The San Michele a Ripa Grande Monumental Complex in Rome, 20 October 2010. Conference: Federalism, rules and growth.

Healthcare service workshop, organised by BIIS Banca Infrastrutture Innovazione e Sviluppo Contribution by Corrado Passera

Before trying to sum up the current debate - an extremely difficult task given the wealth of information involved I would firstly like to thank, on behalf of Intesa Sanpaolo, both the speakers who offered to help us deal with such an important issue, and the large audience for attending. For some time now we have been organising annual conferences designed to debate the most important issues of the day within the increasingly federalist situation here in Italy, and to contribute ideas that can help re-launch growth and employment within the country. We organise these conferences by inviting leading experts in the fields in question, and by attempting to find solutions to existing problems and to build a consensus regarding such solutions, which we believe is the best possible way of resolving even the most persistent problems. This year we have chosen the issue of healthcare, a subject that is highly pertinent for the variety of reasons that previous speakers have clearly described. Our Group is particularly involved in the funding of those structures and infrastructures required by the healthcare sector. We provide various kinds of specific funding to healthcare structures throughout Italy. We try to play a leading role, such as when our Group set up a substantial supplementary healthcare fund for companies and businesses. We try to flank those upstream sectors, such as R&D, as well as those sectors parallel to, or downstream from, the healthcare sector, such as the important pharmaceutical sector. Our actions aim not only at disbursing loans by also at providing investment facilities: our bank has equipped itself for this as well, because in a great many cases venture capital, and not only credit, is called for. Our conferences also focus on the potential cooperation of the public and private sectors. In all of these contexts, our bank plays a fundamental role in the development of infrastructures and in providing opportunities for innovation, through BIIS, successfully governed and developed by Mario Ciaccia since its very inception. During the course of this conference I have made notes on certain points that have emerged, and have tried to put them in some logic order. Today a considerable number of these points have emerged, and I believe that it has been a significant learning experience for a great many of you, or at the very least an additional insight

into the health and healthcare sectors. Health, and thus healthcare, is a number one priority for all of us. Together with employment, any survey of what people consider their priorities to be will invariably end up focusing on the question of health and healthcare. Today we are therefore discussing one of the most important issues of all, both for us as individuals and for society as a whole, due to the importance they have for the preservation of society, for social cohesion, for our own lives and for those of our families. However, healthcare and health are also extremely important from the economic point of view, as they represent key drivers of growth, constituted by sectors characterised by considerable innovation and research, together with a vast range of services personal services in particular. The numbers speak for themselves: this is one of those sectors where by investing one unit you obtain two, and there are very few sectors where investment has such a beneficial effect on the economy. Therefore this is a sector where investment generates substantial returns and a positive effect not only within the sector itself, but also on the whole of society, from the universities where research and teaching is conducted, to the local communities that are being served. In other words, the healthcare sector is one that generates considerable energy. All of todays discussions, together with the last roundtable, have pointed to the fact that the health sector is one area where we are gambling with the very credibility of the transition towards federalism. This is undoubtedly the area where judgment will be passed as to whether we are really serious and capable of obtaining the efficient, solid form of federalism that we are all claim we are pursuing. In this we are guided by Article 32 of the Italian Constitution, which very clearly states that the safeguard of ones health is not only a fundamental individual right but also a collective interest. I mention this constitutional maxim simply in order to emphasise the real importance of the countrys healthcare system. Of course, healthcare also constitutes a fundamental part of Italys government finances: we have spoken of this at some considerable length, and a number of points have clearly emerged from the discussion. Healthcare spending is second only to social insurance spending among the various items of public expenditure, but it is in danger of becoming the most important, and an unbearable burden on Italys national budget if we fail to deal with the dynamics in question in an intelligent, determined manner. If we fail to act, or if we let things drift along, then the current trend could lead to this item of public spending rising from the current 115 billion euro which in reality is 140 billion euro if we include private healthcare to a massive 400 billion euro. The timescale could be established more precisely, but in any case the medium/long-term dynamics of said spending are going

