Keywords

1 Introduction

During the transition, in 1993, the Croatian healthcare system underwent profound changes demarking it from the system established in the communist period. Reforms took place in all three dimensions of healthcare: financing, regulation and provision. This chapter focuses only on reforms in the financing dimension and its regulation (Rothgang et al. 2010). Healthcare financing in the communist period was characterised by formally established social ownership, self-management and decentralisation based on Bismarckian principles. The reforms in the early 1990s tackled the deficiencies of the communist system. They departed radically from its principles and established a mix of financing policies stemming from the experiences of other Western and Central and East European countries, providing evidence for horizontal policy transfer and learning (Dolowitz and Marsh 2000; Klein 1997). This policy mix established a hybrid system of healthcare financing combining Beveridgean, Bismarckian and market principles as well as radically changing the role of the state. Schmid et al. (2010, 455) argue that healthcare systems are becoming hybrid. Hybridisation of healthcare policies occurs through policy transfer, “the cross-national diffusion of ideas about policy concepts and instruments” (Schmid et al. 2010, 460). Although their research includes only OECD countries, the Croatian case confirms that the trend of hybridisation is present even in non-OECD countries.

Croatia is a case worth investigating for several reasons. First, it is an example of one of the few countries in Central and Eastern Europe (CEE) which had a Bismarckian system during the communist regime. Healthcare financing was decentralised and involved multiple social health insurance (SHI) funds managed by providers and users (Džakula et al. 2014; Parmelee 1985; Šarić and Rodwin 1993). Second, while the idea of implementing SHI diffused across CEE, the reforms in Croatia took the opposite direction. SHI was retained, but it was centralised with the creation of one national health fund closely controlled by the government. At the same time, formal out-of-pocket payments (co-payments and self-medication payments) (Kaminska and Wulfgramm 2019) and two different forms of private insurance were instituted. This has effectively created a hybrid financing system (Chen and Mastilica 1998, 1157; Vončina et al. 2007; Kovačić and Šošić 1998). And third, transition accompanied by war has made Croatia an extremely vulnerable country in dire need of international aid where, consequently, one would expect international organisations to have greater bargaining power and leverage. However, the direction and ideas for reform were defined by domestic actors, while international organisations had only a minor influence or none at all.

This chapter answers two research questions: (1) How and why did reforms in the financing of Croatian healthcare move towards a hybrid system in the 1990–1993 period? And (2) what was the role of policy transfer processes in those reforms? The chapter answers the research questions by referring to the elementary and complex causal mechanisms adopted in this volume (Chap. 1). Elementary causal mechanisms explain the production of activities by individual or collective actors that comprise only one causal step, while complex causal mechanisms contain several elementary causal mechanisms which form a causal chain of several causal steps (Chap. 1). Thus, process tracing is used to illuminate the black box between independent and dependent variables (George and Bennett 2005, 206) while holding “the promise of a rich account of how a complex political phenomenon like public policy emerges” (Baker and Kay 2015, 2). In this case, the independent variable is a high level of attention to the issue stemming from the mismatch in healthcare policies and the changing environment (economic and political crisis and its culmination in the early 1990s), while the dependent variable is the 1993 health policy output.

Three complex causal mechanisms are identified: the doctors enter politics mechanism, the old system departure mechanism and the seeking solutions abroad mechanism. The first mechanism explains how doctors occupied key political positions in the healthcare policymaking domain. The second mechanism explains how negative perceptions of the communist healthcare system and intermediary policy solutions led to a departure from the old system. The third mechanism explains how, during the reform process, Croatia scanned policy solutions and drew on lessons learnt abroad. Combined, these three mechanisms form the complex causal mechanism of anti-communist backlash. It explains how the prevailing dissatisfaction with the communist healthcare system, particularly among medical doctors, pushed the reforms in a new direction towards hybridisation of financing. What is more, in all four complex causal mechanisms, different elementary causal mechanisms are identified, such as an emotional orientation, a rational orientation and a comparative orientation.

To reconstruct the reform process, the chapter analyses qualitative data such as media publications, medical journals, laws and parliamentary minutes.Footnote 1 Furthermore, 13 interviews were conducted with experts knowledgeable of the subject, such as ministers and their assistants, healthcare administration staff from the institutions relevant to policy (Ministry of Health, Croatian Institute for Health Insurance and Croatian Institute for Public Health), politicians involved in the healthcare system, but also academics, experts and journalists. The research started with a review of all available secondary literature and then proceeded with the interviews. This chapter is based on an analysis of the collected data using a qualitative content analysis methodology. The mechanisms derived in this chapter were inspired by existing theories and concepts from policy process research, most notably the concept of epistemic communities, the policy transfer literature and punctuated equilibrium theory (Baumgartner and Jones 2009; Haas 1992; Dolowitz and Marsh 2000).

The chapter starts with a literature review on healthcare reforms in CEE countries and Croatia, while also providing an explanation of the role of policy transfer processes in these countries. Subsequently, in Sects. 3 and 4 the chapter explains the context of and the trigger for the reforms. Section 5 identifies the actors involved, their interaction and the activities that produced the reforms. Moreover, it offers explanations for how the reforms produced a hybrid system of healthcare financing in Croatia. The concluding section relates the mechanisms that were identified in this chapter to policy process research and draws some broader conclusions.

