"This project was created by doctors and for doctors," says Tomáš Mládek, executive director of IZIP, the company they created to market the system. "We just wanted to help ourselves."

The doctors eventually sold the system — also called IZIP — to Všeobecná zdravotní pojišťovna (VZP), the country's largest health insurer. VZP was convinced it would save the company money in the long run by reducing redundant medical services, including standard tests that are often repeated when a person changes doctors.

Over the past four years IZIP has been praised for just that, but earlier this month, Health Minister David Rath publicly criticized VZP's investment of approximately 300 million Kč ($11.9 million) into the database, calling it a complete waste of money.

Rath's criticism of the system, which he supported as president of the Czech Medical Chamber in 2002, is one of the most recent examples of the war the minister has waged against VZP since taking office the first week of November.

Rath appears to be blaming VZP for the country's deeply indebted healthcare system, saying the company has been financially irresponsible. But industry experts say VZP is being made a scapegoat for a dysfunctional system that in fact the Health Ministry has mismanaged all along. VZP is a state-owned company, and therefore must follow the Health Ministry's directives and regulations.

How things got so bad

The minister placed VZP, which insured more than 6.5 million people here in 2004, under forced administration Nov. 10, citing the company's 10 billion Kč debt as the primary reason behind his decision.

He appointed Antonín Pečenka, the company's former deputy director, as the new administrator, giving him oversight of all management at VZP. Under forced administration, a state appoints an overseer, who takes control of management responsibilities at a struggling company.

Rath also called on Director Jiřina Musílková to resign.

The Health Ministry says the move should improve healthcare coverage by stabilizing the insurer's finances, though it is already threatening the coverage of some patients and the care on which they've come to depend (See related story, page A1).

The ministry is "concerned that further uncontrolled activities of the current VZP management would only lead to increasing VZP's debt and devastate the financial flow between health facilities and VZP," the ministry said in a statement Nov. 10.

Critics argue, however, that the government is at fault for VZP's debt and that forced administration won't solve the country's healthcare woes.

Philip Hemmings of the Organization for Economic Cooperation and Development says the main problem is that the financial side of the healthcare system is not functioning as originally intended.

The country's nine health insurance providers, all of which are state controlled, are supposed to strike payment agreements with healthcare providers for reimbursing medical services. But for years the negotiations have been so unsuccessful that the government has had to step in.

Beginning in 2001, the Health Ministry set reimbursement levels because VZP was unable to come to a contractural agreement with hospitals. The problem is that it raised payments during the next four years. The reimbursement level is now so high that VZP is spending more money than it can bring in through premiums, says Pavel Hroboň, a healthcare consultant who has been employed by VZP in the past.

VZP has had almost no control over managing its finances, says Vladimír Kothera, general director of Metal Aliance, another insurance provider: "VZP's expenses were decided outside the company without giving it [the power] to react by changing contracts."

VZP's financial history seems to prove the arguement. In 2001 the company didn't have any debt, but in 2002 it was all of a sudden 2.5 billion Kč in the red, according to data provided by the company. VZP's debt has increased 3 billion Kč every year since then. By the end of this year the insurer's debt is expected to reach 14 billion Kč.

Hemmings also says the government has tied the hands of VZP and other insurance providers.

The Health Ministry says that it has signed an agreement with representatives of health insurance companies that calls for finding a better balance between expenses and income in 2006.

Wasteful system

While VZP has had little control over how much it spends, it's had the added problem of operating within a system that many specialists say encourages people to overuse medical services.

Health care in the Czech Republic fully or partially covers 8,751 drugs, significantly more than in other European Union countries, says Jana Mikotová, executive director of the International Association of Pharmaceutical Companies.

Insurance companies such as VZP have to foot the bill for all covered medical services, including drug prescription, because the government has consistently rejected introducing co-payments for medical services. Insurers simply have to follow the Health Ministry's directives.

Not everyone is against forced administration. Milan Kubek of the Trade Union of Doctors in the Czech Republic says it was "a logical outcome of a prolonged crisis." Indeed, doctors have blamed VZP for failing to pay healthcare providers on time, a grudge that came to a head in October when doctors went on strike.

Most experts say placing VZP under full government control won't turn the healthcare system around.

"It's necessary to reform the whole system and change the principles of how coverage is set, for drugs in particular," Mikotová says.

The government has so far lacked the political strength to change the system, according to Hemmings. The ministry will need to keep a leader in office for more than a few months — there have been four health ministers since April 2004 — to implement reform, including increasing co-payments and revising the list of reimbursable drugs.

"The real problem is that [government officials] know they should be doing these things, but there's a lack of continuity in political leaders on the health side," Hemmings says.