achieved only partly), state governments fear to lose voters. State governments seemed to have successfully resisted compliance with current stipulations on regional services planning - the very heart of the current agreement; in particular, the new agreement foresees that negotiations on integrated regional service planning have to take place within 2005.

Doctors chambers

have originally not been allocated any say in the agencies. Doctors fear that the agencies will gain 'monopoly power' in purchasing services. The chamber of physicians had Professor Rürup, a well known health economist and health policy advisor to the German Goverment, evaluating the reform proposal. Doctors succeeded to be given participation rights within the newly created state health platforms (see below).

Legislative outcome


Actors and influence

Description of actors and their influence

state governmentvery strongvery strong none
social health insurancevery strongstrong none
chamber of doctorsvery strongstrong none
current current   previous previous
social health insurancestate governmentchamber of doctors

Positions and Influences at a glance

Graphical actors vs. influence map representing the above actors vs. influences table.

Adoption and implementation

Expected to be based on a private bill in the Federal Council, all political parties were asked to support the reform proposals as negotiated between the MoF, the MoH and state governments. However, as both more and higher copayments (increase and differentiated prescriptions charge, increase in the hospital user charge) were introduced,  Social Democrats but also the liberal Freedom Party (being currently in coalition with the center-right People Party) opposed the first bill and negotiations started over again. After some changes were made with respect to financing legislation was smoothly implemented. The current legislation foresees revenue increases and cost containment measures.

In 2005 the following revenues will be additionally generated:

  • Contribution rates for social health insurance to increase 0.1 percentage points (120 mio. Euro),
  • Maximum income ceiling to be lifted by 90 Euro to € 3.540 (30 mio. Euro),
  • Cigarette tax increase 18 cent per package (90 mio. Euro)
  • Prescription charge increase of 10 cents from € 4.35 to € 4,45 per package
  • Increase of hospital user charges from € 7.98 to € 10, but states may decide on whether they will increase this charge.
  • Abolishment of allowances for optical aids, exempted from this abolishment are all people who are exempted from the prescription charge, children and those who are severely visually impaired (has not been defined yet) (approx. 35 mio. Euro)

Altogether and in addition to the rise in the contribution rate for pensioners (125 mio. Euro) implemented in 2004 these measures will generate about 425 mio. Euro each year.

On the expenditure side of this agreement about 300 mio. Euro per year shall be contained; the following cost containment measures were outlined:

  • Enhanced outsourcing in the hospital sector
  • Creation of day clinics, week clinics and other entities to relieve inpatient care.
  • Reduction of bed days and acute care beds
  • Avoidance of multiple procedures

Needs-based comprehensive health services planning

These measures will be detailed in negotiations during 2005. At the end of 2005 the federal and the state governments shall have come to an agreement about integrated regional health service planning. The idea is that health service planning will be no longer restricted to pure capacity planning in inpatient care but will also cover the ambulatory care sector. The regional health service planning will be mainly needs based.

The main goal of the general agreement between the federal and the state governments is to enable states and social health insurance to coordinate service provision and to enhance the integration of service delivery.

To achieve this nine health-platforms were created and one federal health agency. The federal health agency will make provisions for needs based health service planning and for quality and among other things will develop guidelines for the use of funds within a newly created "reform pool".

  • The federal health agency will consist of all stakeholders; however federal majority prevails. Decision-making is required to be mainly consensual among stakeholders. Within this new agreement, the federal health agency will also make provisions for needs based planning in ambulatory care supplementing the current planning on inpatient care.
  • The health platforms embrace the former state funds for financing inpatient care services. They consist of representatives of the state and of social health insurance. Majority of the state is provided for in state affairs (inpatient care) and of social health insurance in ambulatory care.

"Reformpool" at state level

In areas where cooperation is needed, social health insurance may not be overruled. This area will concern interfaces of service delivery. To promote and stimulate cooperation a "reform pool" in each state will be created. This pool will be fed with 1 percent of total inpatient and ambulatory care expenditure, and according to the MoH calculation will contain about 140 million Euro in 2005. Euro. These means shall increase gradually to about 280 million Euro. 

In order to promote compliance with federal provisions regarding needs based health service planning and regarding provisions for quality assurance the federal health agency may withhold monies to the states. This is a total amount of approximately € 117 mio Euro (about 1.6 % of total expenditure on inpatient care).