2 Healthcare Reforms in CEE and the Role of Policy Transfer

The transition of CEEFootnote 2 countries from the communist regime, which started in 1989, had a profound impact on their health systems. During the communist regime, the majority of CEE countries had a centralised healthcare system named after Semashko. It was characterised by state control of the system, tax-based financing, universal coverage, free provision of health services at the point of use, informal payments, overreliance on hospital services and underfunding (Lawson and Nemec 2008). CEE countries underwent a major paradigm shift and introduced market and liberal reforms into their systems, such as decentralisation by establishing social health insurance (SHI) funds, allowing a free choice of practitioners, privatisation and introducing out-of-pocket payments, while also reducing the hospital sector and developing primary care (Lawson and Nemec 2008; Rechel and McKee 2009).

Although there were many similarities with other CEE countries, the so-called Yugoslav Štampar model was organised on distinctly Yugoslav communist values of self-management and Bismarckian principles whose formal goals were to establish democratic governance through decentralisation and devolution of authority in the decision-making process. The reforms in the early 1990s followed similar principles as in other CEE countries, although Croatia centralised the system and retained the SHI.

In general, the literature on policy transfer processes in CEE countries is inconclusive, suggesting that the ideas for reforms were either exogenous or endogenous. A first strand of literature explains that healthcare reforms in CEE were a result of the influence and pressures of international organisations. It suggests that early transition created a policy vacuum in the CEE countries and that international organisations such as the World Bank (WB), the World Health Organization (WHO), the International Monetary Fund (IMF) or the European Union (EU) seized the opportunity to exert their influence through financing and policy advice (Deacon et al. 1997; Cerami 2006; Kaasch 2015). For instance, Nemec and Kolisnichenko (2006, 15) argue that the World Bank and the IMF were instrumental in providing ideas on marketisation reforms in CEE healthcare systems.

On the other hand, it is suggested that the reform processes were mostly endogenous and that other factors beyond the influence of international organisations accounted for the policy changes (Rechel and McKee 2009; Sitek 2008; Radin 2003; Roberts 2009). Sitek (2008) argues that the direction of change was influenced by the interaction of political institutions, party politics and in some cases professional organisations such as medical chambers. Moreover, the majority of CEE countries wanted to move away from communist policies and looked to Western systems. This suggests horizontal interdependencies in that CEE countries wanted to “emulate the apparent success of models used in Germany and Austria” (Rechel and McKee 2009, 1187) by moving towards “a Western-style insurance system” (Jacoby 2004, 48).

3 The Political and Economic Context of Croatia

After the end of the Second World War, Croatia became a federal republic within Yugoslavia governed by the Communist regime led by Tito. In 1948, after Tito–Stalin split and its culmination in 1952, Yugoslavia embarked on a different path of socialism than that of the other countries in the Eastern bloc—the path of self-management socialism (Ramet 2002). Self-management introduced social ownership and self-managing interest communities (SIZ—samoupravne interesne zajednice) in which workers could participate in the management of their enterprises. This type of governance was also reflected in public services such as healthcare, education and social welfare (Ramet 2002). However, there was a discrepancy between the formal authority of SIZs and the authority of provincial and republic governments. This “democratic centralism” (Sunić 1995, 67) “in which two parallel structures exercised jurisdiction in the same area, was mocked as SIZ-ophrenia” (Ramet 2002, 9).

After Tito’s death in 1980, different ideas emerged on the future organisation of Yugoslavia. Serbia wanted to maintain its hegemony in a centralised federation, while Croatia and Slovenia were favouring a loose confederation or independence (Žižmond 1992). Moreover, a severe economic crisis plagued Yugoslavia during the 1980s and already in 1981, foreign debt amounted to $19.2 billion (Ramet 2002, 10). The economic crisis came to a head at the end of the decade. GNP and labour productivity decreased, while unemployment increased and hyperinflation ensued (Žižmond 1992). As the pressures of political and economic crisis were mounting, the Communist Party was losing its legitimacy and was pushed into holding the first multiparty elections in 1990. The elections established a new party in power, the Croatian Democratic Union (Hrvatska demokratska zajednica, HDZ). HDZ was a pro-reform right-wing party oriented towards breaking with the communist past, independence for Croatia, democratisation, liberalism, pluralism and transition to a market economy (Milanović 2011; Dunatov 2010).

Due to the perceived political and economic crisis, HDZ opted for the introduction of a semi-presidential political system with a strong presidential figure (Boban 2008). After coming to power, HDZ purged policy venues and appointed people loyal to them in public administration and the judiciary, facilitating even more control over policy processes at the time (Ramet 2013, 37). Therefore, the transition to liberal democracy was severely limited. In the 1990s, Croatia was a defected democracy with limited pluralism, dominance of the president and widespread corruption (Ramet 2010, 259).

The ground was set for the dissolution of Yugoslavia when Croatia and Slovenia proclaimed independence in 1991. However, the dissolution was followed by the war in 1991 which lasted until 1995. At the end of 1991, Croatia lost control of 30% of its territory, 40% of industry was destroyed, income from tourism dropped by about 80% and inflation and unemployment increased (Ramet 2013, 38). Between 1991 and 1993, Croatia experienced a decline of about 31% in GDP (World Bank 1995). Moreover, a large population of refugees from occupied Croatian and Bosnian territories came to Croatia (Hebrang et al. 2007). For all these reasons, the financial revenue of the healthcare system dropped considerably. Compared to 1991, the revenue dropped by 62% in 1992 (Hebrang 2015).

