45127 Public Spending in Russia for Health Care: Issues and Options Europe and Central Asia Region Human Development Department Russian Federation Country Management Unit www.alexpublishers.ru The World Bank Public Spending in Russia for Health Care: Issues and Options Europe and Central Asia Region Human Development Department Russian Federation Country Management Unit The World Bank 2 Table of Contents Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 I. The Efficiency of Spending on Health Care Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.1 Poor health outcomes in the Russian Federation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.2 Main causes of premature death, ill health and disability in the RF . . . . . . . . . . . . . . . . . . . . . . 8 1.3 Life expectancy differences within the Russian Federation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.4 The social and economic cost of NCDI in the Russian Federation . . . . . . . . . . . . . . . . . . . . . . . 9 1.5 Low Levels of Health Care Expenditure in the Russian Federation . . . . . . . . . . . . . . . . . . . . . . 11 1.6 Health care expenditures in the Russian Federation: recent trends . . . . . . . . . . . . . . . . . . . . . . . 12 1.7 Health Spending and Outcomes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 II. The Distributional Impact of Spending on Health Care Services . . . . . . . . . . . . . . . . . . . 15 2.1 Health Care Spending by Regions of the Russian Federation . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.2 Distribution of health care spending by income deciles by region . . . . . . . . . . . . . . . . . . . . . . . . 19 2.3 Outcomes by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.4 Distribution of Spending By Type of Health Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.5 Household Payments for Medical Drugs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.6 Uses of Medical Services by Income Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 III. Factors that will influence the growth in health spending over the next 20 years and considerations for guiding the allocation of additional resources . . . . . . . . . . . . . . . . . 25 3.1 What are the main drivers of health and long-term care expenditures globally? . . . . . . . . . . . . . . 26 3.2. Increasing Level of Funding for Health in the Russian Federation: Key Challenges . . . . . . . . . . 26 3.3. Where should additional public resources come from? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 3.4. How to allocate additional financial resources for health care? . . . . . . . . . . . . . . . . . . . . . . . . . . 27 3.5 The process for developing standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 IV. The Imperative of Policy, Structural and Institutional Reforms to Achieve Better Health Outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.1 Key Areas for Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.2 Is health system reform possible in the Russian Federation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 V. The way forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 3 Figures Figure 1. Gross National Income per Capita and Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Figure 2. GDP Per Capita and Male Adult Mortality in Russia and Other Countries. . . . . . . . . . . . . 8 Figure 3. Health care spending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Figure 4. Public Expenditures on Health, Russian Federation, in real terms, 1991­2006 (1991 = 100). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Figure 5. Efficiency of Private and Public Health Spending Standardized Mortality Rate Non-communicable Diseases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Figure 6. Local Governments--PSP, PSE, and DEA Scores vs. Spending in Percent of GRP . . . . 14 Figure 7. Labor expenditures in the health sector and monthly per capita expenditure under the mandatory health insurance (MHI) program, 2006 . . . . . . . . . . . . . . . . . . . . . . . 18 Figure 8. Drugs expenditures in the health sector and monthly per capita expenditure under the mandatory health insurance (MHI) program, 2006.. . . . . . . . . . . . . . . . . . . . . . . 18 Figure 9. Distribution of Health Spending by Regions and Source of Funds, 2006 . . . . . . . . . . . . . . 21 Tables Table 1. Regional Variation in Life Expectancy at Birth in Russia 2000­2006. . . . . . . . . . . . . . . . . . 9 Table 2. Monthly actual health expenditures per capita, by Russian Regions, 2006. . . . . . . . . . . . . . . 15 Table 3. Per capita public health expenditures and income deciles, by region, 2006 . . . . . . . . . . . . . . . 19 Table 4. Per capita funding of regional medical guarantee program, 2006 . . . . . . . . . . . . . . . . . . . . . . 21 Table 5. Self Reported Health Status, by Consumption Quintile, 2003. . . . . . . . . . . . . . . . . . . . . . . . 22 Table 6. Percent of respondents who used medical care in the preceding 3 months . . . . . . . . . . . . . . . . 22 Table 7. Public expenditures on health care (percentage) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Table 8. Estimation of health care funding trends, different sources and years. . . . . . . . . . . . . . . . . . . . 25 Table 9: Russia: Projected Public Expenditures on Health, 2008­2020 . . . . . . . . . . . . . . . . . . . . . 27 Box Box: 1 Priority Setting and Health Spending in the UK in the 2000s . . . . . . . . . . . . . . . . . . . . . . . . . 28 4 Acknowledgements This report was prepared in June/July 2008 by Patricio Marquez, Lead Health Specialist, Europe and Central Asia Region (ECA), The World Bank, with contributions of Edward Frid, Russian Consultant, The World Bank, Rifat Atun, Imperial College of London, Kalipso Chalkidou, UK's National Institute for Health and Clinical Excellence (NICE), and Sevil Kamalovna Salakhutdinova, Health Officer, Moscow Office, The World Bank. The report also incorporates advice and suggestions that were provided by Gerard Anderson, Johns Hopkins University Bloomberg School of Public Health; and Sergey Shishkin, Igor Sheiman and Nadezhda Lebedeva, leading Russian Health Economists. The report is part of the Long Term Fiscal Study that is being conducted by the World Bank for the Russian Ministry of Finance under the leadership of Zeljko Bogetic, Lead Economist and Country Sector Coordinator, Russia Country Management Unit, The World Bank. 5 Introduction " e main challenge now is to translate these eco- There are few data showing how spending in health nomic successes into social programs to show that care in the Russian Federation translates into better developing the economy improves the lives of ev- health outcomes such as improved mortality, improved ery Russian citizen. In recent times we have begun morbidity, increased economic output and productiv- to implement some social programs in the areas of ity, improvements in the number of life years gained, or education and health care and I believe that it's very more sophisticated composite measures such as Qual- important to maintain and develop these programs, ity Adjusted Life Years (QALYs). There is also lim- getting on with the full-scale modernizing of work in ited data on outputs of hospitals and other healthcare health care and education." providers which allow controlling for case mix, socio- economic status, supply-side variables and quality of Dmitry Medvedev, President of the Russian Federation care. Therefore, it is difficult to assess the efficiency Interview with the Financial Times, March 24, 2008 or distributional impacts of health interventions. While the analysis draws on primary data specifically col- This report examines three critically important areas to lected for the study, the absence of detailed output and inform discussions on the appropriate level of health care outcome data, necessarily limits the scope of the study spending in the Russian Federation: and its findings. · e e ciency of spending on health care services. The primary audience for this report consists of policy What is the relationship between inputs and outputs makers, analysts, managers and service providers in the in the Russian Federation? Does the Russian Feder- Russian health sector. A secondary audience is internal, ation achieve value in health care spending compared particularly managers and staff of the World Bank who to members of the European Union (EU) and/or are working in the Russian Federation and other middle- the G-8 group of countries? What factors can re- income countries. duce efficiency in the Russian Federation and how can they be minimized? · Distributional impacts of spending on health care services. How are resources distributed across the regions and how are resources allocated by income. What can be done to minimize the disparities across the regions and by income? · e key factors that will in uence the growth in health care spending over the next 20 years. How can the Russian Federation sustain economic growth in an environment when the working age population is shrinking and the population over age 65 is in- creasing? This analysis draws on routinely collected regional and federal data and as discussed below is limited in scope by the relative absence of routinely or specifically col- lected data on the outcomes and outputs of the health care systems in Russia. 6 I. The Efficiency of Spending on Health Care Services When discussing efficiency of health care spending it is fers to the extent to which the services and interventions useful to briefly visit the definitions of efficiency and ef- provided are in line with the best available evidence. fectiveness as these vary. The analytic challenges are how to measure the cost of Macroeconomic efficiency relates to the proportion health care and how to measure outcomes and outputs. of resources allocated to health care in aggregate and At the simplest level the costs are the expenditures to the benefits achieved (in terms of health outcomes). treat people. As measurement of cost, expenditures Countries that spend more on health care with similar and outcomes vary in different countries cross-country outcomes are less efficient. Countries that spend less comparisons are necessarily difficult. However, with on health care and have better outcomes are more this caveat stated, we draw on published studies to ex- efficient. plore macroeconomic efficiency by comparing the level of spending and the health outcomes across Russia and Microeconomic efficiency which refers to the scope of different countries achieving efficiency from existing resources has two dif- ferent components: technical and allocative efficiency. 