to lead to the doubling, through inertia, of the burden of healthcare spending on Italys GDP. Of course, we are capable of dealing with this problem, and as Rosy Bindi rightly pointed out, this is an area in which we have already been successful in the past. However, increasing life expectancy, which someone described as a disaster from the accounting point of view it may well be a disaster, but it is without any doubt a considerable achievement for our civilisation leads to a massive rise in costs, given that three-quarters of healthcare spending is concentrated on the 65-and-above age category, and when the over-65s account for almost the majority of the population, it is inevitable that overall healthcare spending is going to rocket. Scientific and technological innovation, as the experience of Italy and other countries has proven, whilst resolving certain problems, also contributes towards increased overall expenditure. Thus we have to do everything within our powers to ensure that our healthcare, and the health service system in general, remain both solid and sustainable. In order for this to happen, we need to reason in the medium and long term. Often we plan things in Italy with a limited timescale in mind, whereas in this specific case we really must think in terms of 10, 20 or 30 years from now, if we want to establish the conditions required for this fundamental cornerstone of social cohesion to remain in place. As a nation we have had to deal with another problem which appeared ready to go off in our faces, namely that of the envisaged cost of pensions. However, we have managed to cope with a problem that could well have endangered Italys entire public spending, and we have succeeded in reorganising it in a more easily controllable manner. With regard to healthcare spending, a number of measures have been launched, but there is probably still a lot to be done for this very substantial area of expenditure to be channelled towards sustainable levels of service and costs. As has already been pointed out, this must not represent an end in itself, but it is our responsibility to see that this aspect is not neglected, given that we are well capable of ensuring that the overall expenditure required to guarantee a good healthcare system is compatible with Italys government finances. We think that the healthcare system, not to mention the overall health system in Italy, is a valid, sound system more than one speaker has already said as much and this is objectively proven, with many international institutions placing the Italian healthcare system up there with the best in the world. However, as often happens in Italy, the overall average conceals a certain number of areas of excellence as well as a number of absolutely disastrous situations, and therefore we should not settle for the fact that on average our healthcare system is satisfactory, but we need to valorise that part of the system which is at the very forefront, whilst resolving those situations which drag

the average down. There are numerous areas for improvement, in terms of the medium and long-term sustainability of the healthcare system, and we could begin to deal with them immediately, pulling together all areas of society. It is clear that the cornerstone of this system is, and shall remain, public; however, we recognise the need for the increased involvement of the private sphere, duly governed and managed, together with the growing, increasingly irreplaceable role of the third sector. There has been talk of this, albeit perhaps not to a sufficient degree: in the health and healthcare sectors, a strong public structure can be, and indeed needs to be, accompanied by the growing presence of both private and non-profit-making concerns. Just a while ago something was said which I fully agree with, i.e. that the private concern competing, or in any case present, within a local area must be of a similar quality to its public counterpart, and vice-versa. If we examine the worst cases in Italy, we do not find an excellent private sector and a terrible public sector: as a rule, the quality of the two components, due to very similarity of their behaviour, tend to perform similarly within a given geographical area. This is a sector in which in order to trigger change, a broad consensus is required, since this sector affects the quality of life of all of us. Regardless of local differences, or of ideological or party-political differences, this is a sector where agreement must be reached by all the social players in question, and in this sense we hope that we have taken a small step in this direction during the present conference, which has revealed considerable room for improvement, both long and short term, in many cases. We only have to compare the performance of different Regions. We only have to see how different areas of Italy, and different components of our nation, have behaved when faced with the same problems, to realise that we already possess the solutions, since a large part of Italy boasts a wealth of experience in the excellent administration of healthcare. I have summarised the ideas that appear to have emerged during the course of the day into three categories: I have almost certainly forgotten certain others: some concern the organisation of the system taken as a whole, others concern the management and streamlining of the health service, whilst others regard the financing of the system. While these aspects are all interconnected, they need to be analysed and evaluated separately. As far as regards the general organisation and set-up of the health service system, it seems clear that if we wish to optimise the said system, then we need to consider the entire chain as an organic whole. As things stand, disease prevention, health and medical care are in practice separated to a certain degree. For example, medical

assistance, which is still largely the responsibility of local councils, is not always integrated with the systems health component, which remains the responsibility of regional government on the other hand. Due to the nature of the requirements we have mentioned, the management of these three broad areas in an integrated manner appears to be the best approach possible. More than one speaker has mentioned the problem of lack of information. For example, when one wishes to know the entity of healthcare spending within the framework of the government finances, one encounters considerable problems. We do not know to what extent other types of problem are included within the remit of the health service when they could be managed and resolved better by other structures. The various speeches made during the course of the conference have clearly shown that certain questions are dealt with at national level and it would make no sense to decentralise their governance - whilst others are necessarily delegated to local government level. Moreover, some of the questions dealt with locally are the responsibility of regional government, whilst others are handled at local-district level. Another thing that has clearly emerged is that in certain cases, contrary to what currently happens, certain decisional levels affecting the performance of the health service require greater clarification. When discussing such issues, various functions emerge: the planning and programming of requirements, and the definition of general policies; checks and controls, which represent a different administrative question to that of the management of service demand; the management of the supply of health services, the procurement of health services, the accreditation system and the various forms of production of the services themselves. Being so multifaceted, the health system needs to be seen from an integrated, organic perspective, whilst at the same time preserving a series of clearly distinct roles. The regional governments that have proven to be the most capable of managing health and healthcare services, are those where different responsibilities are managed separately, whereas the worst services are often characterised by the intermingling of roles. The management of current spending and that of investment spending are two questions affecting one another. If we consider the economic performance of certain regional governments, we can clearly see that investments made at the right time and in the right areas have enabled those services to vastly improve their levels of efficiency and efficacy. One of the most important issues that have emerged regards the management of change: if the requirements determining health service demand change, then the nature of the supply of said service, designed to satisfy those requirements, must also change. Therefore, while hospitals certainly remain of key

