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Originally, it was suggested to include in the payment scheme underwriters participating in CMI system, to whom funds are to be passed from the territorial funds of CMI. The underwriters had to sign contracts with the distributors for the supply of drugs and checking substantiation of providing the recipients of benefits with drugs by medical institutions. As a condition for participation of underwriters in procuring drugs for recipients of benefits, the Ministry of Health Care and Social Development set a special license carrying out medical insurance. Using inside information, 12 of 348 medicinal organizations that took part in CMI were able to get such a license before the beginning of 2005. Among them, for example: Alfastrakhovaniye-MS, Gazprommedstrakh, Ingostrakh-M, Max-M, Kapital. Medical Insurance, Red Cross, ROSNO-MS, Soglasiye-Vita, Solidarity for Life.

The underwriters under the control of the Ministry of Health Care and Social Development divided regions for working and started to sign contracts with pharmacology distributors. The attempts to introduce underwriters to regions where they earlier did not work, caused an opposition of governors who wished to transfer the rights of payment of drugs deliveries to regional insurance companies.

Most strongly opposed the mayor of Moscow, who stood against any participation of underwriters in this program. As a result, early in February it had been decided to reject the participation of underwriters in drugs payment schemes and to use for this only Federal and territorial funds of CMI. Such a decision was explained by unpreparedness of underwriters to sharing the risks of paying drugs. But insurance companies made joint statements disproving this.

Supplying preparations for the recipients of benefits had been started by distributors without prepayment, in the form of commodity credit. Provision was made to start payment upon expiration of the first quarter against invoices for actually dispensed drugs to recipients of benefits. This was motivated by absence of precise data on actual demand rate in supplying the categories of population being recipients of benefits with medicinal preparations and, accordingly, by impossibility carrying out tender for supplying of drugs. Such a decision gave rise to emerging high risks of pricing problems and those concerning day-by-day matching of the assortment and volumes of supply of drugs to their demand.

It is natural that such a procedure stimulates distributors to include risk payment in prices set by them. According to statements of the heads of the Ministry of Health Care and Social Development, agreement had been achieved with the producers of drugs on threshold levels of registrated prices of the preparations, included in the list, at a level lower that transfer prices for commercial realization of drugs. Rates of distributors extra-charges to the agreed and registered prices of producers and importers were not the subject of regulation Meanwhile, in January and February many cases had been observed when the size of established prices of dispensed drugs for recipients of benefits were higher than prices of the preparations realized by consumers on commercial basis. Reaction to this on the part of the Ministry of Health Care and Social Development became a suggestion to conclude an agreement with the producers (importers) of drugs on additional obligations for the control of prices and quality of drugs. By the end of February such agreement had been concluded with 170 of 324 producers of preparations included in the list.

Most vulnerable point of the new mechanism is underdevelopment of regulating the volume of demand for appropriate drugs. Doctors themselves assign the volumes of prescribed preparations. It was supposed that underwriters will exercise control over the rightness and relevance of prescribing by medical institutions medicines for recipients of benefits. But they could not start such work. The Ministry of Health Care and Social Development deliberately refused to set any restrictions on the volumes of prescribed drugs in the first months of introducing the new system. This could be explained by desire to use up the deferred demand of recipients of benefits for their required preparations and to determine experimentally the real volume of demand of recipients of benefits for medication. According to the Ministry of Health Care and Social Development, assigning in the federal budget for 50.8 bn for these purposes, which several times exceeds the expenditures on pharmacological support of respecting categories of population in 2004, and observance of agreements with the suppliers of the level of prices of drugs for recipients of benefits will allow to cope with the burst of the deferred demand for medication, which earlier were provided to recipients of benefits in a very limited extent due to insufficiency of means for their payment in regional budgets. After the first months of realization of a new scheme of drugs provision for recipients of benefits, it is suggested to develop mechanisms for regulating the volumes of prescribed preparations.

