Against All Odds: Introducing Social Health Insurance in Albania. An Actor-Centred Approach to Causal Mechanisms

Abstract

Scholarship on international development acknowledges the World Bank as a coercive actor, constraining developing countries to accept and adopt its prescribed policies through conditional structural adjustment loans. While less research examines the non-coercive, persuasive side of the World Bank, this chapter attempts to fill this gap by investigating Social Health Insurance introduction in post-communist Albania. Focused on the interaction between the Albanian Government and the World Bank and applying an actor-centred perspective, the analysis reveals a complex causal mechanism of transnational cooperation, which occurs in a non-coercive form, that explains the process. Next, it illustrates three elementary causal mechanisms that comprise the complex one. They are the rational orientation of the Albanian Government, the normatively-embedded calculatory orientation, and the reflective orientation of the World Bank.

This chapter is a product of the research conducted in the Collaborative Research Centre 1342 “Global Dynamics of Social Policy”, funded by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation)—Projektnummer 374666841—SFB 1342.

1 Introduction

The World Bank is among the most influential organisations in international development. Research is dominated by a view of the World Bank as a coercive actor, constraining developing countries to accept and adopt its prescribed policies, and much of it emphasises the World Bank’s influence in the form of conditional structural adjustment loans (Easterly 2003; Larmour 2002). Less academic literature focuses on its non-coercive side, in persuading countries, recipients of development assistance, to adopt particular policies (Bazbauers 2018, 239). This chapter attempts to fill this gap by investigating the introduction of Social Health Insurance (SHI) in Albania.

Albania was the last communist country in Central and Eastern Europe (CEE) to embark on the road of transition. In need of financial aid and expertise to overcome the crisis, stabilise the macroeconomic situation and build market institutions, the Albanian government turned to the World Bank Group and the International Monetary Fund (IMF). After conducting a dedicated mission in healthcare, in March 1992 the World Bank (WB)¹ delivered a report presenting its recommendations for the future of the Albanian healthcare system. In response to the domestic reform agenda that was dominated by a liberal approach, advocating privatisation of healthcare services and the introduction of health insurance,² the WB suggested keeping the existing model based on general tax revenues and only introducing a scheme for social health insurance at a later date (World Bank 1992a). Notably, the Albanian government did not accept this recommendation and, in June 1993, presented its strategy for the healthcare sector, aiming, among other reforms, at the “introduction of a scheme of health insurance” (Nuri 2002). Despite the WB’s early reservations, the Albanian parliament adopted the SHI law in October 1994. In the years 1993–1994, the World Bank became involved in policy dialogue and analytical work with the government (Shehu 2012; Shehu, interview 2019³; Nuri, interview 2019⁴), and it sought, with some success, to influence the reform process. Thus, the WB, in the role of a facilitator, was able to convince the government to follow a simpler SHI model than the one previously intended—with lower contribution rates and restricted coverage of healthcare services—and assisted in preparing the draft legislation. Considering this background, this chapter addresses the following questions: How did the World Bank influence the policymaking process, and how much was it able to achieve?

The presence of various external actors in the post-communist CEE region makes it an ideal location to test and develop better explanations for external influences (Jacoby 2005, 623). However, there is a rationale behind the selection of the Albanian case. It contradicts the usual perception of the international organisation’s conditionality and its alleged coercion of countries to accept its policy prescriptions. Albania was the least developed country in the region and depended on the WB’s financial leverage. It had already accepted all policy prescriptions and future reforms proposed by the WB and the IMF (Bezemer 2001, 1–2), except for the one in health financing.

To throw light on the role of the World Bank in the Albanian reform process, I rely on actor-centred institutionalism (Mayntz and Scharpf 1995) and investigate “the interactions among purposeful actors” (Scharpf 1997, 1). The actor-centred institutionalism framework has been previously used by scholarship on welfare state reforms (Adascalitei 2012; Cook 2007; Aidukaite 2009) and healthcare reforms in the CEE region (Ovseiko 2009; Sitek 2010). The analysis focuses on the dynamics of the actors’ interaction and aims at identifying the causal mechanisms behind the process. In examining actors’ behaviour, this approach emphasises the causal role played by their interpretations, ideas, and beliefs.

In this chapter, I focus on the mechanism of transnational cooperation to elucidate the role of the World Bank as a transnational actor in introducing SHI in Albania. In a nutshell, the mechanism explains the successful cooperation during the formulation of the law after the non-successful cooperation during the agenda setting stage. In contrast to the often researched “coercive” aspect of transnational cooperation, this study aims at expanding the understanding of its “non-coercive” form. In doing so, I draw on insights from international development studies in general and the non-coercive international development assistance of the World Bank in particular. Though not abundant (Bazbauers 2018), they offer this study a rich explanatory account on this more discursive understanding of the World Bank’s influence (Escobar 1988; Smith 2008; Bazbauers 2018).

The findings show that the WB, in the role of an epistemic community (Haas 1992), pushed for its own prescribed policy in the health financing reform in Albania. But it could not change the domestic agenda. So, the WB stayed in the reform game and sought through a set of tools, such as survey missions and technical assistance, to shape the final law’s formulation. This research also highlights the strategy used by the WB in the reform process: its “keep trying” strategy explains the World Bank’s attempts to stay in the reform game even though the reform was not in line with its preferences, and after it failed to convince the government of its preferred choice. In the end, the “keep trying” strategy helped the WB to induce the government to accept some of its recommendations in formulating the law.