4 Financing of Healthcare in Croatia: Historical Background

The history of SHI in Croatia can be traced back to the times when Croatia was part of the Austro-Hungarian empire. A first form of SHI was introduced already in 1891, although its coverage was very limited. Afterwards, SHI went through a number of changes in 1907, 1922 and 1937, mostly expanding the coverage to a wider range of workers and including more health services (Zrinščak 2003). In Yugoslavia, Croatia followed a similar path to other CEE countries by abolishing SHI and instituting tax financing from local, district, republic and federal levels (Parmelee 1985, 720). However, SHI was reintroduced, thus supporting a new “third way” of self-management socialism.

The model of social ownership and self-management was most explicitly defined after the passage of the 1974 Constitution, which was followed by the 1976 and 1980 Healthcare Acts (Ivčić et al. 2017). During that time, healthcare was heavily decentralised and inefficient. It was organised on socialist principles of expanding health services, “free” healthcare and solidarity (Šarić and Rodwin 1993; Džakula et al. 2012). These formal goals could not be achieved with the financial organisation of a system governed by 113 self-managing interest communities which acted as SHIs, collecting funds according to the Bismarckian model of payroll taxes (Parmelee 1985). In theory, “every local and republican self-governing medical unit managed its own affairs, with a high level of financial independence” (Džakula et al. 2012, 69). However, there was a discrepancy between the self-management component and the influence of the Communist Party.

Parmelee (1985, 725) notes that “SIZ professional administrative staffs are almost constantly accused of usurping the decision-making prerogatives of the self-managed SIZ assemblies, and acting little better than the state bureaucrats they were meant to replace”. There was

a fairly established practice of political interfering in the internal organisation of health care institutions and in particular with personnel policy. It has often been the case that these authorities impose administrative staff who have been unable to find employment elsewhere. (Popović and Škrbić 1968, 89)Footnote 3

The power and influence of the Communist Party permeated all levels of governance, be it local, republic or federal with only a few exceptions. This kind of system was also reflected in the position of medical professionals in the healthcare system. Following the establishment of the Yugoslav state, all professional associations (except lawyers) were disbanded due to ideological reasons. As a representative of the professional interests of doctors, the Croatian Medical Chamber was banned and its properties seized already in 1946 (Ivaničević 2015). The position of the doctor was equated with the position of a regular worker in service to society, the regime and the economy. With the expansion of self-management in the late 1960s and early 1970s, medical professionals could exert more influence in medical facilities and SIZs, mostly because of the asymmetry of information between users and providers (Ivčić et al. 2017), but again no major changes could have been made without the approval of the Communist Party.

We [the doctors; my emphasis] assessed this attitude towards the tendency to develop self-government as quickly as possible in our country as negative, and still believe that the responsibility for healthcare management often goes hand-in-hand with a certain monopoly which ignores the growing demands of reducing the dominance of public administration in decision-making. (Ferber and Knežević 1969, 133)

No one could work in SIZ, there were some exceptions, if one was not a member of the Party because everything was conducted through the Party so that there would be no rebellion or any protests. One received a position along the Party line from which one had some material gain and had to be silent regarding the issues (emphasis mine). On paper … you said it yourself, patients, the population was electing people to those governing bodies, but the list had only Communist Party members. (Hebrang, interview 2019)

Doctors voiced concerns about low salaries, difficulty to find employment despite the lack of doctors in the system, emigration of doctors, accusations of taking bribes and difficulties of retired doctors (Ferber and Knežević 1969). It was emphasised that “doctors should be more involved in health policy, especially in relation to staffing and funding, which, in the current framework, makes full self-management impossible” (Ferber and Knežević 1969, 142). The result was a disoriented system which suffered from disorganisation and bordered on anarchy (Džakula, interview 2019; Mastilica, interview 2019). Moreover, there were huge discrepancies between different regions in terms of financing, quality and access to services (Šarić and Rodwin 1993; Chen and Mastilica 1998). With the culmination of the economic and political crisis these problems became highly apparent and a radical reorganisation of the healthcare system followed in the 1990–1993 period. Prevailing dissatisfaction among medical professionals with their position within the healthcare system pushed them to become involved in politics where they figured prominently, being key actors during the transition period and healthcare reforms of the early 1990s.

5 The Croatian Healthcare Reform Process 1990–1993

In the 1980s, the economic crisis severely decreased the pooling of funds for healthcare. During this time, the discourse in healthcare slowly started to change. Several publications started to introduce new terms into healthcare discourse which also permeated the media, such as “co-payments”, “supply and demand”, “efficiency” or “cost benefits” (Ivčić et al. 2017; Ivčić and Vračar, interview 2020). The period of the late 1980s and early 1990s marked a turning point in Croatian healthcare for which only 3.6% of GDP was allocated (Hebrang 1990a, 10). In 1989, a new communist government led by Ante Marković initiated economic reforms to curb growing inflation and national debt while at the same time introducing aspects of a market economy and limited privatisation. The new minister of health, Mladen Radković, started to prepare a major reorganisation of healthcare and initiated a programme called Basis (Osnova). The idea was to introduce individual responsibility for health through an expansion of co-payments and to reorganise the financing of the system by establishing a two-tier insurance. The first tier would provide financing through a general government budget for basic health services and a second tier would act as a worker’s additional health insurance which was to be covered by the employer (Radković 1990, 7).

