The 2007 Italian national budget law outlines a new framework for the country’s regional healthcare administrations. The law’s purpose is to force each region with a large deficit in its healthcare funding to formulate and implement a recovery plan. "The national budget for 2007 represents a positive step forward in finalizing a set of rules for Italian healthcare," says Simone Zampa, senior analyst at Moody’s. "It aims to make regions more responsible and more accountable."
Earlier this year, Eurostat’s ruling that healthcare securitizations would be treated as on-balance-sheet debt robbed many Italian regions of their main healthcare funding source. The ruling meant that Italian healthcare ABS issues were found to contravene Article 199 of the Italian constitution, which states that local public entities are only allowed to incur debt to finance investments. Italian regions had been using securitization to fund operating costs, benefiting from the principle of payment delegation, which has veiled financing difficulties since the Italian government decentralized healthcare provision. With ABS transactions now invalidated, it was not known how the regions would avoid a financing crisis.
Incentives
The new law offers significant financial incentives, in the form of extra funds and extra lending, to encourage regions to adopt recovery plans.
The last of the Italian regional healthcare ABS deals printed during July. One was a transaction for the Region of Campania called Posillipo Finance 2, a €1.74 billion deal with a 17.9 year average life. Late in the month, Sicily sold a €442 million, A1/A rated, 5.5 year bond at six-month Euribor plus 21 basis points called Trinacria Healthcare. Financing Italian healthcare, it seems, is now the government’s problem.