Government system of control is rather tough because of the cor ruption threat cannot grant to the control bodies the right for decision taking and is based on its own subjective ideas. This leads to a creation of necessary thorough norm regulation of the monitoring bodies’ activ ity. However, the most perfect normative act is unable to take into ac count all different possibilities in practical life. As a result, government control system considerably restricts the freedom of action of monitor ing organizations.
Unlike government system of control public system of control avoids setting rigid restrictions and permits a wider scope of allowable eco nomic decisions. At the same time, while examining justification for any decision taken by a control organization public control bodies have possibility to take into consideration all significant development in that specific situation.
3.3. Transition to the new financing arrangements of the social services Described above issues currently present in the sphere of budgetary network financing and social service delivery in Russia require the need for change in budgetary financing arrangements. Gradual rejection of social service delivery on an estimate based financing arrangement is obviously needed. This arrangement is incompatible with contemporary realia of the market oriented economy and does not provide incentives for quality improvement of the service delivery.
Modernization of the budgetary system financing arrangements pre supposes not only introduction of radically new payment arrangements for the social services bit restructuring and modernization of the current ones. Among them, in particular, we understand financing arrange ments in compulsory health insurance and government personal edu cation loans, which have traces of performance based budgeting. How ever, because of the current legislation they remain only modification of estimate based financing.
Development of optimal financing arrangements for social service delivery to the population by organizations founded as a result of reor ganization of public institutions becomes the principal precondition for the initiation of the reforms. Changes in the approaches to social ser vice delivery financing, transition to performance based budgeting and introduction of competition in this sphere should be linked with the changes in the system of organizations rendering those services. This means that different financing arrangements are differently applicable to different organizational and legal status.
The choice of approaches to the public financing arrangements is also determined by the feature of the social sphere, including:
a) The volume of legislative guarantees in specific sphere, which along with other factors can determine the need for setting compulsory government assignments for social service delivery96. Under the volume Actually government assignment envisages partial reimbursement of budgetary costs incurred on social service delivery. Notion of the partial reimbursement of costs is to a great extent conditional. In the lack of developed market for educational, medical and other social services it is very difficult to estimate their costs. In this case we understand under partial reimbursement of costs a situation, in which an organization of the social of legislative guarantees first of all we understand availability or the lack of government guarantees for free of charge social service delivery to all wanting. Such guarantees are stipulated by the Constitution with re spect to health care, general, primary, secondary and secondary voca tional education. Access to free higher professional education is as sured on a competitive basis.
b) The level of rigidity of budgetary constraints. Fears of growth of costs for social service delivery resulting from reorganization of public institutions against the shortage of budgetary funds generated an idea for designing a special organizational and legal status, according to which fulfillment of government assignments for social service delivery becomes compulsory.
c) Characteristics of the current public institutions network (first of all, by the level of its development and consequently availability or the lack of preconditions for competition between public sector organiza tions) as well as chosen territory for pursuing reorganization, which in fluences of the implementation rates of the new budgetary instruments.
d) Potential possibility for competition by private organizations en gaged in social service delivery similar to those provided by public insti tutions.
e) Lack of the solvent demand for the services, which are provided by public institutions.
f) Characteristics of provided services. For example, composition and cost of medical services depend on the character of disease of specific patient, which results in the need for development of tailor made standards. Whereas composition and cost of educational ser vices in the framework of a single program, as a rule, do not depend on personal characteristics of a student and, consequently, unified stan dards can be applied.
g) Territorial differentiation of costs for service delivery (conditioned, for example, by differentiated cost of utility services, availability of “northern” rates and premiums to the salary of public sector workers and so on).
sphere would prefer to render services, which it had to deliver in the framework of gov ernment assignments, to other consumers.
Taking into account above mentioned factors a scope of financing arrangements should be selected, which should correspond conditions faced by the social service sector after the end on the reform.
In this chapter we will discuss a general set of instruments, which can be applied in public financing of social service delivery. Key pa rameters and application of these instruments should be defined in the budgetary legislation and later defined in detail in brunch legislation depending on the application goals. This chapter will not deal with spe cific types of budgetary financing, which closely tied to specific branches (for example, education loans). Some of them will be dealt with in chapters dedicated to the features of the reform in separate branches of public sector.
We should make a number of reservations before further examina tion of proposed novations. First of all, it should be noted that proposed instruments of financing are additional to already existing ones, in par ticular, to estimate based financing, financing according to CHI and SPEL systems. Latter should be retained with the modifications pro ceeding from the reorganization’s logic. Nowadays, there is no consis tent terminology designed to define different new types of performance based budgeting. We understand that the contents of each used by us term may not coincide with its contents in other sources; in each case we will provide their definitions applied for the purposes of this re search.
One can propose several grounds for classifying budgetary financ ing instruments.