Although the discourse was changing and gaining traction, the reform proposal from the new communist government encountered many obstacles. “The reorganisation of SIZs has been under discussion for two years and all these attempts have shown the egoism of the municipalities expressed in the demand for having their own SIZ, that much energy, paper and money has been spent on elaborating the new organisation” (Cvitkušić 1990, 1). Yet, nothing was implemented after the new government came into power (Cvitkušić 1990). Individuals who were benefiting from the existing organisation of the system and who were organised around the Communist Party at different government levels blocked the reform attempts. Despite the mounting problem pressures and an obvious need to reform the system, it was not possible to overcome the resistance, thus preventing any large-scale reorganisation of the system. Once HDZ won the elections and came to power, the new government had different ideas on how to reform the system. The Osnova programme was discontinued and suffered a dismal fate.

5.1 The Doctors Enter Politics Mechanism

The elections and breakdown of the Communist Party and its influence served as a trigger for the whole causal mechanism underpinning the changes. It created a space for new actors and ideas in Croatian policymaking. The doctors enter politics mechanism explains how doctors entered the political stage and occupied key political positions in the healthcare domain. It consists of several elementary causal mechanisms, more specifically an emotional and a rational orientation. On the one hand, the emotional orientation explains that the dominant feelings of dissatisfaction, frustration and marginalisation of medical professionals drove them to become involved in politics.

As Poljak notes in an interview:

Since the war [Second World War], the Croatian Medical Association has had to serve the ruling politics and even work against the interests of its members. One received support from above [The Communist Party] in proportion to one’s obedience … Thanks to the new political opportunities, the Association now has the freedom to oppose and criticise. (Šimunić 1990, 5)

On the other hand, the rational orientation explains the strategic action in which medical professionals seized their opportunity, joined the HDZ and consequently occupied powerful positions in the government, enabling them to exercise influence on health policy. “Although unprepared for the nuances of politics and governance, doctors filled the political vacuum by replacing the ousted lawyers in the new government” (Blaskovich 1997, 81). A considerable number of medical professionals occupied positions in the government, parliament and municipal councils. Medical professionals not only began to be involved in the formal decision-making venues, but also influenced policymaking through the Medical Association and a newly formed Croatian doctor’s union which was established in 1990 (M. V. 1990, 9). The decision-making process in healthcare shifted from being dominated by the Communist Party to being dominated by doctors. Thus, the doctors had assumed the most important political positions and had a significant influence on healthcare decision-making, for example, in the Ministry of Health and later in the national health fund. Besides occupying political positions, doctors acted as an epistemic community (Haas 1992) which had the knowledge and competence to deliberate on the healthcare system, its problems and policy solutions.

A large number of doctors ran for the state parliament and for the municipal councils, parliaments. Why? The doctor is ahead of the great majority in his social environment and understands what is going on and how. Many got involved in it and I encouraged them strongly. (Hebrang, interview 2019)

Count up how many HDZ ministers are medical doctors, all right. From Mate Granić, I mean the medical lobby and by medical lobby I mean top surgeons … professorial level doctors. (Stubbs, interview 2019)

It is no coincidence that in the political life of Croatia, and I do not know if it is the same in other transition countries, but it seems to me that there are many medics, doctors. Even at the highest functions. You see, there was Foreign Minister Mate Granić, a doctor, a professor of the faculty and today Reiner … doctors were very much involved as ministers. (Mastilica, interview 2019)

5.2 The Old System Departure Mechanism

Although many doctors were involved, the most important one was the Minister of Health Andrija Hebrang, as his ideas were largely implemented. Hebrang was a person with a turbulent history and a strong resentment towards the communist regime.Footnote 4 The old system departure mechanism explains the first changes which were introduced in the health system. It consists of an emotional and a rational orientation of policy actors. At the time, negative feelings towards and perceptions of the communist healthcare system were prevalent in the government, parliament and media outlets. This meant that the policies under consideration were quite dissimilar to those of the communist system (Anonymous expert, interview 2019; Mastilica, interview 2019). The media and policymakers discussed the policy failures of the communist system, evaluating its policies not only through emotional, but also through rational appeals, such as lack of accountability, coordination and expenditure controls, heavy involvement of politics or corruption. The following quotes illustrate this:

The self-management dislocated way of financing and decision-making, as well as the incompetence of the staff, is the cause of anarchy in the management of the Croatian healthcare system, which is why we did not achieve an adequate health standard. (Hebrang 1990b, 6)

The legacy of the old system is still in people’s minds. The term used in this law proposal is actually reminiscent of the term healthcare worker. And that sounds just like a port worker, a railroad worker, a foreman and so on and so forth … I ask that doctors should not fall under that Bolshevik phrase. (Štanfel 1993, 6)

Moreover, the crisis in healthcare meant that the policies had to be based on rational solutions that would alleviate its deficiencies, most importantly contain its costs. The mix of the rational and the emotional orientation thus produced policies dissimilar to the communist system which were at the same time based on the rational deliberation of the situation in which

the money to cover health services and accumulated debts was non-existent. Rather, the Communists had funded healthcare by issuing government bonds which had no real value. The value was given by the legitimacy of the Party, but as soon as the Party lost legitimacy it became obvious that debts had to be paid with sound money for the system to survive. (Hebrang, interview 2019)

