Site hosted by Angelfire.com: Build your free website today!
Russian Health Care in Critical Condition


Who should pay for health care? As Russia wavers between a centralized, state-controlled system or a switch to privatized insurers, accessible and affordable medical care is becoming ever scarcer
By Judyth L. Twigg


THE recent decline in the general health of Russia's population is unprecedented for an advanced industrial society. A few statistics tell the tale: the number of deaths in 1996 exceeded the number of live births by 60 percent; maternal mortality is five to 10 times higher than in Western Europe; infant mortality is two to four times higher; and the number of deaths from tuberculosis has risen by almost 90 percent during the last five years.


Most of this decline cannot be blamed only on Russia's health-care system, but rather on many factors, including worsening diets, increased levels of poisons in the air and drinking water, and decreased workplace safety and public hygiene. But it is also clear that the severe degradation of Russian health care is not helping to reverse the trend.


Until recently, Russians had access to generally reasonable medical care at no fee-or at least, for the price of a small gift to the physician. Today they find themselves frequently subject to long waits for treatments of rapidly worsening quality. In some cases, patients at state hospitals have had to supply their own food, linens, bandages, and even basic medications. Meanwhile, some formerly state-owned medical centers have begun to charge prohibitively high prices, and a number of specialized diagnostic procedures and pharmaceuticals have become unavailable at any price.


The Russian government's efforts to prevent this ongoing deterioration have focused on introducing market forces to improve efficiency and channeling additional revenue into the health-care system. A new, nationwide regime of compulsory health insurance, initiated in 1993, aimed to dismantle the state-funded, centrally managed health-care system inherited from the Soviet Union. The primary features of the new system are compulsory individual health-insurance policies and limited competition among private health insurers and health-care providers.


However, implementation of the program has been very uneven, and it has clearly not been enough to shelter the health-care sector from the endemic money shortages that have accompanied Russia's rapid economic contraction. Medical workers in many regions are paid their wages months late, if at all. In March, the Russian health minister said arrears to medical workers totaled 3.5 trillion rubles ($615 million). According to the 22 January 1997 issue of Segodnya, total debts to the compulsory health-insurance system stood at some 17 trillion rubles ($3 billion) at the beginning of the year. In some areas, federal legislation making strikes by medical personnel illegal is the only glue holding the system together.


REFORMS WITHOUT FUNDS


Attempts to move the Russian health-care system to the free market date back to 1987, when three regions-St. Petersburg, Kemerovo Oblast, and Samara Oblast-embarked on an experiment with a new economic mechanism. Instead of setting contributions from the state budget to hospitals and clinics according to the number of beds and occupancy rates, the new regime funded polyclinics according to the number of residents to which they were assigned to provide care, and hospitals according to the illnesses they had treated and the average costs of treating those illnesses, using a system similar to the "diagnosis-related groups" now common in the West.


That innovative reform reversed the long-standing incentive to over-hospitalize patients and waste resources. In Samara, for example, the average length of a hospital stay has been reduced by 7 percent, leading to the elimination of 5,500 beds deemed unnecessary, according to an article in the 26 June 1996 issue of Meditsinskaya gazeta. However, the experiment was forgotten amid the economic and political chaos of the perestroika period, and was never expanded.


The insurance system was proposed in 1991 and was finally passed by the Russian Supreme Soviet in April 1993. The main thrusts of the reform were to decentralize health care, provide it with a secure, targeted channel of resources separate from the state budget, and introduce new efficiencies through market competition. Its architects were a relatively small group of health economists who, in the heady days of early 1990s economic liberalization, were convinced that a rapid transition to privately funded, market-driven health care was the only cure for Russia's ills.


Off-budget health-insurance funds were established at the regional and federal levels, with the former paying the bulk of health-care costs and the latter covering research, the equalization of health standards across Russia's regions, and treatment for epidemics, natural disasters, and the like. Currently, each employer is expected to pay 3.4 percent of payroll to the regional fund and another 0.2 percent to the federal fund. In addition, each municipality is expected to contribute an amount not less than the average contribution per worker for each of its non-employed residents (children, the elderly, students, and the unemployed).


The regional funds license private insurers for their respective regions and make payments to those insurers, which in turn pay the polyclinics and hospitals. The funds are supposed to ensure that insurance companies do not discriminate against clients based on health-related and/or demographic risk factors. The insurance companies are supposed to act as quality-control mechanisms and guarantors of market-based incentives. In theory, the market forces work through patient and employer choice of insurer and health-care provider. This model copies the systems of such Western European countries as the Netherlands and Germany.


Since 1993, the basic elements of the insurance system have been put in place. More than 550 private insurers have been licensed to work with the 88 regional funds. More than 110 million Russians have been issued insurance policies. Between April of 1993 and October of 1996, 36.2 trillion rubles passed through the insurance network.