First, classification designed depending on who chooses social ser vice provider paid from the budget: government bodies of different level of authority, organizations representing the interests of legal entities (for example, insurance companies in heal care system) or proper physical persons who consume services. In case the government chooses service provider, it is possible to take into account the price of services offered by the providers. In order to minimize the price a ten der based selection of providers is feasible. Tender based selection envisages price differentiation for each specific type of service depend ing on conditions proposed by tender participants.
In case a physical person consumer selects provider of services preliminary selection is absent or comes to licensing, accreditation or the scope of provides is limited by any other way regardless of the price of proposed by a specific service provider. For example, the value of SPEL is currently differentiated depending on the results obtained at the unified state examination. Theoretically it can be differentiated de pending on the location and specialty of the higher education estab lishment but not depending on the tuition set by specific higher educa tion establishment.
Second, it is feasible to differentiate financing arrangements on those proposing differentiation of the volume of appropriated funds de pending on the detailed components of the service provided (let us call it complex rate, for example, of payment for inpatient treatment on CHI system) or unified specifically (simple rate, for example, of payment for education of a school student).
Third, it is feasible to divide financing arrangements depending on whether they propose delivery of corresponding service by provider on a compulsory basis on voluntarily. Compulsory service delivery can proceed from the restrictions imposed by the government on corre sponding organizations exercising the right of a founder (for example, direct definition in law or in statutory documents). Voluntary service de livery means that provider has a free hand in signing agreements with consumers on corresponding service delivery.
Fourth, method for determining consumers of services, which are paid for by the budget. Among those methods are: territorial (residence of service consumer on specific territory), social (well being of a citi zen) or other (for example, USE results, diagnosis and so on). Any method for determining consumers can exercise influence on the cal culation methodology of public financing rates and the choice of ap plied instruments.
Considering the above, one can propose the following set of alterna tive to estimate based system social service financing arrangements:
normative targeted financing, contractual financing and subsidizing consumer.
1) Normative targeted financing Under the normative targeted financing we understand reimburse ment to public institutions of the cost of specific service delivery to spe cific users on the basis of the administrative procedure. As was stated above, depending on the branch features the norm of financial input can be common (i.e. single for all the consumers) or complex (i.e. dif ferent depending on consumer’s characteristics, type and conditions of service delivery and other factors). Normative per capita financing ar rangement is usually called single for all the consumers financing ar rangement.
Implementation of administrative norm of financial input means that they are adopted by a one sided decision taken by government bodies (municipalities) and are addressed to the organizations, which have no right to refuse to provide social services paid on those rates in volumes determined by government’s (municipal) assignment. This means that normative targeted financing arrangement is applicable to the organi zations, which are in administrative subordination to government bodies (municipality) or to other organizations in relation to which the govern ment (local government) has the right to determine conditions and (or) results of their activity, including conditions of making transactions, first of all, regarding autonomous organizations.
Although current legislation does not define normative targeted fi nancing term, this financing arrangement does not contradict the Budget Code of the Russian Federation and can be applied to public institutions without their reorganization. Foe instance, according to Item 5 of Article 161 of the Budget code of the Russian Federation public institution’s budget is calculated on the basis of predictable volumes of government and municipal service delivery and norm of financial input determined on their provision. However, this rate is practically ineffec tive because Article 177 of the Budget Code of the Russian Federation, which determines procedure for the approval of norm of financial input per unit of state or local services, has not entered into effect.
Principles of normative targeted financing have been partly used in two branches of public sector: in compulsory health insurance system and in the 2002–2004 experiment on transition to financing of individual higher education establishment on SPEL (state personal education loans) basis. Per capita norms of financial input for delivery of guaran teed volumes of free of charge medical assistance are used in compul sory health insurance system. Those rates include the cost of a bed day in hospitals of different levels, average outpatient policlinic visit, a day stay in day type hospitals and one call of ambulance.
Per student capita rates of public expenditure on higher education differentiated depending on the results of unified state exam are being used in SPEL system. Administrative financing on both cases manifests itself in, first, exclusively public institutions have an access to it. Sec ond, medical institutions, which are financed form CHI system have no right to charge citizens additional payment for the services rendered in the framework of the Program of government guarantees; and higher education establishments, which are financed according to SPEL sys tem are obliged to accept no less than 50 per cent of student enrolment exclusively from the funds received from SPEL system.
The principal distinction between normative targeted financing and the traditional estimate based budget financing consists in the fact that budgetary allocations cover not any costs incurred by the service pro vider but only those, which are directly connected with social service delivery at the government (municipality) assignment and are economi cally justifiable. In case of consistent implementation the normative targeted financing arrangement allows to avoid public financing of costs incurred by public institutions of their profit making activity and cut public expenses on unallowable costs incurred by the service pro viders (because rates are calculated parting from average costs in curred on service delivery).
On condition that administrative rates assure adequate interest of service providers in their delivery, this financing arrangement can guar antee certain level of competition and displace from the market of so cial service providers whose services are not in demand. Thus, norma tive targeted financing to a greater extent then estimate based financ ing is targeted to the result and interests of the consumers.
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