According to Hebrang, the only rational and fast solution for resolving the situation and departing from the previous system was to introduce centralisation which “goes in terms of financial control, primarily financial because we have come into the situation that without it, we would not have a chance for better days” (Hebrang 1990a, 10). Therefore, the authority of SIZs over financing was disbanded, users and providers no longer had a say in the way financing of healthcare was to be conducted in their municipalities and the responsibility for financing was taken over by one fund called The Republic Health Fund managed by another physician, Mate Granić. Former SIZ authorities now worked under strict control of the SHI fund which established an equal contribution rateFootnote 5 for payroll taxes across the whole country.

SHI lost its Bismarckian principles of decentralised multiple funds and corporatist governance (however limited it was in Yugoslavia) and the government had strict control of the SHI fund by appointing its directors and board of directors; at the same time, it had the authority to dismiss them (Vončina et al. 2007, 147; Pezo, interview 2019). Individuals in SIZ assemblies could no longer rely on the power and legitimacy of the Communist Party to push their agenda and block the reforms. Coupled with the government’s heavy determination towards reforming the sector, the context of policy processes changed and enabled a fast-sweeping reform. A new law was passed after only four months after new government came into power.

5.3 The Seeking Solutions Abroad Mechanism

Centralisation and rationalisation of financing was only a stepping stone which prevented the collapse of the system. Once this burning issue was resolved, policymakers oriented themselves towards introducing new policies which would bring the healthcare system into line with the perceived successes of Western European countries.Footnote 6 Here the seeking solutions abroad mechanism, consisting of an emotional, a rational and a comparative orientation, can provide an explanation. The mechanism explains how policymakers wanted to move away from the communist policies by scanning the policy solutions abroad and implementing those that were best suited for the Croatian context. The emotional orientation explains the role of the media and the policymakers in propagating dissatisfaction with the communist system and a need to further depart from it. It can be said that such a perception of the communist system was prominent in all three causal steps.

Moreover, the comparative orientation reflects the position of policymakers to emulate the perceived success of the West, look for policy solutions elsewhere and draw lessons from other countries. Here it is important to note that the Minister of Health (Andrija Hebrang) had, as a physician in Yugoslavia, travelled to Western countries to attend medical conferences. During his time abroad, he learned about the organisation of healthcare in these countries, most notably the USA and Germany (Hebrang, interview 2019). Learning from his experiences abroad, the minister favoured a radically different organisation of healthcare financing which would introduce neoliberalFootnote 7 policies based on market principles which had already been introduced in many European countries (Šimunić 1990, 7).

As other CEE countries were also in the process of transition, the Ministry of Health had set up an office for evaluating and comparing the policies which were being introduced in countries facing similar problems. This facilitated the process of gathering experiences from other countries. Thus, in the third step, the rational orientation explains how different policy solutions were being evaluated according to their costs and benefits and how they could fit into the Croatian context. The transfer of policy experiences from other countries initiated by the Ministry of Health sought to, on the one hand, avoid the negative consequences of the reforms implemented in other countries and, on the other hand, implement the reforms that proved useful, thus taking into consideration the consequences of alternative courses of action.

The minister’s experiences abroad and the designated office in the Ministry of Health enabled the process of horizontal policy transfer by evaluating policies in other countries, be it CEE or Western ones, in order to draw positive and negative lessons. For example, the experiences and adverse effects in the Czech Republic (Hebrang et al. 2007, 2), which established a “pluralistic semi-competitive insurance-based system” (Earl-Slater 1996, 16), and the USA, where “small business employees are completely unprotected from the negative side of the healthcare market” (Hebrang 1993, 7), have served as a lesson to approach marketisation and privatisation policies carefully. On the other hand, positive learning stemmed from Western Europe.

Among the many organisational forms that are possible in the financing of the health system, we have selected those which have the most favourable ratings in the world based on the experience of others. (Hebrang et al. 2007, 3)

In Europe, there is a sensible combination of the state or SHI funds and private initiatives. Why is that important? Because it brings competition while keeping solidarity. That is the most delicate balance a healthcare system should have. Competition increases quality, lowers service prices, and at the same time you have to keep that social component. (Hebrang, interview 2019)

Individual responsibility for health, co-payments and private insurance schemes appeared on the agenda. Despite heavy criticism in the media, a law which increased co-payments up to 10% for selected healthcare services (Kovačić and Šošić 1998, 4) was supported by the government and was passed by parliament in 1991. The law established co-payments for drugs, visits to primary care, specialists, diagnostic and hospital treatments, among others, while parts of the population such as children or the elderly were exempted (Kovačić and Šošić 1998, 4). Such policies increased the trend of commodification of healthcare. A survey conducted by Mastilica and Chen (1998) shows that over half of the respondents had great or very great problems with out-of-pocket expenses. At the same time, the introduction of private insurance schemes was postponed due to the ever-increasing political crisis and the expected dangers of war. The healthcare system was turned into an integrated military-civilian system. Many doctors were mobilised into the army or were required to serve in reoriented war hospitals. At the same time, the system had to provide healthcare services to civilians in areas not affected by war (Hebrang 2015).