1.1. Poor health outcomes in the Technical efficiency (also called productive efficiency) Russian Federation compares the different levels of service produced at a given level of expenditure using a single method to pro- In the Russian Federation today, female life expectancy duce a service. For example, it would compare two dif- (72 years) is close to the level of 1955; male life expec- ferent ways to perform a CT scan and would measure tancy (59 years) is four years less than what it was in which approach is least costly assuming they both result that year, and is now at the same level as in Eritrea and in the same health gain. Allocative efficiency relates to Papua New Guinea. Until 2004, declines in life expec- different mix of services/activities to achieve greatest tancy in Russia contrasted sharply with strong growth impact on health and health outcomes. A third term also in gross national income (GNI) achieved since 1998 commonly used in discussions of efficiency of health care (Figure 1). Even with the positive dynamic exhibited in spending is effectiveness. Effectiveness in this context re- 2006, average life expectancy in Russia only rebounded Figure 1: Gross National Income per Capita and Life Expectancy Source: World Bank World Development Indicators 2005/WHO/EURO HFA Database 2005. 7 Figure 2: GDP Per Capita and Male Adult Mortality in Russia and Other Countries Source: Prepared by authors on the basis of World Bank and WHO data. to the low level of 2000 (66 years). This can be com- accounted for 56.9 percent, 13.1 percent, 13.1 percent, pared with a 78 year average in the European Union; a 4.1 percent, and 3.8 percent, respectively, of all deaths 12 year difference. The gap is even more pronounced in the country. Collectively, their overall contribution to in terms of healthy life expectancy (HLE): in Russia, total deaths was estimated at 91 percent. While CVD HLE for women is about 10 years less than in France, and cancer accounted for 70 percent of all deaths in and 16 years less for men than in the United Kingdom. 2006, infectious and parasitic diseases accounted for HLE is a measure of the life expectancy at full health. only 1.6 percent of all deaths. As shown in Figure 2, mortality rates for adult males are External causes of death (EC), including injuries, are the very high in Russia relative to other countries at simi- secondleadingcauseofdeathinRussiaafternon-commu- lar income and development levels. These outcomes are nicable diseases--especially in women aged 1­35 years often worse than that in other Eastern European and and in men aged 1­45 years. In 2006, 80 percent of all Commonwealth of Independent States (CIS) countries injury deaths occurred in men aged 20­24 years, and and similar to levels observed in several African coun- 54 percent in women aged 15­19 years. Of all injury-re- tries severely affected by the AIDS epidemic. lated deaths in 2006, industrial accidents accounted for 17­19 percent, domestic accidents for 46­46 percent, and street accidents for 28­30 percent. Road accidents 1.2. Main causes of premature death, ill health accounted for up to 60 percent of the total injury-related and disability in the Russian Federation deaths, and are among the major causes of disability in The main causes of poor health outcomes­premature the working-age population. Some 200,000 persons are death, ill health and disability­among adults in the injured in road accidents each year in the Russian Fede- Russian Federation, are: (i) non-communicable dis- ration and 30,000 of these die. The respective figures eases (NCDs, e.g., heart attacks, strokes, cancer), and for children are 22,000 total injured and 1,500 deaths. (ii) external causes, predominantly injuries due to traf- Road-related injuries are one of the most serious socio- fic accidents. economic and medical problems of Russia today. In 2006, cardiovascular diseases (CVD), cancer, dis- Standardized deaths per 100,000 of population for ma- eases of the digestive system (DDS), diseases of the jor causes of death in the Russian Federation in 2005 far respiratory system (DRS) and diabetes mellitus (DM) exceeded the corresponding rates in the EU countries-- 8 the mortality rates from CVD and external causes of 1.4. e social and economic cost of NCDI death for Russian men are respectively four and seven in the Russian Federation times higher than those observed in the EU, while these As documented in a recent World Bank report1, the rates for Russian women exceed the rates observed in Russian Federation's unprecedented mortality upsurge the EU four times. in the last two decades, coupled with fertility rates that are well below replacement level, has several important At present levels of mortality, less than six out of every implications beyond the socio-demographic make-up of ten 15year-old Russian boys can expect to survive to Russia. These are discussed below. the age of 60, while almost eight out of every ten Bra- zilian or Turkish boys and nine out of ten British boys (i) Shrinkingpopulation:.Sincethebeginningofthe of the same age can expect to live until 60. The sur- 1990s, the Russian Federation's population has vival prospects for Russian girls, while still lower than declined by six million to an estimated 143 mil- many other countries of comparable socio-economic lion. The average annual population growth be- development, do look markedly better than for Rus- tween 1990 and 2003 was -0.3%, and continued sian boys. high mortality and declines in fertility are expected to lead to further population decline. It is estimat- ed that the population of the Russian Federation 1.3. Life expectancy di erences within would be 17 million higher than at present if age- the Russian Federation specific mortality rates had followed the patterns Mortality rates and life expectancy at birth in Rus- experienced by the EU-15 countries since the sia vary greatly by region, in part because of regional mid-1960s2. differences in socioeconomic status and health levels. These differences can be observed when analyzing the (ii) Fewer workers: If these trends persist, the size of regional variation in average life expectancy at birth. the Russian labor force will continue to shrink. A The total and the gender differences however are very healthy population aged 65 to 75 could represent striking. People in a socio-economically better-off re- a sizable untapped workforce3. However, the high gion outlive their counterparts in a socio-economically burden of ill health among surviving older Russians less well off region by almost 20 years. Furthermore the may limit what can be achieved. differences in life expectancy between men and women within regions are also large but these differences are (iii) National security risks. The demographic and less acute across regions. On average, women outlive health crisis in the Russian Federation present many Table 1. Regional Variation in Life Expectancy at Birth in Russia 2000­2006 Life Expectancy at Birth 2000 2003 2006 Total Male Female Total Male Female Total Male Female Region with the longest life expectancy 74,0 68,6 79,0 74,8 71,5 77,8 76,0 71,9 79,8 Region with the shortest life expectancy 56,1 50,4 63,0 54,1 47,4 60,2 55,9 52,8 59,8 Source: Rosstat, 2007. men by eight years within the region with the longest 1World Bank 2005. Dying Too Young. Addressing Premature Mortality and Ill Health Due to Non-Communicable Diseases in the Russian Fede- life expectancy and seven years within the region with ration, Washington, DC. the shortest life expectancy. The within region differ- 2E.M. Andreev, 2005. "Demographic Consequences of Mortality Reversal ence suggests important variations between socio-eco- in Russia." Paper for the XXV IUSSP International Population Confer- ence, Section 36: "Demographic and Socio-Economic Consequences of nomic population groups in addition to the variation Adverse Mortality and Health Trends," Tours, France, July 18, 2005. across regions (Table 1). 3P.F. Drucker, 1999. Management Challenges for the 21st Century. Burlington, MA: Butterworth-Heinemann.. 9 challenges to national security4. First, the number · e cost of absenteeism due to ill health. A conser- of men of conscription age will plunge rapidly in vative estimate identifies significant costs of absen- the decades ahead. Second, a growing percent- teeism due to illness: on average, 10 days are lost per age of the military budget must provide for medi- employee per year due to illness in the Russian Fed- cal, nutritional, and substance abuse programs for eration, while in the EU15 countries the average is soldiers deemed medically unfit. Third, long-term 7.9 days. Sickness absence incurs the direct cost of economic growth will depend on large cohorts of sickness benefits paid to absent employees as well as healthy and skilled young and middle-aged adults the indirect cost of lost productivity. The overall cost engaged in productive enterprises yet the demands associated with the reported workdays lost to illness of the armed forces will reduce the available pool. in the Russian Federation varies between 0.55% and Finally, the Government is concerned that depopu- 1.37% of GDP (depending on whether the mone- lation of some border areas may have potential se- tary value is calculated from the average wage rate, curity implications. giving the lower value, or GDP per capita, giving the higher value). This is a significant impact, given that (iv) Impact on health care costs and the economy: it excludes the many other ways that ill health im- The contribution of NCDI to the burden of ill- pacts the labor market such as the effects of reduced ness in the Russian Federation raises two economic productivity. questions. First, as many NCDI require expensive and prolonged medical treatment, to what extent is · Adverse impact on labor supply. Ill health also the Russian health system burdened with the cost impacts labor supply because jobholders with of treating them? Second, what are the economic chronic non-communicable diseases are more likely consequences of premature mortality, ill health, than healthy individuals to either retire early or to and disability among Russian working-age adults? lose their jobs and draw on state pensions. While a hypothetical Russian male aged 55 with median (v) High medical treatment costs: Estimates of ex- income and other average characteristics6 would be penditure from two regions in the Russian Federa- expected to retire at age 59, having a chronic illness tion (Chuvash Republic ­ an agricultural region would lower his expected retirement age by 2 years. ­ and Kemerovo Oblast ­ an industrial region) Similar results are obtained for females. Chronic ill- in 2003 were analyzed and the results extrapo- ness, therefore, is a significant predictor of premature lated to the national level.5 The shares attributable retirement in the Russian Federation. The effect is to different diseases were applied to the US$13 greatest among the poor who carry a double burden billion that is widely accepted as the total level of of ill health: first, they are more likely to suffer from health care expenditure. This analysis showed that chronic illness, and second, once ill, they suffer worse NCDI are the Russian Federation's highest-cost economic consequences than rich people, perpetuat- conditions. The four most costly conditions were ing socioeconomic disadvantage. circulatory system diseases, respiratory diseases, external causes (both intentional and unintentional · Adverse impact on labor productivity. Empiri- injuries), and digestive system diseases. These cal analyses adopting various estimation procedures conditions account for more than 50% of the coun- conclude that in the Russian Federation poor health try's total health expenditures. reduces wages much more than in the Organiza- tion for Economic Co-operation and Development (vi) Adverseeconomice ects. A summary of the main (OECD) countries, where poor health tends to findings presented in the "Dying Too Young" re- affect mainly the number of hours worked. More port follows. precisely, from the Russian Longitudinal Monitor- ing Survey (RLMS) data, people reporting good health earn higher wages than those in poor health, 4 J. Twigg, 2004. "National Security Implications of Russia's Health and Demographic Crisis," PONARS Policy Memo 360: 1­5. 