Industry Trend Analysis - Healthcare Won't Benefit From Rising Expenditure - MAR 2017

BMI View: Reductions in the payroll tax for healthcare contributions will have a negligible impact on public healthcare spending over the coming years given rapid increases in wages. Indeed, recently approved legislation align s with the government's new expansionary fiscal approach which will lead to a significant uptick in public healthcare expenditure. However, as with the country's economic outlook, this approach will not lead to significant improvements for healthcare.

As previously highlighted, the approval of several laws and amendments by Hungary's National Assembly on December 12 2016 will have a considerable impact on both the funding of healthcare services and the prospect of pharmaceutical firms with a presence in the country ( see ' Cuts To Corporate Tax Rate Will Attract Drugmakers ' , December 14 2016). In addition to the aforementioned reduction of the corporate tax rate, the government also approved a reduction in payroll tax, from 27% to 22% in 2017, and to 20% by 2018. Healthcare contributions will therefore be adjusted accordingly.

While this could potentially result in a reduction in contributions to the National Health Insurance Fund (OEP), the anticipated rise in wages is expected to offset any loss; we therefore maintain our public healthcare expenditure forecast which was revised upwards in October 2016, and consequently our total healthcare market forecast also remains unchanged. We calculate that total health spending was HUF2,627bn (USD8.94bn) in 2016, which is forecast to increase by 6.6% in local currency terms to HUF2,800bn (USD9.47bn) in 2017. Over our 2016-2021 forecast period, we anticipate healthcare expenditure to grow at a compound annual growth rate (CAGR) of 6.0%. This growth will be driven by public healthcare expenditure which is forecast to expand over the same time period at a local currency CAGR of 6.6%.

Short-Term Boost To Public Healthcare Expenditure
Healthcare Market Outlook
f = BMI forecast. Source: World Health Organization (WHO), BMI

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