Transcript Income Inequality and Poverty in Ukraine in the Course of

Health Care System of Ukraine
in the Context of Transition to
the Market Economy
Yevgeny Orel, C.Sc.(Econ.), Docent
Faculty of Economic Science
National University “Kyiv-Mohyla Academy”
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Outline of the presentation
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Introduction: Health care and a market economy
Soviet legacy in the healthcare system
Brief history of the healthcare reform in Ukraine
What Constitution says
Health care: Socioeconomic issues
Tax funding and social health insurance
Donor projects
Healthcare system reform strategies
Conclusive remarks
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Key economic problems (a reminder):
• Infinite needs
• Finite resources
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Economic features of health care
that make it special (Kenneth Arrow):
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Government involvement;
Uncertainty;
Asymmetry of information;
Externalities.
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1.) Government involvement
• Tremendous, compared to other
fields of human activity.
In what ways?
WHY specifically health care?
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2.) Uncertainty
• “The dominant presence of
uncertainty at all levels
of health care, ranging from the
randomness of individuals’
illnesses to the understanding of
how well medical treatments work,
and for whom” (Phelps).
(underscored by me. – EO)
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3.) Asymmetry of information
• “The large difference in knowledge
between doctors (and other
providers) and their patients, the
consumers of health care”. (Phelps)
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4.) Externalities
• “Behavior by individuals that
imposes costs or creates
benefits for others”. (Phelps)
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Specific features of markets in
the context of the health care:
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Uncertainty of demand;
Asymmetry of information;
Local monopoly position of suppliers;
Conflict between ethical and economic
considerations;
• Significance of externalities.
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HCE important task:
• “An important task of health
economics is to distinguish which tasks
are best performed by government,
which are best left to unregulated
markets, and which need some
combination of public and private
action” (Getzen)
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Production of health (?)

• Consumer’s demand for health care?
• – No, consumer’s demand for health.
• Health care service is a good? 
• – It is rather a bad. 
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Production of health (cont.)
• Derived demand for medical care. (like for
subassemblies?!)
• Consumer demand for health. (like for cars?!
No, because we can’t buy/sell our health)
• Supplier-induced demand, SID
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The legacy of the Soviet Healthcare System
• Positive aspects:
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Universal entitlement of all population;
Universal access, very few financial barriers;
Evenly distributed burden of financing;
Comprehensive range of services, well-developed specialistfocused care.
• Negative aspects:
– All health facilities government-owned;
– Emphasis on input indicators (numbers of physicians, beds, etc), its
discrepancy with demand;
– Distorted incentives:
• Emphasis on secondary and tertiary healthcare facilities;
• Poor quality of service;
– Poorly-developed primary care;
– Oversupplied healthcare infrastructure resulted in over-utilization
of health services.
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Health care reform in Ukraine [1]
• 1992
– Law: Principles of the Legislation on Heath Care in
Ukraine;
– Curriculum and program for specialization as
General Practitioner approved by Ministry of Health;
• 1994
– On Ensuring Sanitary and Epidemiological Wellbeing of the Population;
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Health care reform in Ukraine [2]
• 1995
– Laws: on blood donation, on narcotic drugs and psychotropic
substances and their trafficking,
– General Practitioner/Family Physician formally approved as
job positions;
– Family Planning National Program approved;
• 1996
– Constitution of Ukraine; Law on Medicines; Law on
Insurance;
– User charges for defined services provided in public health
facilities introduced;
– Medical industry development program approved (19972003);
– “Children of Ukraine” National Program approved;
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Health care reform in Ukraine [3]
• 1997-2002
– A large number of laws and legislative acts; this included secondreading approval of the Draft Law on Mandatory State Social
Health Insurance;
– The Constitutional Court ruled user charges unconstitutional;
• 2003
– Third-reading rejection of the Draft Law on Mandatory State
Social Health Insurance;
– Amendments to the Law on Procurement of Goods and Services
toward establishment of open tenders
• 2004
– One more failure to approve the Law on Mandatory State Social
Health Insurance;
– Open tender-related scandal.
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Constitution of Ukraine
Article 3
 The human being, his or her life and health, honor and
dignity, inviolability and security are recognized in
Ukraine as the highest social value.
 Human rights and freedoms and their guarantees
determine the essence and orientation of the activity of
the State. The State is answerable to the individual for
its activity. To affirm and ensure human rights and
freedoms is the main duty of the State.