In brief, the core of my argument in this chapter is that the interaction between the World Bank and the Albanian government was characterised by the dual dynamic of the persuasion power of the former and its inability to impose a specific policy model. The outcome of this interaction is explained by a complex causal mechanism (Chap. 1) of transnational cooperation that comprises three steps: (1) Pressures emanating from the economic and political environment forced the Albanian government to anticipate SHI reform in the healthcare sector (elementary causal mechanism of rational orientation). (2) The World Bank, invited by the Albanian government to support the country financially and technically, proposed the draft on future healthcare reforms (elementary causal mechanism of normatively embedded calculatory orientation). (3) Even though the government did not accept the advice of the WB in preserving the old financing model, the WB stayed in the reform game adapting its preference to the domestic choice of policy model (elementary causal mechanism of reflective orientation) and shaping to some extent the final policy formulation.

This study contributes to the scholarship on international development practice and the use of the World Bank’s non-coercive instruments, enriching the scarce literature on the role of the World Bank as a transnational actor in the processes of healthcare financing reforms in the CEE region. Importantly, this chapter adds to the scholarship on Albanian healthcare reforms and more broadly to the scholarship on healthcare politics in post-communist countries of CEE.

In the following section, I introduce the literature review. Next, the chapter proceeds with the section on methods and data, an overview of the politics of the early transition in Albania, and the case study. It concludes with a discussion.

2 The Role of Actors in Welfare State Reforms in Post-Communist CEE: Domestic Actors Versus the World Bank

The combination of economic crises and the democratic transition in the post-communist region offered the opportunity to introduce policy changes and led to a wave of health policy reforms (Preker et al. 2002; Kornai and Eggleston 2001). Following the market-oriented recommendations of the World Bank and the International Monetary Fund, the CEE countries took steps to implement reforms to improve their health systems’ efficiency and productivity (World Bank 1993a; Haggard and Kaufman 2008, 2018). As a result, introducing SHI, as a distinct market-oriented move (Nemec and Kolisnichenko 2006), was a fundamental step in reforming the financing dimension (see Wendt et al. 2009) of their healthcare systems.

Research indicates that welfare state reforms in post-communist CEE countries followed different trajectories, while remaining silent about the mechanisms that contributed to the emergence of social policy configurations (Adascalitei 2012). In healthcare, several factors explain policy outputs. The most obvious one is the influence of International Organisations (IOs), notably the World Bank and the International Monetary Fund, which endorsed the neoliberal ideas of marketisation, liberalisation, privatisation, and decentralisation and called for a reduced role of the state in healthcare (World Bank 1993a). Pursuing this argument, the review in this section draws mostly on the literature on the reforms of the social sector in post-communist CEE countries, highlighting the role of domestic and transnational actors, and their mode of interaction as explanatory factors to dynamics of reforms. The existent literature on health financing reform and SHI in the CEE is not yet systematic, for that reason the scholarship on healthcare reform in the region and from other regions complements the review.

2.1 The Role of the World Bank in Social Health Insurance Reform

The existent scholarship on the role of the WB in SHI reform remains contested, thus implying that new research on the topic continues to be of much interest. One group of scholars posits that the introduction of SHI was one of the main interests of the WB (Cerami 2006) and that the latter was able to influence the process through conditionalities, material leverage (financial aid, loans), and ideas (technical assistance and expertise) (Kaasch 2015; Radin 2003; Cerami 2006). Other scholars (Kaminska et al. 2021; Roberts 2009; Sabbat 2010) contend that in some countries, such as the Czech and the Slovak Republics, Latvia, Poland, and Albania, it was domestic actors who shaped the health reform agenda while pushing for their preferred policy option—the introduction of SHI—and firmly rejecting the World Bank’s recommendation on retaining the general taxation model. While systematic research on the reform of SHI in the post-communist CEE region is still lacking, other literature offers complementary insights. For instance, scholarship on pension and social sector reforms in the region amply confirms the World Bank’s influence (Müller 2001; Orenstein et al. 2008) in these processes. The WB played the role of a “proposal actor” influencing the information, interests, values, and policy preferences of domestic “veto players” to achieve policy change and used multiple strategies such as inspiring and recruiting reformers to pursue pension privatisation, forming coalitions with domestic supporters to win battles in favour of reform, convincing domestic opponents to support reform, and devising strategies to neutralise opposition to reform (Orenstein 2009, 18, 129). Importantly, the most systematic analysis of the influential role of the WB and the IMF in healthcare reforms comes from another region, Latin America. In his book on policy diffusion of social sector reform in Latin America, Weyland (2006) explains that while domestic policy actors hold formal, institutional veto power, transnational actors provide the legitimate, well-elaborated policy ideas and proposals that domestic actors sometimes lack. He also observes that the WB and the IMF usually try to win domestic support and that they have the capacity to “induce countries to move toward the principles they advocate” when they cannot “impose specific blueprints and models” (Weyland 2006, 18, 179).

