1) Demography
The Republic of Hungary has 10.04  million inhabitants of which 2.06 million live in Budapest, the capital of the country. Almost half of the country?s population resides in communities of less than 20,000 inhabitants each. In Hungary, there are 23 cities, 199 towns and 2913 villages.

During the 1950?s and 1960?s Hungary achieved improvements in the historically poor health  status of its population through effective health measures and improved socio-economic conditions. While life expectancy in Western European countries improved during the 1980?s partly due to dropping rates of cardiovascular diseases, this tendency continued to worsen in Hungary as did deaths from cancer, liver cirrhosis and external causes such as accidents and suicide. Hungary has thus far completed  an epidemiological transition. However, a special policy of health care for the ageing population is to be implemented. In Hungary, life expectancy at birth in 1997 was 75.1 years for women and 66.1 years for men compared to 80.8 years and 74.2 years in the European Union.

Mortality and morbidity due to unhealthy lifestyle, such as high consumption of alcohol, increasing rate of smoking and high fat and sugar diet  are thought to be important causative factors.  Factors contributing to the health status of population are complex, including social and economic factors  as well as access to good quality health services.

2) Economy
It is difficult to estimate the total health care expenditure in Hungary, since it consists  of contributions from local governments, voluntary sector and directly from the patients. In  Hungary, the total health expenditure as a percentage of the GDP (6,5 %) is lower than the European Union?s average (8,5 %). The expenditure was  growing steadily from PPP USD 391 in 1990 to PPP USD  602 in 1996 and it has continued to grow. The National Health Insurance Fund has a share of 70%,  the largest part of the total health-care expenditure.

3) History
The first Act on mandatory sickness insurance for Hungary?s factory workers was introduced in 1889, 110 years ago, following the introduction  of Germany?s sickness insurance system, affected  by Chancellor Bismarck. Back then the centralised system of national sickness insurance  was established for the 20th century. Before and after World War II, both the services provided by  the insurance system and the group of insured persons had been extended.

In the 1970?s and 1980?s, the health  insurance system was defined by Act II of 1975 on  health, regulating both health and pension  insurance schemes. In 1991, having returned to the practice  of the first decade of this century, two  self- governmental bodies became responsible for supervising and managing health and pension insurance funds, being the governing bodies of the separated Health Insurance Fund and Pension Insurance Fund.

In 1998, a package of acts has been enacted in order to restructure and redefine the social  insurance system. Acts LXXX of 1997 and LXXXIII of 1997 define the scope of nationals entitled to  social insurance services, private pension, the financing of the above benefits, and the benefits of mandatory health insurance. In 1999, the newly  elected Parliament decided upon the supervision of the social insurance funds by a State Secretary.

4) Organisational Structure
The Hungarian health insurance system is under governmental supervision. The supervision  is exercised pursuant to Act XXXIX of 1998 on the Governmental Supervision of the Financial  Funds and the Organisations of the Social Insurance.

Act CLIV of 1997 on Public Health  assigns responsibilities for health services to Parliament,  the Government, the Ministry of Health and the National Public Health and Medical Officers? Service.
In Hungary, most health care facilities are owned by local governments.

Following the election in May of 1998, the Prime Minister?s Office became responsible for  the supervision of the National Health Insurance Fund, while this task was transferred to the Ministry  of Finance in 1999, which was taken over by the Ministry of Health in the year of 2001.

The state budget of the Republic of Hungary provides financial resources as it follows:
? maintains medical universities and professional institutions in the medical field,
? provides the necessary funds for renovating health care facilities, replacement of equipment and new investment through earmarked subsidies,
? funds and provides public health and emergency services,
? covers the co-payment for certain medicines, medical aids and prosthesis for the poor,
? defrays the deficit of the National Health Insurance Fund.
? subsidises and provides graduate and postgraduate medical education,
? funds medical research and development projects.

The Hungarian health care system is regulated and supervised by the Ministry of Health, Social  and Family Affairs, by supervising the health care service providers, preparing the legal framework for health care and representing Hungary?s health  care interests at international level. The Ministry  of Health, Social and Family Affairs has no longer direct responsibility concerning the financing of health care services, except high-cost diagnostic procedures, organ transplants and blood supplies.

The Ministry of Finance bears responsibility for fiscal policy and budget planning as well as for the macro-economic implications of health care financing.

The National Health Insurance Fund (NHIF) is  a separated monetary fund within the State Budget.
The budget of this fund is approved by Parliament, usually for one calendar year.

The National Health Insurance Fund is a separate administrative organisation under the  supervision of the Ministry of Health, Social and Family Affairs. The National Health Insurance Fund directs  the administrative functions of the insurance branch and supervises both the calculation and payment  of benefits.