In the first two months of the new year the quantity of prescriptions written by doctors for recipients of benefits increased more than 2,5 times as compared to the same period of 2004. Practically at once, but not everywhere, problems started to arise, concerned with receiving of recipients of benefits the prescribed preparations. The Ministry of Health Care and Social Development together with the subjected organizations had to in process to correct the pharmacological support scheme and intensify administrative efforts to effect its operation. N the federal fund there was created a centralized reserve of funds that will be distributed between the regions in a regime of quick response to arising payment problems. M.Yu. Zurabov moved from one region to another, finding out on the spot halts in deliveries of drugs. According to the Ministry data, by mid-February 6,6 mln of prescriptions had been written out for recipients of benefits, of which 88% were served.

The scheme of Pharmacological Support of Recipients of Benefits that is being implemented made the federal bodies responsible for paying all the volume of prescribed drugs that is non-controlled by them. Critical point will be the start of paying to suppliers of dispensed drugs. If no mechanisms of regulating of writing drugs have been provided for, and a procedure will be retained of paying for prescribed drugs upon their receipt, this will lead either to the necessity of further increase of expenditures for these purposes from the federal budget, or to new social tensions because of impossibility to provide the prescribed drugs in full volume.

Shishkin S.V.

Military and related expenditures in the federal budget for year In 2005, the growth in the military spending of the federal budget persisted. The increase of the expenditures pertaining to the item National Defense made 10 per cent in real terms. The bulk of this increase is planned for the arms program.

In connection to the switching to the new budget classification in the federal budget for year (FB 05), there was carried out the further consolidation of the RF military spending in the item National Defense, which included the expenditures for the implementation of the programs of international military and technical cooperation and mobilization preparedness of the economy. Besides, in the structure of expenditures pertaining to this section there were shown two new subsections: Applied research in the area of national defense and Other issues in the area of national defense. The rest of military spending is still carried out via the sections National security and law enforcement activities and Prevention and liquidation of the consequences of emergency situations and natural calamities, civil defense. On the whole, it is planned to spend Rub. 531.1 billion in the framework of the section National Defense, what makes 2.84 per cent of GDP or 17.4 per cent of the FB 05). In spite of the fact that the total increase in the spending pertaining to the section has reached 10.12 per cent, the expenditures entered in the largest subsection RF Armed Forces declined by 16.24 per cent, what should be seen as a result of both changes in the budget classification accounting for the redistribution of a part of expenditures across two new subsections, and the actual decrease in the amount of spending for the maintenance of the army in real terms. It is no secret that similarly to the situation of the last year, 2004, the budget law of 2005 did not envisage any indexation of money allowances of servicemen and salaries of the civilian personnel of armed agencies, what infringed on the law tying this indexation with the indexation of money allowances paid to federal civil servants. However, due to the rigid stand taken by the Finance Ministry, the law on the budget for year 2005 passed all readings and was signed.

Notwithstanding the seeming rationality of the arguments in favor of such decisions worsening the situation of the personnel, the practice demonstrates the fallibility of this approach, since the military and political leadership had to amend its consequences in haste that makes waste already in February of this year. The financing of additional payments will be covered at the expense of expected extraplan budget revenues and most likely will affect the budget at the time of its adjustment.

The amount of Rub. 398.9 billion (2.13 per cent of GDP, or 11.7 per cent of FB 05) was earmarked for the section National security and law enforcement activities (see Table 2), at the same time the total increase in the expenditures relating to this section in real terms made 10.8 per cent in comparison with the figures registered in the preceding year. Since about two thirds of expenditures pertaining to this section are not related to the military outlays, the bulk of the amount indicated above will be spent, apparently, for the judiciary system, while the financing of troops of the RF Interior Ministry and the border troops agencies will significantly diminish in real terms. The financing included in the item Prevention and liquidation of the consequences of emergency situations and natural calamities, civil defense will rather significantly increase by 18.7 per cent. However, only a fraction of these expenditures may be defined as military outlays. The military expenditures per se in this item are the outlays for the civil defense and payments to the personnel engaged in these activities. It should be noted that in the NATO budget expenditures for the civil defense are not defined as military outlays, as well as the expenditures for security agencies.

