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Abstract

The Czech and Slovak republics have passed the needed legislation to move to an insurance based system. Funding for the insurance will come from a tax on wages. It is anticipated that employers will pay two thirds of the tax and employees will pay one third. The rate will most likely be 10 percent of wages paid by the employer and 5 percent from the employee. (NOTE: An alternative was still being discussed in August of 8 percent paid by the employer and 4 percent by the employee). There has not been any detailed study of the expected expenditures on health services found to date. It has been estimated that the health insurance fun needs a minimum of 44 billion Kers. An optimal level of 75 billion Kers would allow for the capital needs of the hospitals and clinics that are decaying. After this posting, a compromise was made that has employers paying 9 percent and employees contributing 4.5 percent of wages.

One problem that has not been clearly addressed is the methodology to make an accurate estimate of how much would be collected in premiums under the above scenario. Estimation is difficult for a number of reasons.

• First, it requires an estimate of wage rates over the next year, which is changing at a rapid pace.
• Second, the collection rate of the premiums is unknown because it has never been done.
• Third, the number of people who will be covered is not known with certainty since the population is moving into and out of each republic and is changing constantly.

Those not working such as students, retirees, women raising children until three years of age, and the unemployed, will be covered by the state. It appears that they intend to use general income taxes, wealth taxes and value added taxes to pay for these groups. The details were not made clear. It is also unclear at what rate each republic will pay for them. Will they pay 15 percent of the average wage in the republic, or the basic wage which is lower? Will they consider wages in the private sector, or just the government sector, or a weighted average of the two? Technical help is needed to assist in the development of appropriate economic models for estimation.

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