6The other characteristics of this hypothetical individual are that he is mar- 5Frid, E. 2005. "Health Care Costs in the Russian Federation." Back- ried, has one child, has a high school diploma, was born in the Russian ground assessment prepared for the World Bank, Moscow, March. Federation, and is living in an urban area. 10 with a 22% premium for women and 18% for men illness negatively affected household incomes, par- (when endogeneity of the health proxy is addressed ticularly during 1998­2002, when it is estimated using standard econometric techniques). The Na- that it contributed to an annual loss of 5.6% of per tional Survey of Household Welfare and Program capita income. Participation (NOBUS) data yield similar results: men in good health earn about 30% more and wom- The above analysis demonstrated various channels en 18% more compared to those in less than good through which health has impacted economic outcomes health. Finally, a panel analysis based on the RLMS in the Russian Federation. In each estimate presented 2000­2003 rounds confirms that good health sta- here, the results proved statistically significant, and tus positively affects the wage rate for males, while where effect size could be assessed, it was considerable. it does not substantially affect the number of hours worked per week. 1.5. Low Levels of Health Care Expenditure · Job losses. Alcohol abuse in the Russian Federation in the Russian Federation significantly increases the probability of being dis- One way to understand the level of health spending in missed from employment. the Russian Federation is to compare this with health spending in other countries. Numerous empirical stu- · Adverse impact on the family. The death of a dies have shown that total health spending generally household member affects other household members' increases as the GDP increases. Whereas, the low- welfare and behavior in various ways. RLMS data and middle-income countries (GDP <$10,000 per indicate that alcohol consumption per capita increase person) allocate less than six percent of GDP, high- by about 10 grams per day as a consequence of the income countries spend around 7­10 percent of their death of an unemployed household member and by GDP on health. about 35 grams if the deceased was employed. The probability of suffering depression increased by 53% Most comparative studies on health expenditures show when controlling for other relevant factors. Chronic that the United States is an outlier amongst high-income Figure 3: Health care spending Per Capita US$ PPP Source: OECD data 2006; for Russia, GDF and WBI, Unified Survey. 11 Figure 4: Public Expenditures on Health, Russian Federation, in real terms, 1991­2006 (1991 = 100) Note: Includes budget and health insurance contributions. Source: Goskomstat database using index deflators of GDP. ­ IET, (2007) ­ Russian Economy in 2006. Moscow: IET, p. 495. http://www.iet.ru/files/text/trends/2006_en/2006_en.pdf countries: spending 17 percent of its GDP on health It is also interesting to compare the balance between care. In comparison, Russia's total health expenditure is public and private spending within the Russian Fed- 5.3 percent of GDP, significantly below the levels ob- eration. In Russia, spending appears to be equally bal- served in countries with similar per capita income.7 anced between public and private spending. In most G-8 and EU countries public sector spending repre- As shown on Figure 3, Russia also spends less on health sents 75 percent of total health care spending, although in per capita terms than in other countries in the G-8 in some of these countries it is as high as 90 percent. and EU countries. These findings, coupled with poor The large proportion of private expenditures in Russia health outcomes and rapidly growing GDP suggests a reflects out-of-pocket payments for informal charges in large scope for increasing overall spending for health care health facilities and the purchase of pharmaceuticals. in the Russian Federation. It also suggests a public willingness to spend more on health care services to cover shortcoming in the pro- In Russia, since 2001, public sector expenditures on vision public health services, more importantly lack health, measured as a share of GDP, have fluctuated of outpatient drug benefits under the State Medical between 2.7 and 3.6 percent (Figure 4). This is signifi- Guarantee Program. cantly less than the expenditures of the G-8 countries and the countries which constitute the EU-15, which 1.6. Health care expenditures in the Russian typically spend 6­12 percent of their GDP on health Federation: recent trends care, and with the exception of the United States, over 75 percent from the public sector sources. However, it is While health spending levels grew in most EU and G-8 important to note that public sector spending for health countries in the 1990's and 2000's, spending levels on in Russia as a share of GDP is similar to levels observed health care did not increase in the Russian Federation. in other middle-income countries. The decline in health status in the Russian Federation occurred simultaneously with decreases in public sector 7Tompson, W. 2007. "Healthcare Reform in Russia: Problem and Pros- health care expenditures and worsening socio-economic pects." OECD Economics Department Working Papers, No. 538, OECD Publishing, do1:10, 1787/327014317703. status of the population. In the 1990s, Government ex- 12 Figure 5. Efficiency of Private and Public Health Spending Standardized Mortality Rate Non-communicable Diseases Sources: Adapted from Hauner (2007); data from WHO, IMF, WEO database, and IMF staff calculations. 1/ Inverted (following Afonso, Schuknecht, and Tanzi 2005), because better outcomes have to be reflected in higher values. penditures for health care declined by one-third, as many tures in the Russian Federation.9 Although the compari- secondary and rural facilities were closed and services sons of expenditure and mortality are imperfectly adjusted discontinued. In real terms, health care spending rose for factors that could affect mortality, the results suggest above pre-transition levels only in 2006 with injection of that health outcomes in Russia are similar to countries resources from the National Priority Health Program of which spend 30­40% less on health (Figure 5). This 2006­2007 period. finding suggests considerable inefficiency in the Russian Federation health system. A second implication of the Rapidly rising incomes with real growth expected to findings of this report is that in order to improve health average over five percent in the medium term, aging outcomes, additional resources for health care are needed population, poor health outcomes and demands of the but these additional resources must be accompanied by growing middle class will continue to put pressure on reforms to improve efficiency and effectiveness of health demand for health services. As a result, total and pub- care organization and delivery.10 lic expenditures on health as a percentage of GDP are likely to increase in Russia over the medium to long term This study also suggests that, at the local government even with efficiency gains that will need to be generated level, comparing spending and outcomes across regions, within the existing health system. on average, the current outcomes in health could again be produced with about two-thirds of the present inputs if the less efficient regions would emulate the more efficient 1.7 Health Spending and Outcomes ones. Local governments account for about 85 percent Combining spending and outcomes to determine the val- ue of spending on health care can be problematic given 9 The efficiency of public spending is measured by comparing actual spend- the lack of good data on spending and outcomes in the ing with the minimum spending theoretically sufficient to produce the same Russian Federation. However, in spite of these limitations actual output. Inputs are measured by public spending in specific functional areas, while outputs are represented by indicators of the impact of public a recent study8 assessed the efficiency of social expendi- spending in these areas. Health outcomes are measured by indicators such as infant mortality, life expectancy. The number of hospital beds, physicians relative to population. For local governments, pubic sector performance 8 (PSP) and public sector efficiency (PSE) scores are used. Hauner, D. (2007) "Benchmarking the Efficiency of Public Expenditure in the Russian Federation." IMF Working Paper WP/07/246. 10 13 Figure 6. Local Governments-- PSP, PSE, and DEA Scores vs. Spending in Percent of GRP PSE (filled markers) and DEA (empty markers) Health Sources: Adapted from Hauner (2007); Rosstat; and IMF staff calculations. of health expenditure. Local government expenditure on of expenditures. This suggests large differences in ef- health varies substantially relative to gross regional prod- ficiency among regions. Statistical measures also under- uct (GRP), mostly between 2 and 4 percent of GRP, score the contrast between the small variation in public but can extend to 15 percent (Figure 6). sector performance (with a coefficient of variation of only 0.10­0.17) and the much larger one in public sector Although local government spending as a percentage of efficiency (coefficient of variation is 0.38­0.42). How- GDP varies considerably across regions, this difference ever, observed minimum and maximum levels of public in spending does not appear to translate into materially sector performance in regions reveals a remarkably wide different health outcomes. Indeed, it is important to note range: 0.60­1.30 in health. In other words, public sec- that whether it is health, education, or social protection, tor performance for health care is over 100 percent higher outcomes are similar, regardless of the associated level in the best region as that in the worst region. 