The dynamics of expenditures for defense and security are shown in Table 3.

Table Direct military expenditures of the federal budget, the National Defense section Difference be- Share in expenditures (%) / inAmount in tween expendi- crement in comparison with the FB 05 (Rub. tures of FB 05 figures in 2004, p. p.

No. Sections and subsections mil.) / and FB 04 (Rub.

Same in mil.) and incre- In relation to In relation to prices of 2004 ment in expendi- FB 05 GDP tures (in %) 1 National defense 531 139 48 129 17,43 2,475 505 10,12 1,99 0,1.1 Armed Forces of the Russian 388 029 -56 415 12,73 2,Federation 347 385 -16,24 -1,86 -0,1.2 Mobilization and extra- 1 895 -2 999 0,06 0,military training 1 697 -176,76 -0,11 -0,1.3 Mobilization preparedness of 3 500 2 033 0,11 0,the economy 3 133 64,89 0,08 0,1.4 Preparation of and participa- 61 156 0,00 0,tion in ensuring collective 55 285,87 0,01 security and peace making activities 1.5 Nuclear arms complex 8 693 -10 544 0,29 0,7 783 -135,48 -0,38 -0,1.6 Carrying out of international 6 231 -4 870 0,20 0,obligations in the sphere of 5 578 -87,30 -0,17 -0,military and technical cooperation 1.7 Applied research in the area of 79 190 2,60 0, national defense 70 895 1.8 Other issues in the area of 43 540 1,43 0, national defense 38 979 Table Direct and indirect military expenditures, other sections of the federal budget Difference Share in expenditures (%) / increAmount in between ex- ment in comparison with the figures FB penditures of in 2004, p. p.


FB 05 and FB No. Sections and subsections mil.) / 04 (Rub. mil.) Same in In relation and increment In relation to FB prices of to FB in expenditures (in %) 2 Expenditures for the military organization included in item State Security and Law Enforcement Total expenditures for law 398 889 38 565 11,68 2,enforcement and state secu- 357 108 10,80 1,33 0,rity, including:

2.1 Troops of the RF Interior 23 894 -1 956 0,78 0,Ministry 21 391 -9,15 -0,06 -0,2.2 Security agencies 62 316 2 217 2,04 0,55 789 3,97 0,11 2.3 Border Service agencies 31 685 -2 906 1,04 0,28 366 -10,24 -0,09 -0,3 Military expenditures included in other sections of the Federal Budget 3.1 Prevention and liquidation of 22 055 3 701 0,72 0,the consequences of emer- 19 745 18,74 0,14 0,gency situations and natural calamities, civil defense Table Dynamics of expenditures for defense and security in 1999 through Years 1999 2000 2001 2002 2003 2004 Expenditures listed in the section National Defense 93 702 140 852 214 688 281 970 354 907 427 376 531 (in prices of the budget 93 702 117 181 150 598 173 504 190 987 204 814 225 year / in prices of 1999), Rub. mil.

Increase in relation to the 25,1 28,5 15,2 10,1 7,2 10,preceding year, % Increase in relation to 25,1 60,7 85,2 103,8 118,6 140,1999, % Expenditures listed in section State Security and Law Enforcement (in 51 324 79 802 131 621 165 999 249 799 318 543 398 prices of the budget year / 51 324 66 391 92 329 102 144 135 618 152 448 168 in prices of 1999), Rub.


Increase in relation to the 29,4 39,1 10,6 32,8 12,4 10,preceding year, % Increase in relation to 29,4 79,9 99,0 164,2 197,0 229,1999, % An analysis of indirect expenditures of the federal budget related to the previous (see Table 4) military activities revealed that in 2005 they did not significantly changed in comparable prices, since the 13 per cent drop of pension expenditures borne by the Defense Ministry is compensated by the respective increase in the spending for pensions carried out by law enforcement agencies (the judiciary system). At the same time, comparing the Russian military spending with the military expenditures of other countries it is necessary to bear in mind that according to the UN standards and the NATO practices the payments to military pensioners are included in the national military expenditures.

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