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Constitution of Ukraine
Article 49
• Everyone has the right to health protection, medical care
and medical insurance.
• Health protection is ensured through state funding of the
relevant socio-economic, medical and sanitary, health
improvement and prophylactic programmes.
• The State creates conditions for effective medical service
accessible to all citizens. State and communal health
protection institutions provide medical care free of charge;
the existing network of such institutions shall not be
reduced. The State promotes the development of health
care facilities of all forms of ownership.
• The State provides for the development of physical culture
and sports, and ensures sanitary-epidemic welfare.
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Ukraine health care system, like the
whole country, suffers from:
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Inconsistent social and economic policy;
Lack of equal conditions for all economic entities;
Unfavorable investment climate;
Imperfect tax policies
B.Tymkovych, 2004
• Frequent reshuffling of the government (each
minister’s term of office averaged a year)
• Political instability and overall unpredictability of
business climate.
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Ukraine's social and health statistics reflect
the impact of nine years of economic decline.
• 1991-1999 – GDP declined by ca. 60%.
• Share of HC expenditures in GDP down
from 4.9 in 1996 to 3 in 2004.
• “Healthy“-rated population down from 54
% in 1995 to 46 % in 2000.
• Live birth per 1000 – 7-8 (declining)
• Death rate per 1000 – 15.3 (increasing)
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HIV/AIDS in Ukraine
• As of April 2005, 79099 registered HIV-positive, incl.
9272 children. Health officials estimate the actual
number ca. 500,000, or about 1 % of the population.
• By April 2005, 6009 registered patients died of AIDS,
incl. 165 children.
• New registered cases (selected years):
– 2002 – 7377
– 2003 – 8166
– 2004 – 10198
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HC expenditures as % of GDP:
• Recommended by WHO: 7-8%
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Georgia – 0.8%
Ukraine – 3% (not counting shadow economy)
Armenia – 4%
Hungary – 5%
Germany – 8-9%
USA – 15% (!) [of 10 trillion US$]
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GDP growth in 2000-2004…
• …did not effectively tell on the health care
sector (and not only HC sector!)
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Common problem for Central and
Eastern European (CEE) countries:
• “Extremely centralized management of
healthcare provision and financing.”
Source: Decentralization in Healthcare, 2005
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Problem of healthcare system in
selected countries, Ukraine incl.
• Structural disproportions
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Structural Disproportions in the Health Sector
(Source: Decentralization in Healthcare, 2005)
Countries with Well
Developed HCS
Indicators
Ukraine
Portion of hospital care expenditures
80-85%
36-50%
Hospitalization rate
Average length of inpatient stay
19.4%
14.9 days
12-17%
8-13 days
Number of bed-days per resident
2.9
4-5%
20%
0.9-2.3
20-30%
60%
Annual number of visits per resident
9.7
4-6
Frequency of primary healthcare referrals to
hospital specialists
60% (in
4-10%
Portion of primary health care expenditures
Percentage of primary physicians
cities, incl.selfreferrals)
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Health care financing (1):
• Public funding:
– Tax-based
– Insurance-based
• Private funding:
– Private insurance
– Out-of-pocket payments - OOPS
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Health care financing (2):
• Tax funding;
• Patient payments: cost-sharing, coinsurance, deductibles, OOPS;
• Social health insurance (community
insurance);
• Private health insurance;
• Other sources: NGOs, domestic and
international donors, legacies, etc.
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By-country breakdown of
financing (%)
UK
France
Germany
Netherlands
Denmark
EU
Tax
72,5
5,9
11,8
4,8
86,6
31,9
SHI PHI OOP Other
7,2 4,5 15,8 0,0
66,4 9,1 17,0 0,8
68,6 6,9 11,7 1,0
73,8 14,1 7,3 0,0
1,9 11,4 0,0
47,0 6,3 15,5 0,2
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“Odd” cases:
• Belgium: OOPS = 20%
• Ukraine: OOPS = ca.70% (shadow economy larger in
health care than overall)
• Estonia: No informal payments!(?)
• USA:
– 40-45 mln. not-insured
– 40 mln. Underinsured
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To insure for health care? WHY?
• Uncertainty of demand for health care;
• Need to alleviate catastrophic expenditures
for household budgets;
• Illness mostly occurs when our income is
low.
