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Armenian Health Ministry unveils ‘comprehensive’ health insurance bill

29 November 2019
Armenian Health Minister Arsen Torosyan.

On 26 November, Armenia’s Minister of Health Arsen Torosyan went live on his Facebook page to discuss a new draft bill proposed by the Ministry of Health. The bill foresees enforcing mandatory health insurance in Armenia by implementing a universal 6% health income tax. 

The bill was uploaded on e-draft.am, an online platform where draft legal bills are published for the public to see, vote for, and discuss, on November 22. Referred to as comprehensive health insurance, the bill proposes to make health insurance mandatory through taxing citizens’ income with a 4%-6% health tax. 

The bill aims to make health services and medical aid accessible to all. In its justification, the Ministry of Health claims that comprehensive health insurance will decrease the rates of infections and mortality and will also help decrease the cases of disability caused by health problems. 

Torosyan made posted the video after backlash started spreading on social media against the bill. Many are opposed because of the increase in the tax burden. Torosyan has said that the bill is not final yet. 

He claims that many aspects of the bill, for example, the 6% health tax, can change. 

‘The Ministry’s budget for 2020 is around ֏109 billion ($230 million) and covers few medical expenses for certain groups depending on the medical condition’, Torosyan explained. 

‘However, we need ֏250 billion ($524 million) to cover medical expenses for all citizens. We can get the necessary additional amount either through the state budget, which for now is not possible or through other additional means. We came to the conclusion that this additional funding should come through taxes. 

I have to reiterate, however’, he added. ‘This provision is not set in stone.’ 

The text of the bill also states that health expenses are mostly uncontrollable and unpredictable because people seek health services only when a health condition becomes urgent. 

The Ministry of Health had previously created a special working group to work on the bill which is based on data and research of the former and current health systems in Armenia as well as international experiences.

The Minister claims that 85% of payments for different health services are paid out of pocket. 

‘This leads to poverty and a rise in debt burdens,’ he explained. ‘Comprehensive health insurance will help us create an inclusive society.’

The draft bill foresees a ֏230 billion ($480 million) investment from the Armenian government.

Health and taxes

The health tax has been the main source of contention for those opposing the bill. However, the Health Ministry claims that citizens will not see an additional tax burden due to the new flat income tax rate that will be implemented starting in January 2020. 

Accordingly, the income tax system which currently is progressive (meaning the tax percentage is calculated based on the level of income), will have a flat rate of 23%. This will decrease to 20% in the next couple of years. This means that those with higher incomes, who fall into brackets above 23% will be taxed comparably less than they are now, while those with lower incomes, who fall into brackets below 23%, will see a rise in income tax. In effect, both will pay the same rate.

However, this new bill complicates this system as it foresees decreasing the flat tax rate for those with a monthly income less than ֏150,000 (59% of those employed in the country), allowing the new health tax to not become an additional burden. As a result, if both the health tax and the flat income tax are considered then the Armenian system will, de facto, have two tiers: one for those earning above ֏150,000 ($300) and one for those earning less.

Other complaints revolved around the idea of why the employed have to pay for the free health care of the unemployed. On 27 November, Torosyan once again went live on Facebook to address these complaints. 

‘Those who are not employed are your spouses, your children, those who are retired, and that unemployed friend you keep lending money to’, the Minister said. 

He believes the approach of ‘why should I pay for those who don’t work’ is discriminatory. ‘If we want an inclusive and social state, then this type of mentality has to stop,’ Torosyan said.

The bill, however, will not cover every possible ailment and treatment. Private health insurance companies are expected to cover these gaps. 

During a briefing with reporters in parliament on November 28, Torosyan was once again asked why the employed should pay for the unemployed or those that avoid taxes. ‘It’s as if you complain why a taxi driver, who doesn’t pay taxes, drives on the roads renovated through state funds which are paid for through the taxes you pay,’ Torosyan replied.

The issue of mandatory health insurance is a priority for the Health Ministry. 

The Minister has explained that they are open to discussing and changing the mechanisms through which it can be implemented, including the health tax, however, comprehensive health insurance not be taken off the table.

The bill states that due to low financing in the healthcare sector, medical organisations are overburdened and in the meantime, only 20% of citizens, because of financial reasons, visit primary care physicians.

According to the draft bill, a lack of financial means has hindered the development of the Armenian healthcare system, has not fostered an increase in the quality of medical care and has led to poverty due to large out-of-pocket health expenses. 

A tough sell

Despite Arsen Torosyan’s vigorous defence of the bill, the comment section under the draft on e-draft.am has been mostly negative.

Samson Avetian, Vice President of the Angel Investor Club of Armenia and an adjunct lecturer at the American University of Armenia and Yerevan State Medical University, told OC Media that this draft bill has no straight-forward path and will be difficult to implement.

‘There are many stakeholders involved, including physicians, hospital owners, etc,’ Avetian said. ‘Tax increases themselves mean big changes. This will always bring opposition.’

However, Avetian said he believes this program can bring positive change if implemented correctly. 

‘International experience has shown that a centralized, mandatory health insurance fosters a productive and cost-efficient health industry’, he said. ‘When financially accessible, people will be able to visit the doctor more, instead of only when its serious or life-threatening. Preventative treatment is cheaper than life-saving treatment.’

According to Avetian this will lead to an improvement in the quality of life and will allow health centers to invest in new technologies.

The draft bill will be up on e-draft.am until 9 December, after which the Government will decide if it will approve of the concept and then put it on their agenda for an upcoming session of parliament.