2.2 The Domestic Rationale for the Social Health Insurance Reform

At the start of transition, countries in the CEE region possessed a strong political will to initiate and implement reforms and limited time to do so (Ovseiko 2009, 25). Most switched from a tax-based to an insurance-based healthcare financing model (Marrée and Groenewegen 1997). Arguments about plurality, independence, and competition (Lawson and Nemec 2003), efficiency improvement (Rechel and Mckee 2009, 1187; Medved et al. 2005, 75; Deppe and Oreskovic 1996), and distrust of governments rooted in the communist period (Rechel and McKee 2009; Oreskovic 1998) underline this change.

Although research on this matter covers only a few countries in the region, the existent scholarship provides useful information. In the case of the Czech Republic, Nemec and Lawson (2008, 29) explain that “a mixture of considerations” was behind “the rationale for such [a] switch”. According to them, the first consideration was the administrative argument that earmarking taxes for health and sub-contracting their administration to an independent institution (insurance fund) would offer the advantage of decentralisation and distancing the government from a contentious area of public policy. Thus, separating the new insurance companies from the government administration would improve the quality of the new administration, and the purchaser-provider split would increase the quality of healthcare services. The second consideration was that of economic efficiency which assumed that the switch to an insurance system would have the advantage of reducing pressure on general budgets (Medved et al. 2005, 75), though there was less concern about where the extra resources for health would come from. Last but not least, there were political considerations. Nemec and Lawson (2008, 29) described these as the desire to signal a break with the old regime and considered them to be the most important factor behind the change.

Other scholars posit very similar findings. Vlădescu et al. (2005) explain that, in Romania, opting for a Bismarckian system was determined by arguments connected with politics, ideology, and technical aspects. After the changes of 1989, everything associated with the old regime was challenged, and “the Soviet-imported Semashko system of healthcare could not keep itself off the chopping block” (Vlădescu et al. 2005, 467). Ideologically, the SHI system was positioned between the free market and government planning, thus it was acceptable to the supporters of both of these options (ibid., 468). The technical aspect is similar to the rationale of efficiency and administrative benefits in providing “more resources allotted to health, increased earnings for health professionals, greater financial independence, an increase in transparency, a better match between patients’ needs and the services provided, improved quality of care, and an increase in service-provider accountability” (ibid., 488).

To summarise, first, findings on the WB’s influence in SHI reform in the region are controversial. Second, because of the differences in the World Bank’s position, scholarship on the pension reform in the CEE region is of little help to explain the SHI reform. For the pension reform, the Bank proposed replacing traditional social security with individual pension savings accounts. In several countries in the region, such as the Czech Republic, Poland, and Albania, the WB proposed no alternative model of financing health but suggested preserving the status quo or the previous communist model and objected to the choice made by the governments—the introduction of SHI. The findings in Kaminska et al. (2021) convincingly show that the WB could not influence the agenda setting of SHI introduction in Albania (and other CEE countries). This chapter focuses on the subsequent step of policymaking and investigates the policy formulation process, which developed after the decision to introduce SHI was settled. The findings demonstrate that the Bank was able to some extent to influence that phase of the policymaking process (see also Druga 2022).

3 Methods and Data

This research employs a qualitative design and uses the case study method and process tracing to describe and explain the process. The period under investigation considers the events that took place from 1990 until 1994. The analysis started with a desk review of documents in order to construct a chronology of events. They included those from the Albanian government, parliament, legislation, and the World Bank, such as strategies, projects, and reports. Next, to gain a deeper understanding of the crucial steps in the policy process and the motivations of different policy actors involved, the research proceeded with interviews, which supplemented the data gathered from the written sources. Between June 2019 and November 2020, I conducted seven semi-structured interviews with health policymakers and national and international experts.⁵ Three interviews were face to face, the other four took place remotely. It is important to note that all interviewees were directly involved in the policymaking process. In particular, the expert from the World Bank, Goldstein, and both the Minister of Health, Shehu, and the Deputy Minister of Health, Nuri, were part of the dialogue process. The other Albanian experts were involved in the legislation drafting process and later also in the process of implementation. I supplemented the empirical data with material from other written resources, such as two Albanian newspapers, Voice of the People, the official newspaper of the Labour Party of Albania (later the Socialist Party of Albania), and The Democratic Renaissance, the official newspaper of the Democratic Party of Albania. Both newspapers were highly influential during the period and were used by the respective political parties as channels of official information and communication.

4 The Political Context of Social Health Insurance Reform

In view of the literature on health policy analysis, which underlines the inseparability of policy and political context (Collins et al. 1999), this section focuses on the context in which the Albanian healthcare reform was conducted.

Until 1990, the totalitarian regime that prevailed for forty-five years in Albania was rigid and based on Stalinist economic ideology (Schnytzer 1982). All domestic and foreign capital was nationalised or confiscated. Market mechanisms disappeared, and economic decisions shaped by a highly centralised one-party state were implemented through five-year plans. After some initial growth in the post-war years, the system ended in “substantially decelerated economic growth” (Blejer et al. 1992, 3) and stagnation. Limited reforms with the paradoxical name New Economic Mechanism, borrowed from the very early Hungarian reform experience, started at the end of the 1980s. They were partial and did not represent a coherent or radical programme (Pashko 1993, 908). As a result, in 1990, industrial production virtually ceased because of the shortage of inputs, and mass unemployment, rampant inflation, and commodity shortages were drawing Albania into chaos. The internal crisis was coupled with the external pressure of the demise of communism in CEE, while Albania remained the last country to still resist the change.