14 II. The Distributional Impact of Spending on Health Care Services This section compares first the public and private sector amounts spent on labor and drugs. The table illustrates spending across the regions of the Russian Federation the considerable variation in actual per capita spending and then the healthcare spending by regional income for health care: including that for healthcare labor-force levels as measured by gross regional product (GRP). and drugs. Analysis of spending at the regional level is of special importance because the overwhelming majority of the The findings summarized in table 2 suggest that monthly population receives medical care at a regional or mu- per capita health expenditures vary almost 12-fold: with nicipal level. This is why the efforts aimed at offering the expenditure in the highest spending region amounting high-tech and costly medical services at federal medical to 255.02 RUB while that in the lowest spending region centers, though important, are of little consequence for is 20.79 RUB in. Similarly, there is a large variation the overall efficiency of public expenditures. in actual labor spending: with almost 13-fold difference, with spending in the highest spending region at 152.58 RUB per month as compared with 11.90 RUB in the 2.1. Health Care Spending by Regions of the lowest spending region. The variation in drug spending Russian Federation is seven-fold, ranging from 40.97 RUB in the highest Table 2 shows the distribution of health care spending spending region to 5.78 RUB in the lowest spending by regions of the Russian Federation. The table shows region. Labor typically represents two thirds of spending the actual level of per capita spending, and then the and drugs about one fifth of total spending on health. Table 2. Monthly actual health expenditures per capita, by Russian Regions, 2006 Actual per capita Actual labor expenditures Actual expenditure on drugs expenditures Value, Value, Value, Value, Value, Value, Percent Percent USD RUB USD RUB USD RUB Belgorod region 3.70 99.64 2.69 72.56 72,8% 0.62 16.73 16,8% Bryansk region 3.77 101.51 2.69 72.35 71,3% 0.77 20.62 20,3% Vladimir region 3.72 100.28 2.82 75.87 75,7% 0.65 17.38 17,3% Voronezh region 3.86 104.00 2.50 67.41 64,8% 0.58 15.73 15,1% Ivanovo region 3.55 95.76 2.62 70.49 73,6% 0.71 19.13 20,0% Kaluga region 4.13 111.39 2.93 79.04 71,0% 0.83 22.27 20,0% Kostroma region 3.61 97.32 2.43 65.59 67,4% 0.68 18.19 18,7% Kursk region 3.15 84.74 2.12 57.25 67,6% 0.65 17.50 20,7% Lipetsk region 4.58 123.40 3.19 86.03 69,7% 0.80 21.66 17,6% Moscow region 4.38 117.95 3.05 82.28 69,8% 0.82 22.02 18,7% Oryol region 3.88 104.49 2.66 71.65 68,6% 0.82 22.02 21,1% Ryazan region 3.07 82.63 2.09 56.42 68,3% 0.70 18.77 22,7% Smolensk region 3.30 88.85 2.39 64.32 72,4% 0.66 17.91 20,2% Tambov region 3.34 90.03 2.57 69.27 76,9% 0.55 14.79 16,4% Tver region 3.51 94.67 2.92 78.80 83,2% 0.38 10.37 11,0% Tula region 3.00 80.70 1.46 39.23 48,6% 1.16 31.14 38,6% 15 Table 2. Monthly actual health expenditures per capita, by Russian Regions, 2006 (continued) Actual per capita Actual labor expenditures Actual expenditure on drugs expenditures Value, Value, Value, Value, Value, Value, Percent Percent USD RUB USD RUB USD RUB Yaroslavl region 4.95 133.47 3.20 86.25 64,6% 0.78 20.99 15,7% Moscow city 7.09 190.92 5.14 138.52 72,6% 0.77 20.87 10,9% Republic of Karelia 2.51 67.64 1.53 41.23 61,0% 0.59 15.80 23,4% Republic of Komi 3.88 104.62 2.75 74.10 70,8% 0.79 21.15 20,2% Archangelsk region 2.60 70.15 1.93 52.06 74,2% 0.52 14.13 20,1% Vologda region 4.33 116.69 3.18 85.72 73,5% 0.88 23.67 20,3% Kaliningrad region 3.49 94.13 2.43 65.46 69,5% 0.76 20.59 21,9% Leningrad region 4.67 125.74 3.55 95.68 76,1% 0.76 20.37 16,2% Murmansk region 3.43 92.46 2.89 77.74 84,1% 0.39 10.46 11,3% Novgorod region 4.03 108.65 2.73 73.53 67,7% 0.56 15.22 14,0% Pskov region 3.82 102.96 2.35 63.26 61,4% 1.03 27.65 26,9% St. Petersburg 4.81 129.51 4.14 111.54 86,1% 0.43 11.46 8,8% Nenets Autonomous Region 3.76 101.41 2.85 76.68 75,6% 0.58 15.63 15,4% Republic of Adygei 4.17 112.46 3.09 83.22 74,0% 0.81 21.76 19,3% Republic of Daghestan 3.02 81.50 1.89 50.91 62,5% 0.77 20.78 25,5% Republic of Ingushetia 1.76 47.34 1.38 37.26 78,7% 0.21 5.78 12,2% Republic of Kabardino- 3.50 94.17 2.41 65.00 69,0% 0.85 22.82 24,2% Balkaria Republic of Kalmykia 2.72 73.26 2.09 56.41 77,0% 0.52 13.91 19,0% Karachai-Circassian 4.26 114.86 2.88 77.53 67,5% 1.07 28.80 25,1% Republic Republic of Northern 3.01 81.05 1.67 44.94 55,4% 1.06 28.43 35,1% Ossetiya-Alaniya Chechen Republic 0.77 20.79 0.01 0.15 0,7% 0.53 14.32 68,9% Krasnodar Territory 3.88 104.65 2.34 63.09 60,3% 1.22 32.95 31,5% Stavropol Territory 3.35 90.15 2.22 59.91 66,5% 0.92 24.69 27,4% Astrakhan Territory 2.84 76.44 1.95 52.62 68,8% 0.50 13.44 17,6% Volgograd Territory 3.43 92.28 2.47 66.68 72,3% 0.60 16.24 17,6% Rostov region 4.46 120.14 2.51 67.66 56,3% 1.08 29.01 24,1% Republic of Bashkortostan 4.02 108.43 2.46 66.29 61,1% 0.64 17.12 15,8% Republic of Mari El 3.47 93.62 1.84 49.56 52,9% 0.82 22.07 23,6% Republic of Mordovia 3.17 85.53 1.24 33.36 39,0% 1.24 33.47 39,1% Republic of Tatarstan 4.61 124.16 3.44 92.80 74,7% 0.79 21.41 17,2% Republic of Udmurtia 2.82 75.96 0.97 26.22 34,5% 1.22 32.91 43,3% Republic of Chuvashia 2.69 72.53 1.63 43.99 60,7% 0.83 22.29 30,7% Kirov region 3.42 92.21 2.19 59.03 64,0% 0.92 24.84 26,9% Nizhny Novgorod region 4.56 122.79 2.82 76.04 61,9% 1.25 33.71 27,5% Orenburg region 4.47 120.53 2.85 76.91 63,8% 0.70 18.73 15,5% Penza region 3.24 87.36 2.34 63.12 72,3% 0.68 18.19 20,8% Perm region 2.94 79.22 2.14 57.57 72,7% 0.57 15.23 19,2% Samara region 3.23 86.96 2.28 61.33 70,5% 0.64 17.22 19,8% Saratov region 2.56 69.10 1.45 39.00 56,4% 0.69 18.71 27,1% Ulyanovsk region 2.71 73.05 0.84 22.72 31,1% 1.48 39.83 54,5% 16 Table 2. Monthly actual health expenditures per capita, by Russian Regions, 2006 (continued) Actual per capita Actual labor expenditures Actual expenditure on drugs expenditures Value, Value, Value, Value, Value, Value, Percent Percent USD RUB USD RUB USD RUB Komi-Perm 3.22 86.83 2.33 62.71 72,2% 0.60 16.08 18,5% Autonomous Region Kurgan region 3.40 91.69 2.24 60.27 65,7% 0.92 24.70 26,9% Sverdlovsk region 3.48 93.72 2.16 58.07 62,0% 1.03 27.88 29,7% Tyumen region 9.47 255.02 5.22 140.54 55,1% 1.38 37.25 14,6% Chelyabinsk region 3.21 86.44 2.57 69.36 80,2% 0.49 13.28 15,4% Khanty-Mansi 3.89 104.69 0.77 20.66 19,7% 1.52 40.97 39,1% Autonomous Region Yamalo-Nenets 4.11 110.82 2.23 60.20 54,3% 0.87 23.56 21,3% Autonomous Region Republic of Altai 3.12 84.10 1.89 50.80 60,4% 0.91 24.44 29,1% Republic of Buryatia 3.73 100.45 2.45 65.94 65,6% 0.80 21.48 21,4% Republic of Tyva 2.31 62.22 1.37 37.03 59,5% 0.49 13.33 21,4% Altai Territory 3.50 94.26 2.35 63.37 67,2% 1.01 27.31 29,0% Krasnoyarsk Territory 3.35 90.32 2.54 68.53 75,9% 0.62 16.71 18,5% Irkutsk region 2.76 74.41 1.83 49.40 66,4% 0.52 14.00 18,8% Kemerovo region 3.76 101.18 2.93 79.03 78,1% 0.61 16.35 16,2% Novosibirsk region 4.29 115.61 3.03 81.69 70,7% 0.93 25.03 21,7% Omsk region 3.21 86.57 1.42 38.33 44,3% 1.19 31.97 36,9% Tomsk region 3.42 92.16 2.53 68.19 74,0% 0.66 17.83 19,3% Chita region 2.45 66.10 0.55 14.87 22,5% 0.82 22.08 33,4% Agee-Buryat 2.93 78.88 1.51 40.70 51,6% 1.24 33.47 42,4% Autonomous Region Taimyr Autonomous Region 7.06 190.19 5.66 152.58 80,2% 0.77 20.76 10,9% Ust-Orda Buryat 3.09 83.33 1.81 48.68 58,4% 1.11 29.96 36,0% Autonomous Region Evenko Autonomous 2.68 72.12 0.44 11.90 16,5% 1.49 40.25 55,8% Region Republic of Sakha (Yakutia) 4.20 113.17 3.06 82.32 72,7% 0.79 21.40 18,9% Maritime Territory 3.27 88.20 2.63 70.73 80,2% 0.32 8.63 9,8% Khabarovsk Territory 3.68 99.21 3.14 84.61 85,3% 0.35 9.52 9,6% Amur region 3.82 102.96 2.46 66.17 64,3% 1.02 27.61 26,8% Kamchatka region 3.83 103.15 3.11 83.76 81,2% 0.43 11.57 11,2% Magadan region 3.26 87.89 2.25 60.72 69,1% 0.74 19.97 22,7% Sakhalin region 2.37 63.77 0.70 18.88 29,6% 1.22 32.97 51,7% Jewish autonomous region 3.68 99.25 2.75 74.17 74,7% 0.80 21.43 21,6% Koryak Autonomous 2.74 73.86 1.90 51.07 69,1% 0.49 13.13 17,8% Region Chukotka Autonomous 8.79 236.74 5.37 144.68 61,1% 0.81 21.76 9,2% Region Average 3.67 98.93 2.41 65.04 65.2% 0.79 21.36 22.7% Minimum value Evenko A.A. 11,90 Rep. Ingushetia 5.78 Maximum value Taimyr A.A. 152.58 Khanty-Mansi A.A. 40.97 Notes: Coefficients of variation are 21,3% for actual labor expenditures and 42.3% for actual drugs expenditures. Source: Form 62 on Regions for 2006 (MOHSD Federal Foundation of MHI). 17 Figure 7. Labor expenditures in the health sector and monthly per capita expenditure under the mandatory health insurance (MHI) program, 2006 Source: Authors calculation using data from Form 62 on Regions for 2006 (MOHSD Federal Foundation of MHI). Figure 8. Drugs expenditures in the health sector and monthly per capita expenditure under the mandatory health insurance (MHI) program, 2006 Source: Authors calculation using data from Form 62 on Regions for 2006 (MOHSD Federal Foundation of MHI). 18 Because approximately two-thirds of spending is for divided into deciles based on per capita government labor, it is important to focus on both increases in spending. The results show substantial regional variation and the relative proportion of overall spending on la- in per capita expenditures for health: from a minimum of bor. Recently, considerable funds have been allocated US$54.22 (1460.76 RUB) in the Republic of Dagh- for raising the salaries of medical staff in the Russian estan to maximum of US$556.76 (15,000.48 RUB) Federation, particularly under the National Priority in the Evenki Autonomous Region (Krasnoyarsk Ter- Health Project over 2006­2008. Figure 7 shows a ritory). The largest values are for Northern regions strong correlation between overall payroll expenditures with oil, gas, gold and extractive industries with very and per capita health spending in the region. Regions small population. The coefficient of variation is equal with higher levels of expenditure have both higher pay- to 30.3 percent. roll expenditures and a larger share of overall expendi- tures devoted to payroll. Figure 9 shows the distribution of health spending by source of funds, both budget transfers and mandatory While there is strong correlation between overall payroll health insurance (MHI) contributions. The Gini coef- expenditures and per capita health spending in a region, ficient for all spending in Figure 9 is 0.234: suggest- there is not the same correlation between overall drug ing an uneven distribution of health spending across expenditures and per capita health spending in a region the Russian regions. Countries with universal coverage as shown in Figure 8. However, given the underreport- and relatively easy access to health care services have ing of out-of-pocket drug spending by patients, the data a Gini coefficient in the 0.1 range while middle income shown in Figure 8 should be viewed with caution. countries such as Mexico have Gini coefficients simi- lar to the Russian Federation. The challenge for the Russian Federation is to make access to health care 2.2. Distribution of health care spending by less dependent on the ability to pay for medical care. income deciles by region A Gini coefficient is a measure of statistical dispersion Table 3 shows the relationship between per capita in- most prominently used as a measure of inequality of come and health spending by region. The regions are wealth distribution. It is defined as a ratio with val- Table 3. Per capita public health expenditures and income deciles, by region, 2006 (Adjusted by differences in the cost of goods and services and goods in the regions