Once the Serbian aggression and advance subsided in the 1992–1993 period, the ground was laid for the formulation of two encompassing healthcare laws. These laws established the Croatian Institute for Health Insurance with 21 regional branches, replacing the former Republican Fund and completely eradicating former SIZ bodies. The perception was that “the state insurance principle … has given the best results in Western countries” (Hebrang et al. 2007, 3). Moreover, a limited space for private insurance market operations was introduced. One form of private insurance was supplementary, covering additional and better quality of health services on top of the mandatory SHI, for which citizens could apply in the private insurance market. The second form, according to the German model, was entirely private health insurance. Eligibility for coverage of citizens was determined by an income above a threshold specified by the Minister of Health and entailed opting out from the mandatory SHI.

Thus, two types of private insurance were reserved for people with high incomes who wanted to have a better standard and coverage of health services. The government introduced market policies and limited competition in the private insurance market while at the same time preserving solidarity and access to healthcare for a majority of population which was insured by mandatory SHI operating under the Croatian Institute for Health Insurance. Again, both the comparative and the rational orientation is evident as the Ministry of Health tried to avoid “the traps of sudden privatisation, which has yielded very poor results in the healthcare of some post-communist countries” (Hebrang et al. 2007, 3). The goal was to slowly expand the private health insurance market which would have an increased role in the years to come.

My idea was to make eighty to ninety percent of the system social, and ten to twenty percent which would go to the market in order to level it all together, and that’s why supplementary insurance and co-payments were the first attempts, and it worked until the 2000s when we lost the election to the leftist parties. (Hebrang, interview 2019)

The goal was never achieved and the private insurance market was only used by few people. For instance, almost ten years after the reforms, “in 2002, private health insurers reported annual revenues of HRK 962 million (EUR 130 million) or roughly 6% of total health expenditure” (Vončina et al. 2007, 151). However, the institution of a single SHI fund managed to curb healthcare expenditures, pool additional funds and save the system from collapsing. “The debts of the previous system have been eliminated and in 1995 a surplus was accumulated to pay for new capital equipment” (WHO 1999, 46).

Apart from implementing horizontal policy transfer, the Ministry of Health sought help from international organisations as well. However, due to the severe political crisis the presence and influence of international organisations were limited.Footnote 8 These organisations were extremely careful not to engage in healthcare projects in a country that was at war and not recognised by the international community (Stubbs and Zrinščak 2007; Hebrang, interview 2020). This was especially the case with the World Bank, IMF and the EU PHARE programme because they offered financial aid for development projects. Ironically enough, this extreme vulnerability actually inhibited the presence of international organisations in the country.

Nevertheless, the minister wanted advice for the initiated reforms and the only possible venue he could turn to was the WHO because its expertise is not reliant on financial aid or strong conditionalities (Kaasch 2015; Deacon 2007). The WHO and its general message of abolishing health inequalities, achieving universal coverage, solidarity and risk pooling was a perfect match since the minister did not want to risk solidarity with the introduction of market and private initiatives. The problem was that the WHO recognised only Yugoslavia as a partner and not Croatia. Thus, the minister used informal connections to meet with the WHO president of the European Regional Office, Jo Asvall, who agreed to set up a small office in the Croatian Ministry of Health in 1991.

[Asvall] tasked one of his men to communicate with us: “I said I don’t need you for money, I only need you for advice. I’ll tell you a problem, you give me advice. Whether or not I will listen to it depends on the situation.” And this man was phenomenal, coming once a month for two to three days. I would invite my co-workers, we talked and filtered out a lot of our uncertainties. (Hebrang, interview 2019)

A working group consisting of domestic and WHO experts was established to work on the formulation of new healthcare laws which were passed by parliament in 1993. Other international organisations were not present in the reform process, while the World Bank only became involved in 1995, supporting the initiated reforms with financial aid and a healthcare project. The World Bank and the WHO praised the introduced reforms and even admitted they could serve as a model for other Eastern European countries (Hebrang et al. 2007; World Bank 1995).

5.4 The Anti-communist Backlash Mechanism

To recapitulate, the dynamics of the reform process can be explained by three complex causal mechanisms: the doctors enter politics mechanism, the old system departure mechanism and the seeking solutions abroad mechanism. The first mechanism explains how the prevailing dissatisfaction towards communist policies drove doctors to get involved in the reform process by joining the new ruling party and occupying key political positions in the healthcare domain. The second mechanism explains the first part of the reform process in which the newly introduced policies were as dissimilar as possible to the communist system while at the same time providing a rational foundation for resolving the deficiencies of the healthcare system. The third mechanism explains the second part of the reform process, namely, the departure from the negatively perceived communist legacies by looking to Western Europe, drawing lessons from other countries and implementing policies which suited the Croatian context according to their perceived costs and benefits. These three complex causal mechanisms form the combined mechanism of anti-communist backlash. It explains how the prevailing dissatisfaction with the communist healthcare system, particularly among medical doctors, pushed reforms in the opposite direction and initiated a search for “non-communist” policies abroad.