In December 1990, the Student Movement forced the communist president Alia to decree political pluralism (Rama 2019) and eventually announce the first multi-party elections to be held on 31 March 1991. The newly established Democratic Party of Albania (DPA) started preparing for the process. The electoral programmes of both parties, the ex-communist Labour Party of Albania (LPA) (Programi Elektoral i Partisë së Punës së Shqipërisë 1991) and the DPA (Platforma Elektorale e Partisë Demokratike të Shqipërisë 1991), were ideologically not different. They both concentrated on economic reforms, advocating a market economy, though the ex-Communists were for a gradual approach to economic and social transition (Bufi 2015), while the Democrats supported rapid and radical measures known as “shock therapy” (Pashko 1993, 917).

The LPA survived the elections. On 11 May 1991, the Nano government presented its reform programme to parliament, addressing issues of privatisation, the establishment of the rule of law, and the market economy.⁶ That was the first phase of the Albanian economic reform (until the first non-communist government of April 1992), accompanied by confusion, half measures, and, above all, high political instability. In June 1991, a Government of National Stability, formed as a coalition of Communists and non-Communists from five major parties (Socialist, Democratic, Republican, Social-Democratic, and Agrarian), endeavoured to steer the country through the difficult period until the new elections planned for spring 1992. Democrats’ representatives in the Government of National Stability undertook several economic reforms. After the abrogation of the entire 1976 (communist) Constitution, at the end of October 1991 parliament approved a series of laws about price liberalisation, investment deregulation, macroeconomic intervention, such as a tight monetary policy and budgetary austerity, land distribution, and small-scale privatisation (Pashko 1993, 911).⁷ Another political crisis slowed down the reform process when in December 1991 the DPA walked out of the ruling coalition. The prime minister resigned and the communist President Alia set the date for the next general election to be held in March 1992. A caretaker government replaced the multi-party coalition government, intending to prepare the new upcoming general election.

The economic situation deteriorated further during the winter of 1991–1992. The unemployment rate increased from twenty-nine per cent in 1990 to eighty-eight per cent in 1992, industrial production fell by over sixty per cent compared to 1991 (Tarifa 1995, 155), and fifty per cent of the urban labour force was out of work (Pashko 1996, 70). Since liberalisation, prices had risen by up to 500 per cent, while wages remained fixed. Inflation reached an annual rate of almost 300 per cent in the first quarter of 1992 (Pashko 1993, 913).

The DPA won the majority in the general election of 22 March 1992 and formed a stable government in April 1992. Hesitant reforms, introduced in 1991, were reinforced politically in 1992 as the Democrats transferred the government’s economic policies to the IMF (Tarifa 1995). Therefore, a macroeconomic stabilisation and restructuring programme under an IMF standby agreement was approved in August 1992, aiming at a short-term stabilisation and launching of structural reform in the country (World Bank 1993b, 2).

5 Introducing Social Health Insurance in Albania

5.1 The Early Albanian Government Efforts for Reform

During the communist period, Albania developed a healthcare system like those of other countries in the CEE region. Management decisions were highly centralised and resource allocation was centrally planned and based on historical budgets rather than on an output-based formula (Albanian Council of Ministers 2001). As a result, the system offered few incentives for quality of care, efficiency, and cost control. Some aspects of the healthcare system though were even more problematic than in other CEE countries: the quality of care was the lowest in the CEE region (Davis 2010, 46), health personnel were poorly paid, and because of the lack of investment in the sector, the average age of medical equipment was twenty-five years.⁸

Early efforts for reforming the financing model in the country started in mid-March 1991 when a group of experts from the Ministry of Health gathered to discuss how to respond to the request of the Albanian Council of Ministers to adjust the old healthcare legislation to the new dynamics in the country. After reviewing several laws and decrees, the experts proposed a list of recommendations.⁹ First—article number one in their report—they suggested an amendment of the law that had established the concept of universal free healthcare in the country.¹⁰ The experts argued that introducing fees and co-payments and the privatisation of several health services would require a complete revision of the law. According to them, the privatisation of health services would call for “fundamental changes” in the role of the state in health financing and, as a result, would demand the introduction of a “state social insurance law”. In addition—article number four in their report—they proposed the revision of the existent budgeting law.¹¹ That would then facilitate the introduction of new financing models in healthcare institutions, through the new social health insurance or a combination of funds from the general budget and the social health insurance. Therefore, the Ministry of Health promised to immediately initiate drafting the new law.

The political events during the rest of 1991 (see section above) hindered the early phase of the health reform and the overall economic reform, leaving many issues unresolved. Therefore, the presentation of the draft bill on (social) health insurance to the Council of Ministers (on 15 December 1991) and parliament a few days later (on 20 December 1991) was cancelled.¹² The reform agenda, however, remained unchanged and work on the draft law was postponed until the first trimester of 1992.¹³

After the elections of 22 March 1992, the DPA established a stable government and started rapid economic reforms aiming at privatisation, liberalisation, and decentralisation.¹⁴ The government’s programme in health was based on the DPA party’s electoral programmes of March 1991 and March 1992, both promising the introduction of social (health) insurance in the healthcare reform package (Programi Elektoral i Partisë së Punës së Shqipërisë 1991; Platforma Elektorale e Partisë Demokratike të Shqipërisë 1991).