as done by Ministry of Finance) Public per capita Public per capita health expenditure health expenditure Region Region RUB US Decile RUB US Decile Dollars Dollars Belgorod region 4202,18 155,97 4 Republic of Tartarstan 4463,93 165,68 5 Bryansk region 3413,06 126,68 2 Republic of Udmurtia 4311,90 160,04 4 Vladimir region 2544,55 94,44 1 Republic of Chuvashia 3725,00 138,26 2 Voronezh region 3083,37 114,44 1 Kirov region 3323,37 123,35 2 Ivanovo region 2986,52 110,85 1 Nizhny Novgorod region 3432,81 127,41 3 Kaluga region 3597,53 133,53 3 Orenburg region 4435,30 164,62 5 Kostroma region 3424,34 127,10 1 Penza region 3414,19 126,72 2 Kursk region 2968,46 110,18 1 Perm region 3446,60 127,93 4 Lipetsk region 5857,88 217,42 7 Samara region 3157,87 117,21 4 Moscow region 5559,42 206,35 8 Saratov region 3149,19 116,89 1 Oryol region 3221,71 119,58 1 Ulyanovsk region 3979,77 147,71 4 Ryazan region 3105,06 115,25 1 Komi-Perm Autonomous Region 3395,60 126,03 3 Smolensk region 3111,79 115,50 1 Kurgan region 4300,45 159,62 5 19 Table 3. Per capita public health expenditures and income deciles, by region, 2006 (continued) Public per capita Public per capita health expenditure health expenditure Region Region RUB US Decile RUB US Decile Dollars Dollars Tambov region 2920,48 108,40 1 Sverdlovsk region 5333,47 197,96 7 Tver region 3039,68 112,82 1 Tyumen region 4243,82 157,52 7 (without Autonomous Regions) Tula region 4432,41 164,52 5 Chelyabinsk region 3791,12 140,71 3 Yaroslavl region 4578,43 169,93 6 Khanty-Mansi Autonomous Region 10695,55 396,98 10 Moscow 5260,87 195,26 9 Yamalo-Nenets Autonomous Region 8769,48 325,49 10 Republic of Karelia 5313,26 197,21 7 Republic of Altai 5210,21 193,38 7 Republic of Komi 4910,26 182,25 7 Republic of Buryatia 4103,51 152,31 6 Arkhangesk region 4415,43 163,88 6 Republic of Tyva 6031,63 223,87 8 Vologda region 4175,73 154,99 6 Republic of Khakassia 3846,84 142,78 4 Kaliningrad region 2884,95 107,08 3 Altai Territory 3268,13 121,30 2 Leningrad region 3607,60 133,90 4 Krasnoyarsk Territory 4387,24 162,84 6 Murmansk region 5062,11 187,89 8 Irkutsk region 4015,26 149,03 5 Novgorod region 3782,78 140,40 3 Kemerovo region 4135,28 153,49 5 Pskov region 3458,95 128,38 2 Novosibirsk region 3089,38 114,67 2 St. Petersburg 5424,81 201,35 8 Omsk region 5144,52 190,95 6 Nenets Autonomous 10808,00 401,15 10 Tomsk region 3873,73 143,78 6 Region Republic of Adygei 3561,81 132,20 3 Chita region 4979,47 184,82 6 Republic of Daghestan 1510,36 56,06 1 Agee-Buryat Autonomous Region 7294,59 270,75 8 Republic of 1863,80 69,18 1 Taimyr (Dolgano-Nenets) 10329,31 383,39 10 Ingushetia Autonomous Region Republic of 3088,21 114,62 1 Ust-Orda Buryat 4141,98 153,74 5 Kabardino-Balkaria Autonomous Region Republic of Kalmykia 2874,37 106,69 1 Evenki Autonomous Region 15000,48 556,76 10 Karachai-Circassian 3611,86 134,06 3 Republic of Sakha (Yakutia) 6139,93 227,89 10 Republic Republic of Northern 2801,60 103,99 1 Maritime Territory 3049,22 113,18 5 Ossetia Chechen Republic 1460,76 54,22 1 Khabarovsk Territory 3933,28 145,99 7 Krasnodar Territory 3587,94 133,17 4 Amur region 3547,78 131,68 6 Stavropol Territory 2426,84 90,08 1 Kamchatka region 4737,07 175,82 10 Astrakhan region 3782,18 140,38 3 Magadan region 8616,93 319,83 10 Volgograd region 3285,51 121,95 2 Sakhalin region 4992,66 185,31 10 Rostov region 3126,88 116,06 2 Jewish autonomous region 3286,78 121,99 5 Republic of 4044,88 150,13 3 Koryak Autonomous Region 9683,09 359,40 10 Bashkortostan Republic of Mari-El 3733,16 138,56 2 Chukchi Autonomous Region 12099,49 449,09 10 Republic of 3535,76 131,23 2 Weighted mean 4074,88 151,24 Mordovia Minimum value 1460,76 54,22 Maximum value 15000,48 556,76 Source: http://www.socpol.ru/baza/baza/pokazately.shtml. 20 Figure 9: Distribution of Health Spending by Regions and Source of Funds, 2006 (US$) MHI Source: Site of Independent Institute of Social Policy: http://www.socpol.ru/baza/baza/pokazately.shtml ues between 0 and 1: A low Gini coefficient indicates Table 4. Per capita funding of regional medical more equal income or wealth distribution, while a high guarantee program, 2006 Gini coefficient indicates more unequal distribution. 0 corresponds to perfect equality (everyone having ex- Average per capita funding of the Size of the Deciles regional medical guarantee program, actly the same and 1 corresponds to perfect inequality population US Dollars (where one person has all the income while everyone 1 24 042 91 else has zero income). 2 19 676 112 Table 4 shows that the main reason for the large varia- 3 17 852 123 tion in per capita spending on health is the large varia- 4 16 494 133 tion of per capita income among the regions. That is, 5 15 477 142 regions with higher per capita incomes have higher levels of health care spending. 6 13 719 160 7 11 586 190 8 10 328 213 9 8 576 256 10 5 809 378 Source: Site of Independent Institute of Social Policy http://www.socpol.ru/baza/baza/pokazately.shtml 21 2.3. Outcomes by Region 2.4. Distribution of Spending By Type of Health Service Russian adults living in the most affluent regions are ex- pected to live on average 20 years longer than those in It is generally agreed that inpatient care consumes too the poorest region. The NOBUS survey of 2003 also large a proportion of health spending and outpatient care found that individuals in the poorest quintiles in Russia too low a proportion in the Russian Federation. In most were more likely to self-report bad or very bad health European Union and G-8 countries the percentage is status than those in richer quintiles (Table 5). between 30 and 40 percent. Table 7 shows that in Rus- sia, inpatient care consumes between 59 and 64 percent Table 5. Self Reported Health Status, of public health spending. However, the percentage has by Consumption Quintile, 2003 been declining and this suggests a transition towards more appropriate spending distributions. Percentage of survey respondents reporting health status as Consumption Table 7. Public expenditures on health care quintile Good or Satisfactory Bad or (percentage) very good very bad 1 Poorest 38 16 47 2001 2002 2003 2004 2005 2006 2007 2 39 20 41 Ambulance 5.5 6.7 6.0 6.3 6.6 6.9 7.2 3 39 20 41 Outpatient 29.0 30.6 31.3 30.6 29.8 29.9 31.4 4 43 21 35 Inpatient 64.0 60.0 60.3 60.5 60.7 60.4 58.7 5 Richest 52 20 28 Day care 1.5 2.7 2.4 2.6 2.9 2.8 2.7 Total: 100 100 100 100 100 100 100 Source: NOBUS 2003. Note: These data are from Form 62 (MOHSD, FF MHII). Form Utilization of health care resources is positively corre- 62 is the only reporting document of hospitals and polyclinics which contains expenditures. These forms are aggregated for the Russian lated with income. Table 6 shows that the there is a two Federation as a whole. These figures are average figures. to one difference in the proportion of respondents who Source: Starodubov V.I., Flek V.O. "Financing of Result-Orien- used medical care in the last three months between those ted Health Care for the Russian Federation Population"/ V.I. Staro- in the highest and lowest income deciles. This suggests dubov (ed.). Moscow, MTsFER, 2007, 400 pp., Form 62 on re- differential levels of access to medical care by income. gions for 2006 and 2006 (MOHSD, Federal Foundation of MHI) Table 6. Percent of respondents who used A number of explanations have been proposed to medical care in the preceding three months why inpatient spending is so large a proportion of total spending and why it has been declining. The Mean 34.4 explanations include: Income · A high number of hospital beds per citizen. The Deciles network of medical institutions is reforming very Lowest 10% 23.5 slowly, inpatient clinics even those in surplus are of- ten not closed down, and the administration tries to Highest 10% 35.9 make use of all the beds. Such means include: hos- pitalization of patients who could do without, extra Not Poor 35.6 long hospital stays, and hospitalization of patients Poor 22.8 whose medical conditions could be treated on an ambulatory basis. Source: Rosstat, 2007. · A higher perceived skill level of specialists at inpa- tient facilities as compared to outpatient ones. Pa- tients try to get to a hospital just because the doctors are perceived to be better there. 22 · Low income population groups prefer hospitals be- educated, the large households and the unemployed, cause drugs are provided free of charge for inpatient that reflect financial barriers for the purchase of phar- care albeit not everywhere. maceuticals. These problems are well known to health care managers In light of the high out of pocket payments for drugs il- and policy makers and they have initiated reforms aimed lustrated in the previous paragraph, this may indicate a at changing health care structures and process, as well financial barrier to purchasing pharmaceuticals for these incentives, at the regional health systems. For example, population groups. As discussed elsewhere11, a key outpatient clinics have been equipped with state-of-the- challenge facing the Russian health system is the rela- art equipment funded by the government and the salaries tive lack of public sector funding at its disposal to cover of the primary care staff have increased considerably. In the cost of services that are already promised by the response to these and other initiatives the percentage Government under the Program of State Guarantees of of spending devoted to inpatient care fell from 64% in free medical services to the whole population. There is 2000 to 58.7 percent in 2007. a gap between health care commitments and funding in Russia when it comes to financing pharmaceuticals pro- vision. Drugs are in theory provided to hospital patients 2.5. Household Payments for Medical Drugs free of charge, but outpatients must pay for them even Recent survey data from 2006 in the Russian Federa- though outpatient drugs should be covered for the spe- tion indicate that about 95 percent of the respondents cial group of beneficiaries (16.9 million people) under who purchased medical drugs in the last three months the Federal "Program of Supplementary Drug Provi- paid out of pocket for their purchase. The percentage sion". Beneficiaries have to pay for what they are sup- of those who paid out of pocket ranges from a low of posed to receive free. Informal cost-sharing is pervasive 82.5 percent for the elderly over 65 years old to a high in the hospital sector. It is assumed therefore that a sub- of 99.5 percent for employed people. The elderly, the stantial proportion of the demand for pharmaceuticals in less educated and those not in the labor force tend to Russia simply goes unmet.12 receive free drugs or are entitled to a drug benefit (igoti). Overall, out of pocket expenditure for pharmaceuticals is All the above implies that the medical benefits package very high in Russia. It is also inequitable as differences under the Mandatory Health Insurance System in the between the lowest and the highest income groups, the Russian Federation needs to be revised to avoid un- poor and the non-poor, urban and rural, household size sustainable commitments and to ensure that it does not and age groups are minimal. create incentives to choose more expensive health care services.13 This is the current situation with the absence The percent of respondents who used medical care is of coverage for outpatient drugs as patients in need of slightly less than the percent that used pharmaceuti- medicines to control their alignments at an early stage cals (34.4% versus 37.1%). About three percent use (e.g., hypertensives who have to take medications on a pharmaceuticals without seeking medical care from a daily basis) might simply be deterred from accessing health services provider. Two patterns emerge from the them and may end up requiring more expensive medical analysis of the survey data comparing use of medical care later on (e.g., unnecessary hospital admissions and care and use of pharmaceuticals. First, some popula- treatment due to strokes). tion groups use pharmaceuticals much more often than they use medical care. This is the case for the highest income decile, the non-poor, the elderly, people living alone, and professionals. However this may result from 11 World Bank. 2008. ""Better Outcomes through Health Reforms in the Russian Federation: The Challenge in 2008 and Beyond." Washington, a difference in the interpretation of the term "use" i.e. a D.C.: The World Bank. drug may be used every day but a medical visit occurs 12. Tragakes, E. and S. Lessof. 