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State funding systems:
• General taxation
• Earmarked payroll tax
• Social insurance
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Tax funding advantages
• A range of revenue sources, i.e. not a single
one;
• STA/IRS/other-equivalent as a single collector
versus numerous state departments;
• Control over government expenditures is
easier;
• Equitable funding, since taxation is mostly
progressive.
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Tax funding problems, part 1:
• Political priorities often tell on HC budget;
• Grey/black economy
– US: ca.10%
– Germany: 15%
– Ukraine: 55% (give or take a jumbo-jet  )
• Equal access (?);
• Government bureaucracy:
– Groups of interests;
– Kickbacks;
– Others.
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Tax funding problems, part 2:
• Equity:
– in financing;
– in access;
• Lack of resources if taxation is regressive (when goods
are taxed, not income);
• Rigid allocation of health care resources;
• Lack of incentives;
• Not patient-driven;
• Waiting lists (you can’t pay and skip the queue).
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Earmarked payroll taxes
• Money is committed to the health sector;
• Tax levied on employment, i.e. no other
income is taxed;
• Tax on employment  contingent on
business cycles;
• Narrow funding base;
• Tax burden is spread upon other people.
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Social health insurance
• Mandatory insurance scheme
• Same as earmarked tax, but entitlement
depends on actual contribution
• Social insurance fund usually duplicates
general taxation system (like STA or IRS)
• Premiums split between employer and
employee in a certain proportion.
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Social health insurance problems
• Economic growth tells on the amounts of
social insurance funding;
• Grey/black economy;
• Administrative complexity;
• Government bureaucracy;
• Moral hazard;
• Lack of consumer choice (e.g. in France).
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Will a mandatory social health
insurance ever be introduced in
Ukraine?
Does Ukraine need it?
Is everybody in the new government
supportive of the mandatory social
health insurance?
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EU Project “Health Financing
and Management in Ukraine”
• Overall objective of the Project
development of an effective and efficient
health care financing and management
system in Ukraine.
• http://www.healthfin.kiev.ua
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Components of the EU Project:
• To build capacity within the MoH to prepare the prerequisite conditions for introduction of social health
insurance.
• To develop two pilot projects to demonstrate efficient and
effective world heath insurance "best practices".
• To develop sustainable training processes for specialists in
the field, medical institutions' administrators and experts
related to the HIF.
• To provide for positive perception of the reform among
population by means of implementing a wide-scale public
awareness campaign in mass-media.
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USAID
Among the 13 strategic objectives for which USAID
requests funds:
– Increased Promotion of Good Health and Access to Quality
Health Care
• increasing access to quality primary health care services and
promoting family medicine;
• improving quality of reproductive health services and supporting
reproductive policy reforms;
• arresting the spread of infectious diseases focusing on HIV/AIDS and
TB epidemics;
• improving health services to the population affected by the Chornobyl
accident;
• surveillance and prevention of birth defects (BDs).
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Other donors:
• DFID (HIV/AIDS Socio-Economic Impact);
• WB;
• UN Family in Ukraine (UNDP, UNAIDS, UNFPA,
UNICEF);
• SIDA;
• CIDA;
• Etc.
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[a repeat slide] Structural Disproportions in the
Health Sector (Source: Decentralization in Healthcare,
2005)
Countries with Well
Developed HCS
Indicators
Ukraine
Portion of hospital care expenditures
80-85%
36-50%
Hospitalization rate
Average length of inpatient stay
19.4%
14.9 days
12-17%
8-13 days
Number of bed-days per resident
2.9
4-5%
20%
0.9-2.3
20-30%
60%
Annual number of visits per resident
9.7
4-6
Frequency of primary healthcare referrals to
hospital specialists
60% (in
4-10%
Portion of primary health care expenditures
Percentage of primary physicians
cities, incl.selfreferrals)
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Hospital Care Restructuring and Primary
Health Care Reform in Ukraine
(a proposed scope of lines)
• “Replace hospital care with outpatient care when
possible;
• Develop home surveillance for aged and disabled
patients;
• Change the legal status of hospitals from
budgetary organizations to paid-service
enterprises;
• Promote integration of inpatient, primary and
social care;
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Hospital Care Restructuring and Primary
Health Care Reform in Ukraine [2]
(a proposed scope of lines)
• “Gradually introduce single physician (GP) PHC
provision, making doctors responsible for their
patient communities;
• Introduce administrative and economic
mechanisms that lead to rational use of available
health care funds;
• Develop a system of incentives for medical staff
of general/family practice facilities to enhance
their performance (incl. salary incentives)“
Source: Decentralization in Healthcare, 2005
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Ways to reduce the number of hospital
beds in Ukraine (scope of lines)
• “[where possible] Convert hospitals into nursing
homes and long-term care facilities with expanded medical
surveillance, rehabilitation and treatment of chronic patients;
• Close maternity homes after maternity
departments have been opened at general
hospitals;
• Set up geriatric departments for acute patients at
general hospitals: use existing empty beds, close mental long-term
hospitals, develop sopcial social services and outpatient facilities;
• Close facilities that are not up to current
standards.”