5.2 The World Bank’s 1992 Strategy for the Albanian Healthcare Sector

The International Monetary Fund carried out its first mission to Albania in February 1991, shortly after the country sent its request for membership to the World Bank Group. Until October 1991, when the country received official acceptance, three missions visited the country, aiming to get an understanding of the situation and prepare for future engagement. Recalling that period, the head of the IMF mission, Mario Blejer, states that

[n]ot much [was] known about the country’s economy but the picture that emerge[d] [was] one of an economy in the midst of a very serious and profound crisis that [was] probably deeper than that experienced by other former socialist countries. (Bank of Albania 2005, 176)

During the mission conducted in October and November 1991, a team of experts from the World Bank concentrated on healthcare issues, collecting and documenting data and information for further analysis and preparation of a strategy proposal. Alongside the examination of the problems inherited from the communist period, the Bank’s experts analysed the recent reform attempts in the sector and reviewed the new body of legislation together with the drafts of the National Health Law, the Privatisation of Medical Practice and Health Insurance (World Bank 1992a, 1).

In February 1992,¹⁵ the WB presented its insights in a report and a strategy proposal “For the survival and the long-term development of the Albanian healthcare system in the context of the larger economic transformation of the country”, which was officially delivered on 23 March 1992. In this report, the WB raised the concern that even though the health status of the population was “impressive for a country at [its] stage of economic development”, however “the threat [of deterioration in health outcomes] was real” (World Bank 1992a, i). The Bank assessed that the Albanian healthcare system was suffering from both short-term financial difficulties and fundamental structural weaknesses in service provision and pharmaceuticals which impeded its effective functioning in the long run. Therefore, the proposed strategy rested on three main pillars: “past achievements, improve quality, contain costs” (ibid., 29). As it was more broadly explained,

[T]he proposed strategy call[ed] for a reform of the system that would capitalize on its strengths, by maintaining and further promoting the primary care system, improving the input mix and the quality of inputs, and improving services, and correct its structural weaknesses, by streamlining the hospital system, improving the input mix and the quality of inputs, and improving management and planning systems. (Ibid., 1)

Alongside the inherited problems, the Bank’s experts also analysed the recent reform attempts in the sector, namely, “the privatisation of health services” and “the introduction of the health insurance scheme”. The Albanian government was hoping to reduce the inefficiencies in the healthcare system in the same way as in the other sectors of the economy, through privatisation and liberalisation measures. This raised concerns at the Bank, which was preoccupied with the social objective of ensuring equal access to services and argued that “equal access would be threatened by a rapid shift to privatisation, particularly given the low-income levels of the population and the expected increase in income disparity” (ibid., 1). The Bank provided a thorough argument on the issue while stating that

[T]here are strong economic (efficiency) and equity arguments for keeping health services in the public domain even when other sectors in the economy are being liberalised, and the state must find an appropriate role for itself—in the financing, providing, regulating health services—to ensure that efficiency and equity are both maintained. Although the extent and nature of public sector involvement vary considerably among different countries, there is a growing consensus that public financing is important if only to ensure equitable access to services. (Ibid., iv)

As a result, the Bank recommended “gradual private sector involvement in the provision of health services”, but “continued public sector financing, until at least more stable economic conditions permit the introduction of [a] social health insurance scheme” (ibid., 2). Consequently, the WB stated that the drafts of the National Health Law, the Privatisation of Medical Practice and Health Insurance were not ready for adoption because of serious shortcomings in both substance and formulation. The Bank clearly articulated that “while new legislation is essential to the reform, it would probably be best to delay finalisation of these laws until after the policies and strategies they reflect are better developed” (ibid., vi).

5.3 The Road to Comprehensive Healthcare Reforms

Healthcare reforms were initiated in May 1992, soon after the appointment of the new Minister of Health, Shehu.¹⁶ One month later, in June 1992, the government adopted the proposed WB health sector strategy (World Bank 1992b, 7), though still insisting on the idea of introducing SHI. However, Albania lacked previous institutional experience with a contribution-based health financing model. In addition, the lack of experts on market economies, democratised institutions, and health policy was a further problem in Albania, as in other countries in the CEE region. Therefore, an expert, the director of budgeting at the Ministry of Health, was invited to attend a German-funded summer school on healthcare financing in CEE at ILO Turin Centre in Italy (Hobdari, interview 2020; Mano, interview 2020)¹⁷ (ILO 1995, 108). Later, the Ministry of Health organised and sent a group of experts on study tours to Germany and France (Kadiu, interview 2020; Jani, interview 2020; Mano, interview 2020).¹⁸ The visit to Cologne in October 1992 was the only one to Germany. Albanian experts and doctors were not familiar with the German language, which seems to have been a communication barrier (Kadiu, interview 2020; Jani, interview 2020). So, the study tours continued in France, as French was “the language of elite” in Albania (Kadiu, interview 2020; Jani, interview 2020). Old ties with France and the French healthcare system¹⁹ and the personal relationship between Minister of Health Shehu and President Berisha, two well-known doctors and professors at the Medical University in Tirana who both became politicians and joined the DPA, contributed to the future of such developments. As a result, the study tours and training with the French experts took place in Tirana and Paris in 1993 and 1994 (Kadiu, interview 2020; Mano, interview 2020; Jani, interview 2020; Hobdari, interview 2020). Even though the French assistance was useful, the lack of previous institutional experience and the differences in economic and social development between Albania and the Western European countries made it difficult to find the right starting path (Kadiu, interview 2020; Jani, interview 2020).