2003. Health Care Systems in Transition: less frequently. Second, some population groups use Russian Federation. Copenhagen: European Observatory on Health Sys- tems and Policies. medical care more often than they use pharmaceuticals. 13 This is especially true for the poor, the rural population, Tompson, W. 2007. Healthcare Reform in Russia : Problems and Pros- pects, OECD Economic Department Working Papers, N0.538, OECD the younger age groups (0­15 and 15­24), the less Publishing. Doi:10.1787/327014317703. 23 2.6. Uses of Medical Services by Income Group With income growth, the probability of using medical services increases: the rich (the fifth quintile) would Analysis of data from different surveys show that high- use medical services 37 percent more frequently than er income groups use health services more often than the poor (the first quintile).14 the poor. Regression analysis of RLMS 2004 data, level of income is the next factor in importance in de- 14See http://www.socpol.ru/eng/research_projects/pdf/proj25_report_eng. termining use of health services after the health status. pdf. 24 III. Factors that will influence the growth in health spending over the next 20 years and considerations for guiding the allocation of additional resources Before analyzing the projections of health spending, to 2005. It shows a declining population, increasing it is important to examine recent trends in health budgetary spending in current and constant rubles, spending as the past is a good predictor of future increasing MHI spending in current and constant health spending. Table 8 shows the trends in health rubles, and increasing out- of pocket spending in care spending and other data for the period from 2002 current and constant rubles. Table 8. Estimation of health care funding trends, different sources and years 2002 2003 2004 2005 Trend R2 Size of the population (M) 145.3 144.6 143.8 143.1 Consumer price deflators 1.158 1.137 1.109 1.127 Budget expenditures per capita in current prices, RUB 1120 1245 1508 1763 Budget expenditures per capita in current prices, 35.56 40.98 51.92 61.58 US Dollars Budget expenditures per capita in 2005 prices, RUB 1592 1556 1699 1763 66 0.79 Budget expenditures per capita in 2005 prices, US Dollars 50.54 51.22 58.49 61.58 MHI expenditures per capita in current prices, RUB 860 1042 1293 1513 MHI expenditures per capita in current prices, US Dollars 27.30 34.30 44.51 52.85 MHI expenditures per capita in 2005 prices, RUB 996 1185 1434 1705 238 0.99 MHI expenditures per capita in 2005 prices, US Dollars 31.62 39.00 49.37 59.56 Other public expenditures per capita in current prices, 172.00 250.50 340.20 672.40 RUB Other public expenditures per capita in current prices, 5.46 7.95 10.80 21.35 US Dollars Other public expenditures per capita in 2005 prices, RUB 244.49 313.07 383.29 672.40 Other public expenditures per capita in 2005 prices, 7.76 9.94 12.17 21.35 US Dollars Actual expenses from personal funds (RUB,mn) 199991.8 243218.0 293595.7 352763.6 Actual expenses from personal funds (US Dollars, M) 6348.9 8005.6 10107.6 12322.2 Actual per capita expenses from personal funds in 2005 1956 2102 2301 2465 173 1.00 prices, RUB Actual per capita expenses from personal funds in 2005 62.09 69.19 79.22 86.10 prices, USD Source: Starodubov V.I., Flek V.O. "Financing of Result-Oriented Health Care for the Russian Federation Population"/ V.I. Starodubov (ed.). Moscow, MTsFER, 2007, 400 pp. 25 3.1. What are the main drivers of health and The content of the package is quite extensive for a coun- long-term care expenditures globally? try that spends a relatively low share of GDP on health care. Access to health care has been compromised con- Public spending on health and long-term care is sistently over the last 15 years as available resources a major source of fiscal pressure globally. A recent have been insufficient to cover the guaranteed package OECD assessment of its member countries identified (only in 2006 health care funding exceeded the formally the following main forces driving health and long-term calculated cost of this program). Indeed, Russia prob- spending15: ably needs to spend more on health care than it currently · Health care, demographic factors: a rising share of does, and the major long-term drivers of health care older age groups in the population will put upward spending ­ rising incomes,16 technological change and pressure on costs because health costs rise with age. demographic change ­ all point to a significant, long- However, thee average cost per individual in older term rise in health care expenditure. It is reasonable to age groups should fall over time for two reasons: assume that part of this increase could and should be (i) longevity gains are assumed to translate into met by public provision of health service that is likely additional years of good health ("healthy aging"); to remain an important pillar of the system, despite the and (ii) major health cost come at the end of life. expected growth of private provision and finance. · Health care, non-demographic factors: health care The impact of demography will be particularly impor- costs have typically grown faster than income (even tant. As noted above, the Russian population is aging as incomes have increased). This is generally held fast: the proportion of the population above the age of to be due to the effect of technology and relative- 60 is projected to rise from 17 percent in 2005 to 31 price movements in the supply of health services. percent by 2050. Since health care spending per capita Besides "cost pressures" there is "cost containment" on pensioners (women over 55 and men over 60) is typi- policy action to curb "extra" expenditures growth. cally estimated to be roughly triple the level for working- age adults and double the level for children, the system · Long-term care, demographic factors: dependency will come under enormous pressure with aging unless the on long-term will tend to rise as the share of old healthy life expectancy of Russians increases. Russian people in the population increase. This effect is mit- women, in particular, tend to suffer much worse health igated somewhat by the likelihood that the share of than either Russian men or western women, and the gap dependents per older age group will fall as longevity increases with age. This is one reason why the success of increases due to "healthy aging." reform of the health care system will depend on broader · Long-term care, non demographic factors: expen- initiatives aimed at improving Russians' health condi- tions. Unless healthy life expectancy (HLE) increases, ditures likely to be pushed up by a possible effect the system risks becoming overburdened by a rapidly of increases in the relative price of long-term care aging, increasingly ill population. in line with average productivity growth in the economy. Given the above considerations, then the question that needs to be answered is how much should Russia spend 3.2. Increasing Level of Funding for Health on health, given its current epidemiological pro le in the Russian Federation: Key Challenges relative to its desired level of health status, consider- ing the e ectiveness of health inputs that would be A key challenge facing the Russian health system is the purchased at existing prices, and taking into account relative lack of public sector funding at its disposal to the relative value and cost of other demands on social cover the cost of services that are already promised by resources?17 Two approaches could be used to address the Government under the Program of State Guaran- tees of free, medical services to the whole population. 16In both OECD and emerging market economies, health care expenditure exhibits a tendency to rise faster than real GDP. 15OECD. 2006. Projecting OECD Health and Long-Term Care Expen- 17A good discussion on this topic is presented in: Savedoff, W.D. "What ditures: What are the Main Drivers? Economics Department Working Should a Country Spend on Health Care?", Health Affairs 26, Papers No. 477. Paris: OECD. no.4(2007):962­969. 26 this question: (i) a peer approach, focusing on whether salaries of physicians and nurses, (ii) introduce incen- a country is spending more or less than countries with tives for improving performance by differentiating remu- similar characteristics, such as income levels, cultures, or neration depending on the volume and quality of health epidemiological profiles, accepting that the relationship services; (iii) ensure free drug provision for hospital care between health spending and health outcomes is difficult and fund targeted outpatient drug programs for children to specify and aiming instead to learn from comparable and the elderly, and (iv) rehabilitate health facilities, re- experiences; and (ii) a budget approach, that aims to place outdate equipment and train personnel.18 identify the desired health status changes and determine what needs to be purchased with an given level of fi- 3.3. Where should additional public resources nancial resources by directly focusing on the issues of come om? current and desired health status, prices, effectiveness, and trade-offs. The short answer to this question is from improved com- position of public expenditures toward long-term needs Following the "peer approach", probably the Russian of social sectors such as health, education and pensions Government would need to gradually increase aggregate and away from less productive categories of public expen- public funding on health above the current 3­5 percent ditures (e.g., untargeted subsidies and transfers, general of GDP level in 2006 to a 4.5­6.0 percent of GDP administration expenditures and unproductive public in- level as in other middle-income countries within the next vestments). As the