5.5 Hybridisation of Healthcare Financing as the Output of the Reform Process

The output of the described reform process was a hybrid model of healthcare financing and its regulation. SHI insurance accounted for most of the revenue in healthcare (93% in 1994), more than in 1980 (74%). A negligible number of people signed up for the two types of private insurance, while co-payments remained constant at around 2%. However, the revenue from co-payments is understated and “not necessarily included in the national accounts” (WHO 1999, 13). Other sources were subsidised by the state budget (prevention, education, statistics, etc.) and county budgets (special programmes and healthcare for elderly peasants) (Kovačić and Šošić 1998, 4). Table 8.1 represents the sources of income for Croatian healthcare during the 1990s.

Table 8.1 Financing sources for the Croatian healthcare system
Full size table

Although the revenue from SHI increased, there are arguments to be made that Croatia actually moved away from the SHI model, introducing Beveridgean and neoliberal principles. First, self-governance where users and providers negotiated the scope and price of healthcare services through SIZ assemblies was abolished. Second and inextricably linked to the first argument, the decentralised and fragmented health system consisting of 113 health funds was abolished in favour of one national SHI fund, the Croatian Institute for Health Insurance, which holds a monopoly in the SHI market. In theory, the Croatian Institute for Health Insurance established a form of corporatist governance as the managerial board consisted of representatives of employers, medical professionals and patients (Croatian Parliament 1993).

However, professional organisations or unions in Croatia are largely underdeveloped and their influence in decision-making is marginal. The medical professionals’ organisations are an exception (Škaričić, interview 2019; Rukavina, interview 2019; Radin, interview 2019; Belina, interview 2019). Thus, corporatism is severely limited and in practice the Croatian Institute for Health Insurance is just an extension of government politics as the fund implements policies already agreed upon at the governmental level (Vončina, interview 2019; Anonymous expert, interview 2019). “The observation that everything happens in one place is only partially correct. Everything is happening in one place, which is the government, i.e., the Ministry of Health. The Croatian Institute for Health Insurance only implements a specific policy” (Hebrang 1996, 4).

Third, although the system was stabilised, once the debts started accumulating again, the government has, more often than not, covered these debts through government budget transactions.

Every year we are 2 to 3 billion kuna [HRK, Croatian currency] in deficit and while I was a minister, I always covered it from the budget so I made this mixed Beveridge model … and then I would come to the Government session: now look people I have rationalised this, introduced controls and records. I did everything and cannot go any further. Expenditures are higher because prices are expensive … Every year I have managed to transfer 2 to 2.5 billion HRK from the budget to the health fund and this is how we covered the debts. (Hebrang, interview 2019)

Therefore, incentives to rationalise and curb expenditures are lacking (Anonymous expert, interview 2019) since the government eventually pays for the accumulated debts from the general budget—a form of retrospective tax financing (Mossialos et al. 2002, 69). Thus, the “principle of stable contribution rate” (Giaimo 2001, 351) in an SHI, where equalising revenue and expenditures should figure prominently, is actually non-existent.

Fourth, an explicit basket of services to which insurees are entitled was not defined (Vehovec, interview 2019). Rather similarly to general taxation systems, the Ministry of Health and the Croatian Institute for Health Insurance produced an annual health plan containing “regulations on health insurance entitlements” which had to be approved by parliament (WHO 1999, 10). Although limited, neoliberal principles were also introduced in the healthcare financing dimension, such as a move towards individual responsibility for health, setting up healthcare services as a commodity by instituting co-payments and self-medication payments to private providers and opening a private insurance market.

Thus, a hybrid system of healthcare financing incorporating Beveridgean, Bismarckian and neoliberal principles was created. Practically, the only difference between a true Beveridge system was that the funds were mainly collected by payroll taxes and pooled into an extra-budgetary SHI fund. The arguments mentioned above confirm Steffen’s (2010) conclusions which show that categorisations of healthcare systems are rather difficult and that every country has its own specific policies borrowed from various healthcare models.

6 Discussion and Conclusions

Three causal mechanisms explain the perceptions and interpretations of key policy actors and consequently their action orientation towards reforming the health system in Croatia: the doctors enter politics mechanism, the old system departure mechanism and the seeking solutions abroad mechanism, which together form the combined causal mechanism of anti-communist backlash. It explains the dominant perception of communist policies as a failure, particularly by medical doctors, and searching for new policy solutions abroad. The mechanisms are composed of different elementary causal mechanisms, namely, emotional orientation (prevailing feelings of dissatisfaction towards the communist regime and its policies), rational orientation (strategic actions of doctors, cost and benefit analysis of new policy solutions) and comparative orientation (emulating the perceived success of Western European countries, avoiding policy failures of other CEE countries).

Taken together, this has created a hybrid system of healthcare financing and its regulation based on Bismarckian, Beveridgean and neoliberal principles. In sum, analysing the causal process by dividing it into several causal mechanisms and linking them together into a complex causal mechanism proves to be a useful tool for tracing and explaining the reform process. Moreover, the causal mechanism approach can work across and link different theoretical traditions which aim to explain policy changes, thereby contributing to the existing literature.

The mechanisms in this chapter were inspired by theories and concepts such as punctuated equilibrium theory, policy transfer and epistemic communities. Despite the external pressures of a growing economic crisis during the 1980s, healthcare policy in Croatia remained stable, leading to the accumulation of policy errors which created a mismatch or friction between a changing environment and unchanging policy (Zehavi 2012; Baumgartner and Jones 2009). Baumgartner and Jones (2009, 25, 31) argue that increasing policy failures and increasing problem pressures modify policy images or shared “public understandings of policy problems” which are then coupled to policy venues or “institutions or groups in society” that “have the authority to make decisions”. This process leads to positive feedback which punctuates the equilibrium of policymaking and results in major policy change. In Croatia the same process can be observed.