5.4 The Reform Game: “Keep Trying” (Until You Succeed)

Despite the resistance from the WB, the government kept insisting on the idea of introducing SHI (Shehu, interview 2019; Nuri, interview 2019; Kadiu, interview 2020). The WB task manager for the healthcare project, Ellen Goldstein, explained that “there was a huge push by the government [of Albania]. [It] wanted to start right away with the insurance that would cover health services and drugs” (Goldstein, interview 2020).²⁰ Minister of Health Shehu confirmed the same conflicting position with the Bank adding that the WB “considered us [the Albanian government] incapable of governing such a model” (Shehu, interview 2019). In fact, the Bank was presenting the same arguments as in the 1992 report when suggesting that introducing SHI should be postponed to a later date because positive projections for the economy would increase individuals’ incomes and improve prospects for the new policy (World Bank 1992a). Because of these recommendations, the government discourse transformed into “[we are] exploring the opportunity for introducing SHI until a new level of economic growth, and sectoral development will allow its viability”.²¹ The 1992 WB report also provided a list of instructions or “some preliminary steps leading to the development of SHI”.²² These steps included establishing accounting and financial management systems at all health facilities to enable estimations of unit costs, the development of payment/reimbursement schemes, and their gradual application in the system to replace the ex-ante budgeting method. The World Bank believed that this period would take several years, and for this reason, introducing SHI a decade later seemed to be the right-time projection (World Bank 1992a). Ergo, SHI became an issue “of further analyses”.²³

There was no further progress until 1993. Since joining the World Bank group in 1991, the government agreed on the future strategy and lending programme the Bank would offer to the country. Based on the Critical Imports Project signed in June 1992, emergency issues like the provision of essential goods became the Bank’s number one priority. In 1993, the Bank planned to implement the Employment and Social Protection project, followed by the Health Sector project in 1994 (World Bank 1993c, 18). However, in July 1992, the government abolished the guaranteed payments (sheltered wages because of the lack of raw materials and the halting of production), thus raising the unemployment level and increasing the pressure on future social assistance payments, though the latter had to be ready when the unemployment benefits would expire (in 1993, one year later). The existing social insurance was itself another problem; the budget subsidised it. In 1991, budget subsidies accounted for 28 per cent of social insurance expenditure (World Bank 1993c, 5). In 1992, the situation became even worse as contributions were declining sharply due to the rise in unemployment and the dissolution of cooperatives. Contributions from the latter accounted for forty-two per cent of the insured in 1991, a considerable component in the social insurance system. Furthermore, the unemployment compensation programme was designed as a separate contributory insurance scheme and again depended on general revenues to meet the deficit, even though employers were paying a further six per cent tax on payroll. Therefore, the Social Safety Net project planned in two components, (1) social insurance and (2) social assistance, became a pressing problem.

Pursuing the intention to introduce reforms to reduce the state’s involvement in social insurance and increase individuals’ and employers’ responsibility for the financing of the benefits, the government appointed a standing committee to coordinate the process of social insurance reform. Two international experts engaged by the World Bank, Jon Eivind Kolberg, a Finnish expert, and Igor Tomes, a Czech expert, assisted in drafting the New Social Insurance Act which was adopted by parliament on 11 May 1993 (World Bank 1993c, 14–15; 67).

After settling the Bank’s number one priority of reforming the social sector, the Bank and the government entered into an extensive dialogue to find a way forward with the SHI reform. As the WB’s task manager explained in an interview, the WB “had a problem in Albania” because “payroll taxes [pension contributions] were already extremely high” and “more contributions would raise the cost of labour”. According to the Bank’s expert, the competitiveness of the Albanian economy, a low-income country, was dependent on the cost of labour—since low-cost labour could turn it into “the perfect place for manufacturing”. The concern about labour costs was not, however, the only problem the Bank perceived. Another structural issue would potentially harm the viability of the future contributory system. Albania was not a highly industrialised country and “large parts of the population were not wage earners”. Therefore, choosing a financing model based on payroll contributions while “not all the people are on the payroll” was clearly a problem (Goldstein, interview 2020).

Importantly, the dialogue between the Bank and the government was about building an understanding of what it meant to transition from one system to the next. Therefore, the Bank aimed at raising awareness of the cost that the transition period and other measures taken to stabilise the financial system would have on the Albanian healthcare system.

Those who were advocating the quick shift to health insurance probably had not fully appreciated how much the collapse of the economy would have influenced the ability to even maintain the level of healthcare that (Albania) had before. Suddenly you have half the money you had before. Instead of the quality of the services being better or more responsive, the quality of the services would get worse, and that was something that no government could afford politically. (Goldstein, interview 2020)

Finally, after discussions both parties agreed on a contribution rate of two per cent for social health insurance. That was the green light for the government to start drafting the SHI law. The SHI initially started rather as a scheme (Nuri 2002), but with its introduction, the government fulfilled its wish to introduce the new financing policy in the country.