Russian health care financing system five to twelve years (Table 9). This, if achieved, is a is based mostly on general budget revenue rather than reasonable rate of increase. Too rapid an increase will on earmarked payroll taxes, mechanisms should also be result in inflation and an inability of the health care sys- explored to raise additional funding from regional bud- tem to absorb the resources efficiently. As noted earlier, gets ­ as contributions to mandatory health insurance the level of spending in the Russian Federation is below (MHI) of the non-working population. Another area that the international average for a country with this level of merits further analysis is the channeling of additional pri- income and also the public sector component of spend- vate expenditures for health through the development of ing is below the international norms. Spending more on voluntary health insurance (VHI) to complement MHI. health care in Russia is justified in large measure by the massive past under-spending that needs to catch up and 3.4. How to allocate additional nancial generate outcome improvements while structural reform resources for health care? and behavioral change and efficiency gains take time to materialize. It should be clear that any discussion on future spend- ing on health in the Russian Federation has to depart Private spending is also expected to increase from the from an understanding of the moral values or distributive current 1.8 percent of GDP to 2.5­3 percent of GDP ethic guiding the health system. That is, unless the ethi- in the long term. Russia's health care system in the long cal goals of the system are articulated in terms of whether term should rely on both strong public sector core and health care is a pure social good to be available to all rising a private sector provision and finance pillar. on equal terms, a pure social good for all but a small moneyed elite, or a private consumption good like food Table 9: Russia: Projected Public or housing, the minimum expenditure of real resources Expenditures on Health, 2008­2020 needed to achieve those goals cannot be defined.19 (average annual percentage of GDP) 18For a detailed discussion see Vishnevskiy, A.G., Y.I. Kuzminov, V.I. Shevskiy, I.M. Sheiman, S.V. Shishkin, L.I. Yakobson, E.G. Yasin. 2006­2007 2008­2010 2011­2015 2016­2020 2007. "Russian Healthcare: Way Out of Crisis." [: .., .., .., .., 3.5 4.5 5.5 6 .., .., .. : ­ Source: Authors estimations. ]. Moscow: Report of State University ­ High School of Economics. Mimeo. 19 The increase in public expenditures would help to ad- Presentation by Prof. Uwe Reinhart at the Opening Session of the Euro- pean Health Ministers Meeting in Tallinn, Estonia, that was organized by dress some long-standing problems: (i) raise the base WHO-EURO on June 24­27, 2008. 27 Following the second approach to address the question UK's National Health Service, and in middle-income "what should Russia spend on health care", one could countries such as Brazil and Chile, there are a number of conclude that the short and medium term challenge is to complementary ways to achieve this objective. allocate additional funding for health effectively and ef- ficiently in order to operationalize the universal coverage The starting point could be the development of stan- mandate of the Russian Constitution. As noted earlier, dards targeting high priority disease areas in terms of there is considerable regional variation in spending and high burden of disease and capacity to benefit; high efficiency. One possibility is to define a minimum set of unwarranted variation across socioeconomic groups and services and then allocate resources to insure that all re- regions; and high spending clinical areas. The World gions have the necessary resources to provide a guaran- Bank report "Dying Too Young" provides arguments to teed minimum level of services following evidence-based concentrate on tackling NCD, particularly cardiovas- clinical standards. As shown by the experience under the cular diseases, cancer, cancer, diseases of the digestive Box 1: Priority Setting and Health Spending in the UK in the 2000s The NHS Plan, published in 2000, followed by the Allocatingtheadditionalfundingbasedonclinicalstan- Wanless Reports (2002; 2004), signaled the largest dards: Mental health, cancer and cardiovascular disease ever increase in public investment in the NHS, aimed at were identified as key priorities and national plans of action bringing the UK's share of GDP dedicated to health- (NSFs) were developed, setting out reforms in clinical care care to the EU average. Between 2002 and 2008 net and service configuration to improve outcomes. Within public expenditure more than doubled from £44 to £91 these broader priorities, NICE developed guidance on op- billion. A large proportion of the increased spending was timal use of medical technologies, best clinical practice and absorbed by pay rises for NHS professionals (50% in disease prevention programs based on evidence of clinical 2005/06 and 40% in 2006/07). effectiveness and also value-for-money for the NHS. For example, in 2006/7, NICE recommendations for the up- Selection of high priority areas for increased invest- take of new treatments accounted for approximately 13% ment: A significant proportion of the remaining funds, of the additional investment in healthcare. after meeting other cost pressures, went into, mostly centrally-set high priority areas, which can be grouped Impactassessment: Even though it is hard to prove a causal into three broad and somewhat overlapping categories: link between increased investment driven by clinical indi- (a) high priority disease areas, based on factors such as cators and outcome (or process) measures, there is some disease burden data, international benchmarking of per- evidence of impact. For example, in the UK, in the case of formance indicators (e.g. mortality), unwarranted varia- cancer, access to treatment and mortality rates from com- tion in practice and degree of diffusion of and access to mon cancers have both improved over recent years. Based new technologies; (b) service delivery and organization on a national progress report, NICE guidance on the use of areas, mainly focused on improving timely access to ser- new cost-effective technologies has resulted in an increase vices through reducing waiting times for elective surgery in uptake by almost 50% between 2003 and 2005 and a or emergency admissions; and (c) patient experience, reduction in geographical variation in use from 3­8 fold centered around increasing patient choice, providing to 2­3 fold over the same period. In a different priority more information and making the health system more area, cardiovascular disease, recent NICE recommenda- "user-friendly". tions for increased use of statins at high risk populations is estimated to cost an additional £35 million and prevent ap- Clinical standards, through National Institute for Health proximately £15,000 myocardial infarctions. In light of the and Clinical Excellence (NICE) guidance and the Na- current reduction in the growth rates of investment in health tional Service Frameworks (NSFs), drove investment in the UK, the government is now placing increasing im- mainly in high priority disease areas and, to a lesser de- portance on clinical standards to drive efficient investment gree, in service delivery, whereas spending in improving through the use of financial incentives and normative pricing patient experience was mostly based on user satisfaction for technologies and services provided in the NHS. surveys and focus groups. Source: Authors elaboration using different sources. 28 system, diseases of the respiratory system and diabetes, 3.5. e process for developing standards along with HIV/TB, as the initial priority set of dis- The following considerations could be taken into ac- eases given their relative high contribution to the burden count when developing standards: of disease in Russia. (i) Develop priority setting and resource allocation The UK's National Institute for Health and Clini- mechanisms in an incremental and inclusive cal Excellence (NICE) has established guidelines for fashion. Rationing lists are methodologically and the management of most clinical diseases and these ethically challenging and have significant compu- have been used by many countries to determine how tational and informational requirements. By target- to allocate resources. The challenge is to adapt the ing instead additional funding to high priority areas NICE guidelines to the situation and medical prac- both the processes and methods of allocation deci- tice in the country. In order to improve the likelihood sions can be tested and improved. Current fees and of implementation at the local level, the adaptation prices used and international benchmarking based process should be led by clinicians and the academic on countries of GDP/health outcomes similar to institutions operating in the Russian Federation. Such the Russian setting could be used as a starting guidelines could then be used to determine high pri- point to be optimized instead of attempting to build ority services and how resources should be allocated new universal price lists. to fund those. The funds need to be allocated in a way that assures that the services will be available when (ii) Institutional reform to improve governance ar- they are needed, which, in turn, requires that clini- rangements for resource allocation in the health cians should work together with health economists to system. Russia is missing the appropriate struc- decide the cost-effectiveness and affordability of the tures/institutions with legitimacy to make healthcare needed services. resource allocation decisions. Such a programmatic reform requires delegation of responsibility from Using international guidelines adapted to the Rus- federal government to an arm's length transparent sian environment would be one way to develop and and inclusive multi-disciplinary body that would update standards for treatment in high priority dis- enjoy explicit political support when making difficult eases. Any new funding should support the develop- allocation decisions. A departure from top-down ment and implementation of standards in these areas decision-making would improve the likelihood of evi- both through the uptake of effective and cost effective dence-based policies being implemented and reduce medical technologies and public health interventions perceived influence on decisions by vested interests. and through improving process of care delivery (e.g. reducing waiting times and ensuring access to a ba- (iii) Be exible and adaptable to regional needs and sic package of services for all citizens). A continuous budgets: this would be methodologically challeng- process of monitoring and prioritization of clinical ing and carries significant informational require- and public health areas will also mean that as more ments but is necessary to ensure these standards are resources become available and/or priorities change, meaningful and implementable at the local level. additional disease areas will be identified and added in the high priority list. The application of this ap- (iv) Introduce gradually an a ordable and equi- proach in the UK since the early 2000s is discussed table basic package of publicly funded services in Box 1 above. protecting the general population from high out- of-pocket payments and ensuring access to neces- sary treatments. 