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Ways to reduce the number of hospital
beds in Ukraine (scope of lines) [2]
• “Open TB departments at general hospitals for shortterm examination and treatment; focus on long-term
community service support;
• Set up alcohol/drug rehabilitation and treatment centers
as general hospital departments, involving community
service support;
• Convert hospitals into special asylums for the homeless
and victims of physical/sexual abuse;
• Create hospices to take care of terminal patients.”
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Health care reform activities in Ukraine:
• Strategic interventions. They aim at
structural reorganization;
• First-aid actions. They seek to preserve and
maintain the current system;
• Changes resulted from political and
economic transition
Source: “Health Care System in Transition: Ukraine”, 2004
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Strategic interventions [1]:
• Reorganization of primary health care on the
principles of general practice / family medicine
(1994-2000, in fact, training reorganized, system not);
• CabMin Resolution (2000) “On Comprehensive
Measures for Introducing Family Medicine into
the Health Care System”:
– Family ambulatories in rural areas;
• Implementation heavily depends on political
attitudes (Kharkiv, Zhitomir, Poltava);
Source: “Health Care System in Transition: Ukraine”, 2004
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Strategic interventions [2]:
• Law on Procurement; contractual
relationships
• Exceptional case – December, 1995 –
government-supported health insurance for
railroad workers (limited application, within
railroad health care facilities);
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First-aid actions [1]:
• Efforts toward preserving and maintaining the current
system (Semashko system);
• Approval of user charges for selected services;
• Approval of voluntary contributions and donations
(complementary sources of health finance).
Source: “Health Care System in Transition: Ukraine”, 2004
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First-aid actions [2]:
• Rhetorical issue of defining “health care” as distinct to “health
service” (you can pay for the latter, but not fo the former)
• Maximum norms of beds established in 1997 for the most costintensive hospitals
• How to get rid of shadow economy? How to let people pay in
line with their means? How to deal with impoverishment?
Source: “Health Care System in Transition: Ukraine”, 2004
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Changes caused by economic transition [1]:
• Democratization, decentralization, deregulation,
development of market economy – resulted in
decentralization of power and in local selfgovernment development;
• Hence, health care financing more phasing out
from the central budget into local budgets;
• But – this has inhibited the potential of Ministry of
Health in reforms implementation;
Source: “Health Care System in Transition: Ukraine”, 2004
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Changes caused by economic transition [2]:
• Transition to market economy resulted in development
of non-governmental sector in the health care system
(privately owned first-aid ambulances, privately owned
maternity home, etc)
• Domestic pharmaceutical industry is on the rise,
exceeding their foreign competitors.
• Had it not been for at least partial market reforms in
health care, the access of most people to health care
services would have been significantly limited.
Source: “Health Care System in Transition: Ukraine”, 2004
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Other remarks [1]
• Legal framework:
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fragmentation,
complexity,
overlapping,
ambiguity;
• Inadequate resources to meet goals;
• Poor efficiency, both allocative and technical.
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Other remarks [2]
• Primary health care reform in progress;
• Created were legal prerequisites for:
– private health care sector;
– Manufacturing and distribution of
pharmaceuticals;
• Voluntary health insurance developing.
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Major strategy for the future:
• Improving the management of the existing
system:
– More efficient use of limited resources;
– Ensuring access of people to the heath care
facilities and services;
– Focus on prevention and social services, deemphasizing the role of inpatient facilities.
(*_*)
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Thank you for attention!
Дякую за увагу!
Спасибо за внимание!
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