importance above all for the treatment of acute cases, those facilities or units offering post-hospital or para-hospital care, or that represent in any case an alternative to hospital care ranging from home visits to all those facilities offering local healthcare services, are of equal importance. This host of facilities and structures is where that half of health service spending, currently earmarked for chronic diseases, could be better organised and could produce considerable savings by avoiding a substantial number of unnecessary hospital admissions of patients with illnesses that do not require hospital admission. This is where as several people have already pointed out we see the importance of local health services spread across the country, constituted by local GPs, pharmacies, and all those structures constituting the healthcare network, home-based or otherwise - which needs to be integrated and to be provided with the necessary infrastructures. If we could manage these four or five levels in an integrated manner, thus permitting them to be mutually beneficial and enabling us to send different categories of patient or sufferer, on the basis of their illness or susceptibility to illness, to the most suitable structures, then this alone would enable us to make very substantial savings. With regard to parameters, i.e. the basic service levels which have to be maintained but change from one situation to another, the standard costs which must converge towards the optimal national benchmarks, and requirements, it has been said that quality parameters are perhaps not high enough. Costs and volumes determine requirements, but if they are not accompanied by minimum levels and standards of care, they may give completely different results to those expected. The issue of parameters of planning and control can lead to vast improvements in the management of the National Health Service. Great care is called for, and situations where no control is exercised, where losses are made or where results are still unknown unfortunately still the norm in many cases - can no longer be tolerated. Authorities must be put under the administration of an external commissioner if necessary, and all cases of corrupt or poor management must be effectively resolved. Furthermore, there is considerable room for savings when it comes to acquisitions: how is it possible that acquisitions at national level have yet to be optimised? I would like to pose this question to those who have talking about doing so for years now. Then there is the extremely important question of investment. I would like to point out, once again, that without the right kinds of investment, both in hospitals and in local healthcare facilities, results cannot be obtained in terms of either service quality or cost containment. Information technology is not in itself enough to guarantee the improved quality of those services provided, although it may permit us to achieve levels of cost efficiency which would be otherwise unimaginable. This is not by chance

that the President of the USA has decided to invest some 100 billion dollars in health service information technology alone. It is hardly surprising that such a level of investment is witnessed in the USA, where the sustainability of health service spending represents the greatest threat to the overall sustainability of that government finances. In the United States they have realised that the improved management, flow and availability of information, both for those who operate the system and for its beneficiaries - the citizens who must be in a position to compare and verify what actually happens in their local area or region, are the necessary prerequisites for the achievement of those targets set. Investment leads to training, which various speakers have rightly emphasises the importance of. The third section of this summary concerns the ways in which this sector, which is inevitably going to become increasingly important in coming years both in absolute terms and from the point of view of its weight vis--vis the government finances, must be funded. Obviously, statutory health service contributions and general taxes will continue to contribute greatly towards paying for the health service. Undoubtedly more needs to be demanded in terms of individuals contributions to the funding, at least in part, of the cost of those healthcare services they receive, on the basis of their respective incomes. A lot could be done using mutual funds and the like, which should not replace but supplement other forms of funding; they could make up, also in terms of service provision, for what the national health service cannot, or does not wish to, offer. As regards the insurance sector, up until now we have not been very successful on long-term care insurance, at least as far as concerns certain types of non-selfsufficient; however, this sector needs innovative new solutions. Capitalisation mechanisms are probably not those best suited to the healthcare sector, at least not in a country like ours, although in other cases mentioned beforehand, such as that of Germanys mandatory insurance scheme, which show that given certain figures and certain approaches, insurance mechanisms can be extremely beneficial. From this point of view, the tax system could do a lot, since encouraging and rewarding certain forms of funding may well be a burden in the short term, but an enormous relief in the medium term. A great many ideas have emerged during the course of the day which I have not managed to summarise in these final observations; nevertheless, this brief list of points I have raised concerning the nature of the healthcare services supply, the efficiency of the provision of said services, and the financial management of those services, shows just how useful the contributions of the various speakers taking part in this conference have been. We have spoken, and we will continue to speak, about

healthcare as one of the most important aspects of the management of Italy, both from the economic point of view and in terms of the very cohesion of Italian society as such. There are no easy solutions, and though we all know that current healthcare spending is unsustainable, the means are available for rendering it sustainable. We believe that the welfare system is one of the great achievements of our civilisation: undoubtedly it needs to conform to ongoing changes, including demographic change, but it would be disastrous if that system were weakened. Healthcare is one of the fundamental components of the welfare system, and as a bank we feel very much involved in it. Any suggestions or ideas from this sector, and from society in general, designed to improve the role we currently play, are highly appreciated. For this reason, I would like, once again, to thank all of todays speakers and the audience, and I genuinely believe this has been a worthwhile experience for all concerned.