29 IV. The imperative of policy, structural and institutional reforms to achieve better health outcomes It has been argued in this report that spending more distribution, prices, access, and advertising) and money, while necessary, will not be sufficient to improve demand (e.g., information, education and commu- Russia's health outcomes on a sustainable basis. It is nication campaigns); (ii) controlling tobacco con- critical therefore that increased health investments sumption (e.g., development of policies for smoke- and expenditures in the Russian health system be also free worksites and public places, taxation, legislation accompanied by multi-sectoral policies and programs for banning tobacco advertising and promotion, as coupled with structural and institutional reforms to well as sale to minors); (iii) promoting changes in improve the efficiency and effectiveness of health care diet and physical activity (e.g., public health poli- organization, financing and service delivery. cies promoting dietary guidelines for healthier eat- ing, school programs on the importance of healthy nutrition and physical activity); and (iv) improving 4.1. Key Areas for Action road safety (e.g., promotion of use of seat belts and Specifically, as discussed in detail in the 2008 World helmets, action by the policy to prevent drunk driv- Bank report "Better Outcomes through Health Reforms ing, better road signaling and maintenance ). in the Russian Federation: The Challenge in 2008 and Beyond"20 and in the recent World Bank's Russia Eco- (b) Establishing a single source of funding for pub- nomic Report #16,21 the following broad lines of action lic health services. The health financing system should be considered and implemented: in Russia is very fragmented and much more de- centralized than in most middle- or high-income (a) Tackling the broad social determinants of the countries. It is also inefficient as it unnecessar- health crisis in Russia. Reducing the high-mor- ily duplicates administrative efforts and increases tality rates, ill health and disability among Rus- transaction costs. Funding comes from federal, sian working-age adults due to non-communicable regional, and municipality budgets, in addition to diseases (NCDs) such as cardiovascular diseases, the MHI established in 1993. In Russia, budget cancer, and diabetes, as well as injuries due to funding accounts for around 60 percent of total traffic accidents and other external events is likely public spend for health and MHI funding ac- to have a major positive impact on economic and counts for the rest. Most public sector funds, over social welfare of the country. These efforts should 85 percent, are raised and allocated at the regional be seen as key investments to help improve general level through general revenues and the 3.1% rate welfare and secure sustainable economic growth in of payroll tax. The equalization of budget transfers the country. Support should be provided to par- from the Federal level, however, have never been ticipating eligible regions to implement nationally earmarked for health, and regions have mostly defined multi-sectoral programs targeting the entire been unwilling to either contribute for nonwork- population to deal with NCDs and injuries, but al- ing groups or to pool necessary funds under the lowing for regional differences and selection of re- regional health insurance funds, as called for in gion-specific interventions according to their needs the legislation. The gradual integration of financial and priorities. Under these programs, legal and fis- resources from federal and regional government cal measures and interventions would be developed transfers and the MHI would enable the estab- for: (i) controlling excessive alcohol consumption lishment of a single-payer funding for public health targeting supply (e.g., regulation of production, services. This would enable development of more meaningful strategic plans for the regional health 20World Bank. 2008. "Better Outcomes through Health Reforms in the systems as a whole, encourage integration and co- Russian Federation: The Challenge in 2008 and Beyond." Policy Note. ordination, reduce barriers to intra-sectoral activi- Washington, D.C. 21 ties, and provide greater flexibility with transfer of Marquez, P. 2008. "Tackling Health Reform," in Russia Economic Re- port No.16. Moscow: The World Bank. funds between services. 30 (c) Revising the state guaranteed medical bene ts pays for inputs providing little incentive for providers package. While health care spending is expected to to improve efficiency. Funds provided through line go on rising, both in absolute terms and relative to item budgeting should be incorporated into tariffs GDP, the balance between commitments and re- that incorporate quality and efficiency standards (for sources cannot be restored merely by increasing the example tariffs that stipulate average length of stay in latter. The guaranteed package of medical benefits line cost-effective medical interventions). will have to be re-examined. This will involve more than an assessment of what the Russian state can (f) Expanding the role for private businesses. Involve- actually afford, although resource constraints will ment of the private sector is also of particular im- clearly be a critical factor. If the state guarantee is to portance. Since private firms bear much of the costs be meaningful, the package must be transparent to from the poor health of employees, they also have both providers and patients by specifying the types, a direct incentive to invest in their health. Private volumes, procedures and conditions of health care and public/private initiatives can reduce the cost provision. A set of services and drugs should be and increase the effectiveness of programs aimed at established for priority diseases to be provided free protecting the health of the population. Companies based on the government guarantees. It must also can also have a strong influence on the behavior of provide mechanisms for citizens to assert their rights their staff and can make them aware of the health if the commitments in the package are not met. risks in ways not open to the government. Tax ben- efits could be used to encourage private businesses (d) Addressing the Structural Imbalances in the involvement as it is done in several G-8 countries. Organization of Health Care Services. Russian regions need significant capital investment to re- 4.2. Is health system reform possible in the structure, renew and appropriately equip its health Russian Federation? infrastructure. Although there are special issues of geographic dispersion and severe climatic condi- Contrary to this perceived wisdom, the achievements in tions, making some additional health infrastructure ChuvashRepublicandVoronezhOblastdemonstratethat necessary, this does not necessarily mean building it is possible to effectively restructure regional health sys- new facilities, but rather modernizing the existing tems to address emerging public health challenges faced network. Judicious investment in hospital, inter- by the Russian Federation. The experiences of these two mediate care centers, primary care facilities, emer- pilot regions supported under the Ministry of Health and gency medical services, upgrading competences of Social Development (MOHSD)-led and World Bank- human resources, and strengthening management funded Health Reform Implementation Project (HRIP) systems, including the widespread introduction of provide much needed evidence of success and rich local electronic medical records, the number of admis- experience to inform regional health system strengthening sions and the length of stay in Russian hospitals efforts in other regions of the vast Russian Federation. can be substantially reduced while expanding the coverage of ambulatory services. As shown in a forthcoming World Bank study "IsHealth Care Reform Possible in the Russian Federation? (e) Developing new payment mechanisms for health Emerging Evidence om the Chuvash Republic and services. Per capita payments should be combined theVoronezhOblast"22 the initial results of these regional with performance related pay linked to achieving reforms are very promising with substantial improvements quality standards or providing new services. For ex- in many of the efficiency indicators. For example, in both ample, additional (bonus) target payments could be regions, outpatient facility capacity has grown, and while provided for reaching certain quality and efficiency the number of general practices has grown significantly the targets (such as expanded coverage for immuniza- number of hospitals and hospital inpatient beds has de- tion, cervical screening, annual health promotion clined substantially. Financing arrangements have evolved advice, smoking cessation, alcohol reduction). Hos- such that financing for health care from the federal, re- pitals in Russia are paid mostly per treated case but gional and local governments has nearly doubled. Perhaps some items of expenditure (mostly fixed) are not more important, spending on primary health care, as op- included in MHI tariffs and covered directly from posed to specialty care, has significantly increased. budgets controlled by governments of various levels This combination is inefficient as line item budgeting 22To be published in August/September 2008. 31 V. The way forward The new administration of the Russian Federation has gional, and municipal levels covering many sectors and made a commitment to increasing public spending in not only the health system. Improving health outcomes healthcare. In order for the additional funding to help by implementing the proposed reforms in tandem to en- deliver better outcomes it is crucial that current and extra sure overall coherence of effort is a very complex, me- investment (a) targets high priority disease areas (b) is dium- to long-term undertaking that should begin to be driven by evidence of comparative clinical and cost ef- addressed forcefully today. fectiveness of alterative clinical and public health inter- ventions and (c) the appropriate institutions and struc- To conclude it is worth reiterating the importance of in- tures are put in place to develop and help implement vesting on health in a society by quoting Herophilus, such evidence based investment decisions by regional Physician to Alexander the Great, who in the year 325 and federal governments. B.C. advised that "when health is absent, wisdom can- not reveal itself, art cannot become manifest, strength It should be clear, however, that most health challenges cannot fight, wealth becomes useless, and intelligence in the Russian Federation need to be addressed through cannot be applied." broad policy and institutional reforms at the federal, re- 32