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The participation of insurers in provision of medicines to beneficiaries was conditioned by MHCSD. The Ministry demanded that they should obtain a special license on the provision of the respective insurance services. Using the insider information, 12 out of 348 medical insurance institutions that participated in CMI, succeeded in getting such licenses until early 2005. The list of such organizations comprises Alfastrakhovaniye MS, Gazprommed strakh M, Ingosstrakh M, Maks M, Kapital, Meditsinskoye strakhovaniye, Krasnyy Krest, ROSNO MS, Soglasiye Vita, Solidarnost dlya zhizni.

Under control on the part of the Ministry for Health Care and Social Development, in surers identified regions for their further operations and started to conclude contracts with pharmaceutical distributors. The insurers attempts to intrude into regions where they had not ever operated caused conflicts with local governors, who desired to reassign rights of payment for medicine supplies to the regional insurance companies. The Mayor of Mos cow was the strongest opponent and he objected the insurers participation in this pro gram. As a result, in early February 2005, it was decided to exclude insurers from partici pation in the payment arrangements for medicines and to use for this purpose solely the Federal and territorial CMI funds. However, 8 insurance companies opposed this ruling in their joint statement.

Distributors started supplying medicines to beneficiaries without a fore payment, i.e.

in the form of commodity credit. The procedural arrangements envisaged that the payment was to be effected upon the end of the first quarter against bills for medicines de facto supplied to beneficiaries. This particular arrangement emerged because the absence of accurate data on real volumes of needs in securing for those entitled for benefits with medicines and, consequently, the impossibility to hold tenders on their supply. Such a de cision gave a rise to high risks of emergence of problems with price levels and ensuring the general match between the assortment and volumes of supplies of medicines and the re spective demand for them.

The above mentioned procedure quite naturally gives incentives to distributors to in clude risk premiums in the prices set by them. According to the Ministry for Health Care and Social Development, it agreed with the manufacturers of medicines on marginal levels of registered prices for medicines that are included in the list at the level lower than the producer prices sales of medicines. The amounts of price caps set by distributors produc ers and importers prices were not subject to regulation. Meanwhile, January and February saw numerous cases when the amounts of the pre set prices on the medicines for benefi ciaries were higher than those for the same medicines sold on the commercial basis. In RUSSIAN ECONOMY in trends and outlooks response to that, MHCSD proposed to conclude agreements with manufacturers (import ers) of medicines on additional obligations to exercise control over prices and quality of medicines. By late February 2005, 170 out of 324 manufacturers of medicines included in the list signed such agreements.

Lack of maturity of regulation of the volume of demand for the respective medicines is Achilles' heel of the new mechanism. Medical doctors independently determine the vol umes of the prescribed medicines. Insurers were supposed to exercise control over the accuracy and validity in respect to prescriptions medical institutions produced for benefi ciaries. But they failed to start this work. MHCSD deliberately refused to impose any re strictions on the volumes of the prescribed medicines during the first months of implemen tation of the new system. This can be easily explained by the fact that it was keen to exhaust the delayed demand of the individuals entitled for benefits for much needed medicines and by means of an experiment to find a real volume of the beneficiaries needs for their provision. According to the Ministry of Health Care and Social Development, the 50.8 Rb. bln allocated in the 2005 Federal Budget in for these purposes (which is much greater than the respective 2004 budget allocations) and honoring agreements with sup pliers about the price levels for medicines for beneficiaries will allow to cope with the rise in the delayed demand for the medicines that had earlier been in short supply to the benefit recipients due to regional budgets falling short of funds to pay for them. It was suggested to work out mechanisms of adjustment of the volumes of the prescribed medicines upon the first months of the attempt to implement the new provision arrangement.

During the first two months of the year, the number of medical prescriptions for beneficiaries grew more than 2.5 times vis a vis the analogous period of 2004.

There immediately began to arise with benefit recipients failing to get prescribed medicines. However, that was a countrywide phenomenon. MHCSD, along with subordi nated institutions, had to fine tune the procedures of provision of medicines and to inten sify administrative efforts to ensure their effectiveness. The Federal Fund formed a central ized pool of resources, which were going to be earmarked between regions in an immediate reaction mode, once an emergency associated with payment for medicines arose. Mr. M. Zyrabov happened to move from one region to other investigating into causes of the faults with supplies of medicines. According to the Ministrys data, until mid February beneficiaries received 6.6 mln. prescriptions. About 88% of them were fulfilled.

