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The Health Care System Needs Resources

The government-set objectives for the health care system for the next three to five years barely conform tothe fiscal policy set for that period. In his report, ‘The Russian Health Care System: Problems and Prospects for Development’, Sergey Shishkin, Academic Supervisor of the HSE Institute for Health Economics, analysed the opportunities to meet these objectives in the context of the institutional changes taking place in that industry

The political objectives set by the government for the health care system, such as a life expectancy of 74 years by 2018, higher salaries for medical personnel, and improved availability and quality of free medical care, are not being accompanied by additional public funding.

‘This doesn’t mean that these goals won’t be reached, but without increasing the available resources, other methods, different from those used before, will have to be employed’, Shishkin emphasized in his report, which was presented at the HSE during the Russian-Brazilian conference ‘The Right for Health and Democracy in Health care’.

Russia Could Spend More on Health Care

Sergey Shishkin studied Russian public spending on health care in the context of spending by other countries with a similar level of economic development, particularly, Brazil.

Russia and Brazil are among those countries having above average incomes. In both countries, per capita public expenditure on health care turned out to be higher than the average for the group. But, the expert says, unlike Brazil, Russia spends ‘relatively less on this industry than those countries having a similar per capita gross national income’, such as Poland, Hungary, and Estonia.

This means that ‘countries with the same level of wealth as Russia are spending more on health care in absolute terms’, Shishkin says.

‘As for the share of health care expenditure within total public spending, here we also see similarities between the two countries, but they are rather negative’, the researcher noted. ‘Compared with other countries with similar levels of economic development, the share of public spending earmarked for health care is lower, both in Russia and Brazil’. This indicator is rather remarkable, considering Russian health care is facing complex challenges that, in theory, involve considerable monetary investment.

The Health Care System’s Key Challenges

Today, the industry faces a paradoxical situation. Shishkin emphasized that the health care system’s main challenges at present are the political goals the government has set before it against the backdrop of current fiscal policy.

According to presidential decrees, the health care system’s key objectives are to decrease the death rate, implement a new payment system for medical personnel, and improve the availability of free and quality medical care. But does the current fiscal policy respond to these challenges? According to Mr. Shishkin, current fiscal policy will barely support the fulfillment of these objectives.

Public Spending on Health Care Is Hardly Growing

While from 2006 to 2011 public spending for health care grew 1.5 times in real terms, in 2012-2013 spending stalled, Shishkin noted. According to the three-year budget up to 2016, by optimistic evaluations, spending on health care as compared to 2013 will grow only by 4% in real terms, he explained.

Then the expert analysed how well each of the imperatives could be implemented in the context of the planned budget.

Demographic Imperative Demands Substantial Resources

It’s hardly correct to speak of a direct correlation between the volume of public spending on health care and the country’s death rate, Shishkin said. However, in previous years, certain resources were invested to resolve demographic challenges, such as increasing life expectancy. Over the last six years, the average life expectancy has grown by three years – from 67 to 70, while public funding has grown 1.5 times. In 2012, health care spending barely grew. According to preliminary data, the average life expectancy also remained the same.

‘Over the next six years we are supposed to increase life expectancy by another four years (to 74), and no increase in health care funding is planned’, the researcher emphasized.

Meanwhile, in order to decrease the death rate, at least four areas of medical care must be invested in: modernizing primary health care, increasing the availability of medicines, increasing spending on cancer-related illnesses, and investing in patient rehabilitation.

Doctors’ Salaries Will Consume the Lion’s Share of Public Funding

The researcher showed calculations related to increasing the salaries of medical personnel. ‘If we include very moderate growth in the number of doctors, mainly at the primary level of health care, it turns out, that the share of public spending for wages will grow substantially, even if part of it will be provided by revenues derived from paid services’, said Shishkin.

Even taking into account possible income growth stemming from paid medical services, in order to reach the 2018 goals for medical staff salaries, over 80% of all public funding will have to be spent on wages. ‘If this happens, it will be at the expense of underfunding in other spending categories (medicine, equipment, etc)’, the expert noted.

Free Medical Care: A Possible Flashback to the 1990s

The Ministry of Health Care claims that it will reach the goals even with the money allocated by the government, recalled Shishkin. But, if they increase salaries without increasing public funding, they may return to the situation of the 1990s, when patients had to bring their own medicines to hospitals; there was no money for reconstruction and new medical equipment, the speaker said.

The question is: how can the goals be reached in a way that is least painful for patients? A possible solution is to increase the industry’s effectiveness. This means developing competition, improving planning, restructuring the range of medical care, and some other measures.

The share of paid services will inevitably grow, the expert believes. If since 2002 (peak indicator of over 50%), the share of patients paying for medicines in hospitals has gradually decreased, reaching 20% in 2012, in the near future this trend may be reversed.

In What Direction Is Russian Health Care Evolving?

In the given conditions, the health care system will move towards a three-sector model. This means the following care will be provided:

  • High-tech medical care mainly in public clinics, covered partly by informal co-payments, and partly by full payments from the patients;
  • Medical care for wealthy individuals in private clinics for full payment;
  • Medical care for the poor in public clinics, partly for free, and partly for a fee.

According to Shishkin, today about 20% of the wealthiest citizens are already getting medical care (not taking into account dentistry) in the private sector. This trend will gain momentum: the private sector will be replacing the public one in order to meet patients’ needs.

Despite economic difficulties, money must be found to increase public funding of health care. According to the researcher, the growth must be at least 1% of GDP by 2020.

Institutional changes suggest two lines of development.

First, we need a breakthrough with regard to developing competition between health care providers, since only a competitive environment can force clinics to work more effectively.

Second, we need a leap forward with regard to the development of public-private partnerships.

According to Shishkin, new mechanisms for co-funding health care must be developed by the state, communities, and employers. This may include at least three areas of operation:

Introducing a mechanism whereby compulsory health insurance funds and patients provide a co-payment for services rendered by private medical institutions;

Creating procedures to combine compulsory and voluntary medical insurance;

Obtaining co-payments from some patients for types of medical care that are based on new medical technologies (not covered by existing warranties).


Author: Olga Sobolevskaya, January 30, 2014