So, we argued, and I think probably persuasively that the worst possible scenario would be to move in some big way toward the health insurance scheme (…) We [WB] carefully discussed and shifted opinion toward starting slowly with very smaller change (…) So, we advised to take a cautious approach and that is what was done. (Goldstein, interview 2020)

In April 1993, the government presented its medium-term strategy to the donors’ community: “A new policy for the healthcare sector in Albania”, articulating “the introduction of market elements into healthcare financing” and “a careful introduction of a scheme of health insurance” among the proposed reforms (Nuri 2002, 70). By the end of 1993, an inter-ministerial group of experts (from the Ministry of Health, the Ministry of Finance, the Ministry of Labour, Emigration, Social Protection and Ex-Politically Persecuted People, the Ministry of Agriculture, and the Social Insurance Institute) were appointed to work on the draft formulation. The Czech expert, Igor Tomes, joined the group from the start and played a prominent role in policy formulation (Kadiu, interview 2020). The Albanian Council of Ministers consulted on the draft in summer 1994 and the bill was passed by parliament on 13 October 1994 (Albanian Parliament 1994).

6 Opening the Black Box: Transnational Cooperation

The mechanism of transnational cooperation, which unfolds in a non-coercive way, explains the role of a transnational actor, namely, the World Bank, in introducing SHI in post-communist Albania. It elucidates how the World Bank, even though it was not able to influence the policy choice, namely, the introduction of SHI, could however influence the process during subsequent policy formulation. The complex causal mechanism of transnational cooperation consists of three elementary causal mechanisms (see Chap. 1): First, the calculatory orientation of the government in ideating the introduction of SHI; its action is driven by the logic of efficiency and quality improvement; second, the normatively embedded calculatory orientation of the World Bank manifested in its report from 1992; and third, the reflective orientation of the Bank in the dialogue process with the Albanian government and, as a result, in the change of its position towards the policy choice.

• 1. The government’s calculatory orientation

The Albanian post-communist healthcare system heavily depended on state budget resources and inadequate financial resources “were a fundamental problem” (Shehu, interview 2019; Nuri, interview 2019). The performance of the (dwindling) national economy further constrained the government’s financial resources for health, which were even lower than those in the other countries of the CEE region (Goldstein, interview 2020). All actors (doctors, politicians, patients) were aiming at extending the scope and scale of health services. As a result, Albania had to cope with the discrepancy between needs and resources (Goldstein, interview 2020; Shehu, interview 2019).

In 1991, the proposal for introducing SHI was a result of attempts to reform the healthcare system, based on the New Economic Mechanism model.²⁴ The government perceived this model to be the remedy for the economy after decades of inefficiency and economic mismanagement in the country. Therefore, introducing SHI was driven by the economic logic of efficiency because of tight budgets and financial limitations and quality improvement in the system. In 1992, the government’s healthcare strategy reflected the preferences of the new political elite that was advocating a restricted role for the state in the economy (Shehu, interview 2019). It must be stressed that despite the differences in the reform’s speed, all governments, either before the election in 1992 or after, were in favour of a limited role of the state in health financing. To them, SHI meant individual responsibility through payroll contributions, and the introduction of SHI would lead to a smaller role of the state in the healthcare system.

Therefore, the behaviour of the Albanian government in the process was driven by an opportunistic logic—a logic based on time-specific conditions—and a self-interest seeking one, driven by efficiency and quality improvement.

• 2. The normatively embedded calculatory orientation of the World Bank

The 1992 World Bank’s report for Albania’s future reform of the health sector was a product of the norm compliance orientation of the WB combined with rational calculation. Public documents produced by the Bank and other data support this argument. As for the norm compliance orientation, the 1992 WB report reflects the content of an earlier WB report, published in 1987 and titled “Financing Health Services in Developing Countries: An Agenda for Reform” (World Bank 1987), where the Bank proposed an alternative approach to financing healthcare in developing countries through four measures: first, introducing user fees in health; second, providing insurance or other risk coverage and encouraging well-designed health insurance programmes to help mobilise resources for health; third, using non-government resources effectively; and fourth, decentralisation (World Bank 1987, 6). These four measures are reflected in the Bank’s normative position in Albania in 1992. As for the rational calculation behind the 1992 WB report, it is visible in the Bank’s arguments of efficiency²⁵ and equity and the recommendation on preserving the tax-based model of health financing. The equity argument is related to the Bank’s concern about ensuring equal access to healthcare. According to the Bank, this issue was particularly relevant during a transition period marked by inflation and unemployment and by growing income disparities, like in Albania (indeed, one year later, the “1993 World Development Report: Investing in Health” would advocate for a synergy between equity-enhancing and efficiency-oriented change with the government’s role more on the regulatory side (World Bank 1993a, 7)).

To sum up, the logic underlying the 1992 WB report can be explicated by the norms derived from the WB’s report “Financing Health Services in Developing Countries: An Agenda for Reform” (World Bank 1987) coupled with the rational arguments of efficiency in healthcare provision and equity in healthcare access, relevant for a transition country.