Policy change in Croatian healthcare was only possible once the policy monopoly (Baumgartner and Jones 2009) of the Communist Party at different levels of government was dissolved. After the communists lost the elections in 1990, a causal mechanism which underpins the changes was triggered. Doctors who were unsatisfied with their position joined the new ruling party and occupied relevant policy venues, while veto actors in the municipalities lost their legitimacy and could no longer exert their influence and block the reforms. The exogenous crisis and endogenous problem pressures within the healthcare system were only a sufficient condition for change, while elections and the installation of a new party in the power structures provided a necessary condition for change. Indeed, Walgrave and Varone (2008, 370) argue that “if parties adopt a new policy image and control the new institutional venue, then it will translate into a major policy change”. After the elections, the negative policy image was able to be coupled with new policy venues which pushed for a reorganisation of the healthcare system.

Doctors figured prominently in the reforms, acting like an epistemic community, “a network of professionals with recognized expertise and competence in a particular domain and an authoritative claim to policy relevant knowledge within that domain or issue area” (Haas 1992, 3). The influence of such an epistemic community was obvious as doctors did not have any competition in the policymaking field. Moreover, doctors occupied key political positions and were crucial actors in formulating new healthcare policies. As they wanted to move away from communist legacies and towards the perceived successes of Western policies, policymakers were involved in policy transfer, a “process by which knowledge about policies, administrative arrangements, institutions and ideas in one political system (past or present) is used in the development of policies, administrative arrangements, institutions and ideas in another political system” (Dolowitz and Marsh 2000, 5). It can be either voluntary or coercive, revolving around a “continuum that runs from lesson-drawing to the direct imposition of a program, policy or institutional arrangement on one political system by another” (Dolowitz and Marsh 2000, 13).

Besides setting up an office within the Ministry of Health tasked with drawing policy lessons from other CEE countries, the Minister of Health already had knowledge about Western policies acquired during his travels abroad. The transfer of policies was completely voluntary and consisted of mostly horizontal lesson drawing from other countries. It was both negative (e.g., CEE, USA) and positive (Western Europe), which served to either avoid the mistakes of others or to add potential policy tools to the repertoire (Klein 1997, 1270). Moreover, it was also a “symbolic act whereby politicians seek to enhance their status, credibility or modernity” (Stone 2017, 61). Therefore, contrary to the literature which states that international organisations exploited the policy vacuum in CEE countries, the Croatian case offers evidence that international organisations were not crucial for the reform process at all. Although the WHO was involved in the formulation of new healthcare laws by providing advice, it has not enforced any conditionalities. The World Bank, however, was involved in the reform process only after the new laws were passed and agreed on health projects with the government in 1995 in order to support the new government agenda.

Such a comparative orientation among key policy actors established a mix of policies, thus radically changing health financing and its regulation from self-management and Bismarckian principles towards hybrid policy. The Croatian case has indeed demonstrated that policy transfer plays a major role in hybridisation of healthcare systems (Schmid et al. 2010; Steffen 2010). As policymakers respond to problem pressures by searching for compatible solutions elsewhere, they develop “distinct policy responses” and “new elements that are not system specific” (Schmid et al. 2010, 460). Croatian policymakers considered policy solutions irrespective of their ideological background except for dismissing anything resembling communism. Therefore, a hybrid model consisting of Bismarckian, Beveridgean and neoliberal principles of financing was introduced. Although financing from SHI contributions has expanded, its regulation was heavily in line with the Beveridgean system. The state has assumed a major role in the regulation of financing, controlling the SHI fund. At the same time, neoliberal principles were introduced. Individual responsibility for health was introduced by establishing formal co-payments and self-medication payments (Kaminska and Wulfgramm 2019), while market principles were introduced in the health insurance field by establishing two forms of private insurance.

To conclude, the Croatian case provides insights on the dynamics of reform in healthcare policy in one CEE country by using process tracing as a method and establishing causal mechanisms underpinning the changes. It provides evidence that key actors in the reform process were domestic doctors, similarly to other CEE countries (Kaminska et al. 2021), thereby supporting the literature which states that healthcare reforms in CEE were mostly endogenous (Rechel and Mckee 2009; Sitek 2008; Radin 2003; Roberts 2009). On the other hand, it contradicts the literature which claims that exogenous actors such as international organisations were instrumental in directing the reform processes in CEE countries (Deacon et al. 1997; Cerami 2006; Kaasch 2015; see Nemec and Kolisnichenko 2006). Nevertheless, the WHO and the World Bank were present at different stages of the reform process, mostly supporting the initiated reforms rather than initiating themselves. Although the impetus came from the inside, policy ideas were influenced by the experiences of other countries, be it CEE ones or Western ones like Germany, thus supporting the literature which states that CEE countries wanted to emulate policy models used in Western countries (Rechel and Mckee 2009; Jacoby 2004), Therefore, the chapter contributes to the literature on healthcare policy changes in CEE during the transition period and provides a piece of the puzzle which helps us understand how and why changes in healthcare happened in those countries. Furthermore, it contributes to future research on international interdependencies in social policymaking in CEE countries.