Austria: Financial Flows for Public Healthcare

Austria is considered one of the wealthiest nations in Europe, enjoying a nominal GDP in 2014 of 329 billion Euro and a per capita income of 40,656 Euro. Austria qualifies highly in international health service rankings, scores highly in patient satisfaction surveys, and has repeatedly been listed amongst the top nations to reside in. But how does this little but wealthy nation in the heart of Europe finance the healthcare services for its population?

In Austria, public funds are pooled by the federal and regional governments, and by the social security institution. Pooled funds are distributed amongst these collecting agents, in order to finance public healthcare provisions. A share of these publicly pooled funds also goes to local authorities and to cross-stakeholder institutions.

Bundesländer (i.e. the Provinces in Austria) and local authorities in fact have little authority to collect taxes themselves, but receive 30 percent of the pooled funds to spend on public care for their respective jurisdictions.

The Bundesländer are entitled to place levies on local authorities, which is an important flow of financing in the Austrian healthcare system. Currently, local authorities finance approximately 10.2 percent of fund hospitals in Austria.

Each Bundesland has its own regionally-responsible health insurance fund. The Austrian taxpayer, employee and employer is obligated to pay social insurance contributions. These contributions are collected at a regional level, where the social contributions are administered by each regional health insurance fund separately.

In 2014, social insurance funds received their funding from the following sources:

  • 85 percent from contributions
    • 56 percent of this 85 percent came from compulsory insured people
    • 21 percent came from compulsory insured pensioners
  • 10 percent from federal funds for reimbursements of service-related costs
    • Including preventative service and maternity care costs
  • 4 percent from cost-sharing
  • 1 percent from other sources
    • Such as supplementary contributions and added interest

Taxation and public levies for healthcare, particularly in regards to care allowances and healthcare benefits, are designed to have a highly redistributive effect to protect lower income individuals. Social insurance rates are fixed at a federal level and any changes made to them must be agreed upon by the Parliament.

The public taxation that is gathered at a regional level helps finance the following:

  • Income tax – To finance hospitals and care homes
  • Tobacco tax – 66 percent goes to hospitals, 34 percent goes to preventative examinations and health promotion
  • Value added tax (VAT) – Primarily for financing hospitals

The Federal Health Agency, a supportive branch of the Ministry of Health, receives funding from VAT related income and a flat-rate grant via the contribution incomes of the social funds’ umbrella organization (the Federation of Austrian Social Security Institutions). The Federal Health Agency in turn distributes most of this financing for hospital provisions via fixed financing quotas in the Bundesländer.

Regional Structural Plans are issued periodically and designed by the state in collaboration with the regional governments to set forth the strategy and guidelines for regional care provisions and expenditures. The Austrian mechanism of funding is in part designed to create a type of penalization system, when necessary, in case the Bundesländer do not adhere to their Structural Plan. However, so far no sanctions have been imposed.

To ensure a fair and appropriate flow of funding and resources, additional Fund organizations have been created, such as the Interregional Equalization Fund, the Hospital Finance Equalization Fund, PRIKRAF, and in part, the Health Insurer’s Structural Fund. These Funds are financed separately from the Austrian Federation of Social Security Institutions’ branches.

PRIKRAF, for example, receives its financial resources from all social health insurance funds collectively.

In summary, the Austrian financing system is complex, cross-referential and decentralized, with adjustment bodies to ensure an equal re-distribution of wealth and income.