For screening programs the federal government may spend € 3,5 mill. each year and further 2.9 mill. Euro for organ transplantation.

Monitoring and evaluation

With respect to cost containment measures the agreement foresees an evaluation on a biannual basis; how the evaluation will be carried out is not yet specified. This will be of particular importance as the government insisted that each additional Euro spent shall be contained on the expenditure side.

Expected outcome

The current legislation is a compromise and basically sustains current power relations between financing agents and desicion making previously in effect. In spite of this, we nevertheless think that the following organizational issues may indicate a paradigmatic shift in health policy making in Austria in the longer run:

  1. the newly created health platforms on the state level may form the basis for targeted regional strategic purchasing at all levels of care including long term care. This may enhance horizontal integration of service delivery. Disintegration of service provision has been a long lasting deficiency in the Austrian health sector. However, with respect to decision making, providers may or may not work together and are likely to block decisions.
  2. To make providers cooperate with each other, a financial pool on the state level is to be set up (overall approx. 140 million Euro in 2005). These monies are expected to compensate providers if for instance inpatient care services are shifted into primary care or vica versa. This measure is certainly containing incentives to "beggar the neighbour", i.e. cost shifting but the amount may be too low to really shift monies to the most appropriate use.
  3. the federal health agency is being given more power concerning integrated health service planning and quality assurance. As opposed to previous federal provisions, health service planning is essentially needs based and ought to embrace both inpatient and ambulatory care. Yet, negotiations with state governments on the integrated regional health planning are to be concluded in the course of the year 2005. Thus the current agreement provides no obligations and just contains the option for needs based health planning. Further, commentators claim that neither detailed provisions nor sanctions with respect to non-compliance are specified. In addition, the plan stipulates that states may spread capacities in a range of +/- 25 percent and envisages a horizon of planning until 2010. This period exceeds the validity of this agreement. Thus both the length of the agreement and the "allowed" deviations  are likely to mitigate incentives to realise economies of scale and scope.
  4. In order to execute provisionsthat are centrally planned and designed, the federal health agency may withhold monies to the states. This budget is in the order of 120 million Euro. This amount was already foreseen in the last general agreement, however never executed towards an individual state; rather, commentators claim that provisions in the 2000 plan were adjusted to the claims of states. We believe that the loss individual states may face if they are not compliant may still be too low.

Currently it is hard to see how the envisaged savings in the order of 300 million Euros could be really achieved. Neither details on the measures suggested are available nor is it possible to appraise whether or not cost growth may be contained due to organizational changes.

Impact of this policy

Quality of Health Care Services marginal rather fundamental fundamental
Level of Equity system less equitable neutral system more equitable
Cost Efficiency very low neutral very high
current current   previous previous

If the federal health agency succeeded in enforcing provisions as stipulated in the new quality law, the impact on the quality of health service provision may be rather fundamental.  

We think that the impact on the level of equity is rather ambiguous. If the integrated health service planning is realized, regional equity may improve. Even though copayments have been increased only to a minor extent, the benefit on visual aids was reduced, likely to generate about 35 million Euro. And as current co payments are anyway not designed very equitably the level of relative (in)-equity may remain unchanged.

With respect to cost efficiency, we believe that this policy has the potential to address misallocations and to reduce cost growth. But as cost containment measures are not clearly specified yet current inefficiencies may be conserved.


Sources of Information

Vereinbarung gemäß Art. 15a B-VG über die Organisation und Finanzierung des Gesundheitswesens.

Andrea Fried, ÖSG 2005 Strukturplan ohne Biss? Österreichische Krankenhauszeitung (ÖKZ) 45. Jh. (2004) 10 pp 05-07

Media coverage.

Reform formerly reported in

Health Purchasing Agencies
Process Stages: Idea
The Austrian Health Reform 2005
Process Stages: Policy Paper
Health Quality Law
Process Stages: Policy Paper, Idea

Author/s and/or contributors to this survey

Maria M. Hofmarcher, proof reading: Monika Riedel (IHS HealthEcon), Gerhard Fueloep (OEBIG), Ernest Pichlbauer (OEBIG)

Suggested citation for this online article

Maria M. Hofmarcher, proof reading: Monika Riedel (IHS HealthEcon), Gerhard Fueloep (OEBIG), Ernest Pichlbauer (OEBIG). "Austrian Health Reform 2005: Agreement reached". Health Policy Monitor, November 2004. Available at