Administrative organisations of the National Health Insurance Fund are the Budapest Metropolitan and Country Health Insurance Directorates, the National Institution of Medical Experts, the Railway Social Security Directorate and the  Journalist Division. The Fund is led by a Director General, who is responsible for the administration of the central and regional offices. The post of the Director General is proposed by the Minister of Health, Social and Family Affairs, and appointed by the Government.

The tasks of National Health Insurance Fund are as follows:
? purchasing health care services for the insured,
? directing the regional and other administrative bodies,
? operating the health insurance branch system,
? getting involved in preparation of legislation,
? preparing and implementing bilateral international agreements regarding health insurance,
? developing and operating the data base of the health insurance system,
? collecting, processing and analysing the statistical data of the health insurance system.

The collection of contributions, the operation of the contribution account and the financial control have been the functions of the National Tax Office, since 1 January 1999.

The National Health Insurance Fund finances the recurrent costs in the framework of contracts  with health care providers. The investment   and development costs of the health care institutions do not burden the budget of the Health Insurance Fund. Accordingly, their costs are covered by the owners of the institutions or by the state. In  Hungary, approximately 98 % of the health institutions  are owned by the local governments.

Benefits in kind (health services provided by the suppliers financed by NHIF) and benefits in  cash provided by the National Health Insurance Fund are as follows:

Health services provided free of charge:
? preventive medical examinations,
? medical care by family physicians (primary health care services),
? dental care,
? out-patient care,
? in-patient care,
? delivery care,
? medical rehabilitation,
? patient transportation,
? accident health supply.

Cost allowances to health care services:
? pharmaceutical cost allowances,
? medical aids cost allowances,
? travel cost reimbursement,
? international medical cost reimbursement.

Co-payment is charged in the following instances:
? orthodontical treatment under the age of 18,
? tooth-keeping and replacement above the age of
? extra meal and accommodation for in-patients,
? sanatorium treatment.
Benefits in cash delivered by the Fund are:
? sick-pay,
? pregnancy and confinement benefit,
? child care fee,
? disability benefits,
? accident benefits,
? accident pension.

The Hungarian mandatory health insurance operates as an independent branch of the social security system, based on the principle of solidarity.

On the basis of Act LXXX of 1997 insured persons are as follows:
? employees, civil servants and clerks, employees of the administration of justice professional adoptive parents, members of the armed forces including law enforcement bodies as well as civil national security services, regardless of whether they are employed full-time or part-time,
? members of co-operatives, excluding full-time student members of school co-operatives if  they participate in the activity of the co-operative within the framework of economic enterprises,
? students having their apprentice studies based on student contracts,
? individuals receiving income supplementing benefits unemployment benefits,  pre-pension unemployment benefits,
? self-employed persons whose activity is not to be qualified as supplementary.

Additionally the scope of Act LXXXIII of 1997 on mandatory health insurance extends to the
following groups of individuals:
? persons insured by virtue of Act LXXX of 1997 as well as individuals under a special health insurance contract,
? persons and organisations paying social insurance contributions,
? health care service providers on a contractual basis.

5) Financing Health Care
In Hungary, 83 % of public financing of health care came from public sources in 1996. It is difficult to estimate the overall amount and share of  the various sources. The magnitude of gratuity  is unknown. Government revenue is composed of central, local and general sources. The  National Health Insurance Fund is the main source of health care financing. The fund defrays the recurring costs of services, while maintenance costs are funded from the central and local governments? budgets. Local governments have their share of responsibility due to ownership, while the national government provides earmarked and targeted subsidies. Private health insurance doesn?t exist in Hungary, however, there is a limited number of private providers.

The National Health Insurance Fund operates with state guarantees. The Fund?s main sources  of revenue are health insurance contributions. Health insurance contribution constitutes 14% of the payroll expenses, 11% paid by employers, 3%  by employees. Employers and self-employed  persons pay in addition 3450 HUF/person/month flat rate health contribution.

Significant co-payment is required from patients for certain dental treatments, services rendered without referrals and for services in addition to those ordered by specialists as well as for  extra hotel/accommodation costs. Co-payments are also paid for chronic care and treatment in sanatoria.
Medical services, neither covered by the National Health Insurance Fund nor by the State, are classified as out-of-pocket expenses. Some out-of-pocket payments are on medicines and medical aids. Finally, informal gratitude payments constitute another category of out-of-pocket expenditure.
The latter can be estimated at some 1 to 3 percent of the total health care expenditure.
The health care policy implemented during the 1990?s reforms has brought about significant changes to the former fixed annual budget system. The system of payment has become more performancebased and payment mechanisms are determined of the type of services. The National Health Insurance Fund introduced a per capita system for family doctors, and a fee-for-service system for out-patient health care services. Hospitals are financed through Diagnosis Related Groups (DRG), introduced in the early 1990?s. The procedure is managed by both the National Health Insurance Fund and the Information Centre for Health (GY_GYINFOK). In case of chronic in-patient care the number of days spent in hospital is the underlying basis for payments.