But with industry still faltering and government at all levels struggling to balance budgets, contributions to the insurance funds almost always fall below mandated levels. As a result, the majority of Russia's regions woefully underfund their health-care systems: according to a 30 May 1996 report in Segodnya, 65 percent of the regional funds saw less than half of their designated health budgets in 1995, one-third saw less than 30 percent, and four saw less than 10 percent.


The main source of the shortfall has been municipalities' inability to make payments for non-working citizens, who comprise around 60 percent of the population. According to the federal fund's chief analyst, writing in the 18 September 1996 issue of Meditsinskaya gazeta, 48 of Russia's regional funds did not receive any contributions from municipalities in 1994. Although by 1996 that number had dropped to 29, and the aggregate volume of payment for non-workers had grown threefold, the payments for non-workers still totaled only 36 percent of the legally mandated level.


Non-payment of health-insurance taxes by employers is another major problem. No comprehensive statistics on the extent of the problem have been released, but Meditsinskaya gazeta has published some interesting local examples. Of 32,000 existing private enterprises in Volgograd, only a little more than 500 were paying into the insurance system as of early 1996. Samara's AvtoVAZ and its subsidiaries owed more than 50 billion rubles ($10.7 million) in health-insurance taxes at the beginning of that year. Virtually all of St. Petersburg's employers, on the other hand, make insurance payments in a reasonably timely manner, with stiff fines for late payment encouraging compliance.


Of course, some enterprises avoid payments not just to save a ruble, but because the rubles simply are not there. Many insurance funds are crafting barter schemes for these instances; transporting coal from mines directly to heat clinics and hospitals, for example, or distributing food and other light inventory to treatment facilities or to medical workers in lieu of wages.


Even if the insurance system were fully funded, Russian health-care officials say it would still fall far short of fulfilling the constitutional pledge of comprehensive medical care. While developed Western countries spend between 8 percent and 12 percent of their gross national products on health care, around 3 percent of Russia's GNP is earmarked for that purpose.


Although the insurance system was supposed to address that issue by adding an additional source of revenue, it has generally been interpreted as justification for cutting other state and local spending on health care. This year, faced with a massive revenue shortfall, the Russian government plans to cut expenditures on health care from the general tax pool to 45 percent of the previously budgeted level. Even worse, some regions-and, it is rumored, even the federal government-have raided the health-insurance funds to plug non-health-related gaps in their general budgets.


REGIONAL VARIATION


The vastly differing economic conditions across Russia's regions have resulted in increasing disparity in the volume and quality of available medical services. In one region, the capacity to handle even emergency hospitalizations may have deteriorated, while in the neighboring region, well-equipped facilities may stand idle. The meager 0.2 percent payroll tax that goes into the federal fund is not nearly enough to equalize the level of care available across Russia.


The insurance system has also been implemented in varying degrees across Russia. Last September, the federal fund's chief analyst reported that only 30 percent of Russians lived in regions where the law had been installed as written. Another 44 percent of the population lived in regions where affiliates of the regional funds operated alongside private companies in the insurance business, while 14 percent lived in regions where there were no private insurers and the regional funds and their affiliates took sole responsibility for paying medical bills. The remaining 12 percent still fell under a Soviet-style system in which local health ministries collect and redistribute the insurance taxes, bypassing the funds completely.


As a result, enrollment in the insurance system is uneven. In many regions, insurance policies have been issued to the entire population. In others, municipalities' failure to make payments for non-workers means that only the employed are insured. And in those regions where neither insurance companies nor regional funds are active, medical insurance remains an unfamiliar concept. The level of coverage also varies from region to region, and among population groups within each region. For example, in Astrakhan Oblast, workers are insured only for hospital care while the non-employed are insured only for polyclinic care.


These variations threaten to divide Russian patients into "white" and "red," the former enjoying a higher quality of care delivered by health-care workers subject to incentives for high-quality work, and the latter subject to long waits and indifferent treatment at poorly equipped and intermittently supplied facilities. As the non-employed are especially likely to have no insurance, the "red" category is predominantly children, the elderly, and the disabled-precisely those people whose requirements for medical care are the greatest.


Even in regions where the insurance system is working, the systems used to determine the amounts paid to hospitals and clinics, and more importantly, physicians' salaries, often have not changed. In some cases, the result has been the worst of all possible worlds: a still substandard quality of care, but available and affordable to far fewer people.


In contrast, in some areas where competitive pressures are working, there are complaints of negative side effects that would sound familiar in the West: pressure to enroll more patients and cut costs, resulting in less allotted time per patient visit; closure of rural clinics and hospitals; excessive standardization of diagnostic and treatment regimens; and medically premature discharge of patients from hospitals.