• 3. The reflective orientation of the World Bank

The consensus on introducing SHI in Albania derived from a reflection process. Though both the WB and the Albanian government changed their positions from their initial stance, the WB did so considerably—from opposing the government’s choice to a negotiated decision. The World Bank had to re-evaluate its recommendation on the future health financing model in Albania and follow the government’s wishes.

Pro and contra arguments exploring the costs and benefits of the policy choice were part of the dialogue process. The most important argument was related to higher labour costs, because the (additional) health contributions would harm the country’s strategy developed by the World Bank for future economic growth. Next, the WB considered the health sector to be different to the other economic sectors, and as a result, it was concerned about the fulfilment of two principles: efficiency and equity in healthcare provision. For these reasons, the Bank advised that the state must find an appropriate role for itself—in financing, providing, regulating, and/or setting policy for health services—so that it could ensure that efficiency and equity are both maintained. Finally, the Bank provided helpful technical recommendations for setting up an SHI scheme. Thus, it was able to convince the government to follow a simpler SHI model than the one previously intended and so influenced the policy formulation process (see Druga 2022). Importantly, the WB remained in the process and was able to exert pressure on the government regarding the formulation of the new policy.

7 Discussions and Conclusions

This chapter addressed the challenge of explaining the role of the World Bank in the social health insurance reform in Albania. Focussing on the strategic interaction between the Albanian government and the World Bank and relying on an actor-centred perspective (Scharpf 1997) to frame it, the analysis of the chain of events revealed the crucial role of the mechanism of transnational cooperation to understand the process and underlined the non-coercive form it took.

The findings show that the World Bank had no preference for introducing SHI in Albania. Next, they illustrate that the WB did not force the government to accept its policy prescription. Notwithstanding, the WB used a strategy, which I name the “keep trying” strategy, to challenge the government. This strategy expresses the World Bank’s attempts to stay in the reform game despite its course not being in line with its preferences. Interestingly, the “keep trying” strategy adds to the list of the strategies that transnational actors, the WB and the IMF in particular, have employed to shape health and social reforms in the countries of the Global South (Orenstein 2009; Weyland 2006). Finally, the case demonstrates that the World Bank took a non-coercive approach throughout the process, with successful cooperation during the formulation stage after it had failed during agenda setting.

The interaction between the WB and the Albanian government is characterised by the dual dynamic of the persuasion power of the former and its lack of ability to impose a specific policy model. The WB’s policy prescription was but maintaining the status quo, asking the government to preserve the same model of health financing as during the communist period. Further, the WB reflected on its policy prescription, and even though SHI was not its favourite policy choice, it assisted the government in preparing the draft bill. In the end, the WB was able to convince the government to follow a simpler SHI model than the one previously intended, with lower contribution rates and restricted coverage of healthcare services. As a result, even though it was not able to impose its policy choice on the Albanian government, the World Bank could induce it to move towards the principles of the strategy it advocated.²⁶

The study reveals the government’s rationale for choosing SHI as the new model for health financing. Consistent with the findings from previous studies on the post-communist CEE region (Medved et al. 2005; Vlădescu et al. 2005), the government was driven by the rationale of efficiency and quality improvement. From the other side, alongside the actors’ preferences, the study explicitly also evinces their position. Thus, as the government did not change its position towards its policy choice, introducing SHI, I would consider that the government possessed the attributes of a “veto” and “proposal” actor. The domestic actors indeed held the veto role (Tsebelis 2002), but the role of a proposal actor has previously been attributed to the WB in pension reform in the CEE region (see Orenstein 2008). In contrast to this view, I suggest that here the WB played the role of a “reflective” actor because of the change of its position on introducing SHI.

Finally, the chapter sheds light on the role of the WB in development assistance in the post-communist CEE region, emphasising its non-coercive form. In line with the previous scholarship on this more discursive understanding of the WB’s influence in developing countries, the case of Albania confirms that development assistance, which is concerned with selling ideas and practices from the international to the domestic stage through the production and circulation of discourses, is indeed a form of exercising power (Escobar 1988, 430). Further, the case sheds light on the persuasive side of development assistance, which stands in contrast to the imposed conditions attached to loans. Rather than dictating policy solutions, the recipient of development assistance can internalise new ways of thinking because development assistance convinces via implied technical legitimacy and is premised upon dialogue, collaboration, and consent (Smith 2008, 238–39). Ultimately, development assistance is a social and political construction. As such, it does not in itself possess legitimacy. Forces that grant or deny legitimacy are those embedded in the political and social interactions between technical assistance provider and recipient (Bazbauers 2018, 240). Thereby, conferring that legitimacy is of the same great importance as the norms the WB brings to the domestic policy arena is highly relevant and has been spelled out in the case of Albania.

I have focused my analysis on the Albanian government. Further research should focus on the elites, particularly the medical elite, that managed to place introducing SHI on the agenda and won the resources to implement it. That way, the analysis might unravel another rationale for the policy choice. Furthermore, placing the medical elite at the centre of investigation provides valuable insights on its role in enacting healthcare reforms in the post-communist CEE region compared to the doctors’ veto role in blocking reforms, as the existent scholarship from the Global North countries emphasises (Roberts 2009).