While some of the regional variation can be attributed to a reasonable time lag for any new system to take root, in some cases it appears that bureaucratic resistance and sabotage are responsible. In the Nizhnii Novgorod, Ivanovo, Kirov, and Smolensk oblasts, for example, local leaders have made deliberate decisions to ignore the insurance mandate. According to the federal fund's press service, by late 1996 only 9 out of 173 medical institutions in Ivanovo had even begun to prepare documentation for licensing in the insurance system.


In most cases where the insurance system has been slow to develop, the cause can be traced to battles for control over money. Many local officials in charge of public health resent the birth of the insurance system as an intrusion on their turf and are eager to scuttle it at every opportunity, either by ignoring it, diverting funds from it, or refusing to make payments for non-workers.


Local health ministries have on more than one occasion been accused of using insurance revenues to lavishly remodel their offices, while the health ministries have attempted to discredit the insurance system by accusing the regional funds of corruption and overspending on administrative costs. According to the federal fund, the federal and regional funds spend only about 2.6 percent of insurance revenue on administration-an amount that is more than made up through the funds' investment activity.


PRESS ON OR GO BACK?


Four years into the reform program, the controversy over whether it was worth launching is coming to a head. The Health Ministry wants to condemn the four-year experiment with health insurance as a failure and abolish it altogether. It has proposed a draft law (published in the 27 December 1996 issue of Meditsinskaya gazeta) that would place the insurance funds and all the revenue currently going to them under the health ministry and its branches in the regions. Private health insurers would in effect be eliminated, at least from the public health-care realm.


In other words, the ministry wants to recentralize financing and regain its lost financial resources and administrative power. Health Minister Tatyana Dmitrieva argues that excessive decentralization and marketization have led to chaos and a diminished quality of care; as she was quoted in Nezavisimaya gazeta on 18 December 1996, "not everything about socialism was bad."


On the other side of the fence, a group of Duma deputies, backed by a strong insurers' lobby, are pushing a plan to further marketize health care in Russia, enhancing and augmenting the 1993 legislation's incentives for efficiency and privatization and wrenching more power from the ministry's grasp. The draft law they are supporting, described in the 24 January 1997 issue of Meditsinskaya gazeta, would enhance the role of private insurers and other non-governmental institutions in the area of licensing, accreditation, and inspection of medical facilities; strengthen the role of private-practice physicians; and enforce the requirement on municipalities to pay for non-working people.


Other recent proposals include the introduction of patient co-payments (to give people an incentive to adopt healthy behaviors); requiring employers to pay insurance for workers' dependents, and the pension fund to pay for retired persons; and tying health-care workers' wages to their performance through evaluations and incentives.


The conceptual debate underlying this bureaucratic struggle sounds not unlike conversations about health-care finance reform taking place in virtually every other industrialized society: who should pay for health care, through what administrative structure should those payments be made, and most important, what incentive structure should those payments create to govern physicians' and patients' behaviors?


Russian doctors and policy-makers now face many of the same questions asked by their colleagues in the West about the potential effects of health-care reforms. Will the insurance system allow intolerable holes to develop in the previously well-established safety net? Will physicians' authority diminish in favor of insurance companies, in the name of cost-cutting and efficiency? Will the drive to foster better quality through marketization result in the loss of a comprehensive, compassionate, thorough regime of medical treatment available to everyone?


The difference is that in Russia this debate is taking place in the context of a dramatic collapse of public financing. Those pushing health-care reform argue that it at least offers light at the end of the tunnel, whereas attempting to preserve the Soviet health-care system would only doom it to complete disintegration.


Public opinion surveys on the issue are contradictory. One national survey published in Meditsinskaya gazeta on 13 March 1996 found that more than 70 percent of doctors and 60 percent of the general population were satisfied with the insurance system; another published in the January 1996 edition of Zdravookhraneniye found that more than 70 percent of both groups had negative opinions about the new system.


In general, the public appears to be confused about how the system is supposed to work and apprehensive about where it will lead. Many Muscovites, for example, complain bitterly about the transition to insurance but acknowledge that they do not have to pay for visits to a polyclinic or hospital. In another national survey published in Meditsinskaya gazeta on 2 October 1996, a majority of respondents said their knowledge and understanding of health insurance was inadequate, but more than half also said they would be willing to pay up to 3 percent more of their salaries in insurance tax to maintain their access to health care and improve its quality.


Given bureaucratic rivalries, a lack of public awareness and acceptance, and inadequate financing, reform of Russia's health-care system remains tentative. The upcoming decision between the competing amendments to the insurance law will be critical in determining the future direction and scope of reform. But without sufficient financing, even the most appropriate, innovative, and insightful insurance legislation will not cure the ills of Russia's health-care system.


Judyth L. Twigg is an assistant professor in the Department of Political Science and Public Administration at Virginia Commonwealth University. Her research on this topic includes several trips to Russia over the past four years, most recently in May 1997, when she visited hospitals and clinics in Kemerovo, Nizhnii Novgorod, Moscow, and St. Petersburg.