The new procedures of provision of medicines to beneficiaries made the federal agencies responsible for paying for all the volume of the prescribed medicines, which they do not control. The beginning of payment to suppliers for the sold medicines will form the X hour. If the government fails to design mechanisms of adjustment of prescription and there remains the procedure of payment against the actual amount of sales of medicines, this would entail either the necessity for the Federal Budget to further raise in its expendi tures on these purposes, or in a rise in social tensions fueled by the impossibility to deliver the prescribed medicines in full.

3.6.2. Education The development of Russian educational system has recently been conditioned by changes in the demographic situation, the dynamics of demands of the labor market, processes of redistribution of powers between government levels, as well as attempts to pursue reforms in this sphere. As concerns considerable changes in this sector, one should note, first of all, the rise in the number of university and secondary polytechnic insti Section 3.

The real sector tutions students (Table 40). The higher education has actually become broadly available in this country.Table Educational Institutions Network in Russia No Indicators 1998 1999 2000 2001 2002 1 Quantity of pre school institutions, as 56,6 53,9 51,3 50,0 48,9 47,thousand A number of children, as thousands 4379 4225 4263 4246 4267 as % of children of the respective 53,9 54,9 56,0 57,2 58,1 57,age 2 Quantity of institutions of general 67,9 67,5 67,0 66,9 65,7 64,education, as thousand.Including:

in public and municipal 67,3 66,9 66,4 66,2 65,0 63, in non government 0,6 0,6 0,6 0,7 0,7 0,3 Quantity of students of institutions of 21479 20879 20074 19429 18440 general education, as thousand in public and municipal 21429 20826 20013 19363 18372 in non government 50 53 61 66 68 4 Quantity of elementary polytechnic institutions. Quantity of students, as 3954 3911 3893 3872 3843 thousand 1676 1694 1679 1649 1651 5 Quantity of secondary polytechnic 2631 2649 2703 2684 2816 institutions 6 Quantity of students in secondary 2069 2175 2361 2470 2586 polytechnic institutions, as thousand total quantity on public and munici 2052 2147 2309 2410 2489 pal institutions, as thousand per 10.000 of the population 141 148 160 167 173 7 Quantity of higher educational institu 914 939 965 1008 1039 tions public and municipal 580 590 607 621 655 non government 334 349 358 387 384 8 Quantity of students in the higher 3598 4073 4742 5427 5948 educational institutions, as thousand per 10.000 of the population 229 256 294 332 364 in non government institutions 251 345 471 630 719 Source: Rossiyskiy Statisticheskiy Yezhegodnik. 2004: Stat. sb. M.: Rosstat, 2004. p.227.

The analysis of financing of the system of education shows that the Federal Budget has maintained a fairly high growth rate of spending on education. Between 1999 and 2002 the spending was not lower than 43% annually in nominal terms. In 2003, growth rates reduced, with the rise in expenditures on education accounting 24.6% vis a vis 2002, while in 2004 21.5% vis a vis 2003 (Table 41). But the 20032004 budgets did not take into account the recommendation of the RF State Council to increase the amount of financing of education by not less than 25% annually. Nevertheless, the share of expendi tures on education is growing in the structure of the Federal Budget as well as in Gross Domestic Product (GDP) from 0.73% in 2002 to 0.76% in 2004.

Dostupnost vysshego obrazovaniya v Rossii / Otv. red. S.V. Shishkin. M.: Independent Institute for Social Policy, 2004.

RUSSIAN ECONOMY in trends and outlooks Table Expenditures on Education in the Federal Budget 1998 1999 2000 2001 2002 2003 The Federal Budget, as Rb. bln. 388,9 664,7 1029,2 1325,7 1947,4 2354,9 2659,Expenditures on education:

Rb. bln. 14,6 20,9 38,1 54,5 80,1 99,8 121, as % to the prior year 143,1 182,2 143,0 147,0 124,6 121,The share of expenditures one education in the Federal 3,7 3,1 3,7 4,11 4,11 4,24 4,Budget, as % Source: Calculated basing on the Rosstat data.

According to the 2004 results, the level of the average monthly wages of employees in the sphere of education remains lower vis vis the health care and culture spheres (4,824 and 4,747, respectively). Moreover, during the year one noted a slight decline in the level of average monthly wages in the sphere of education relative to the nation wide aver age level of wages. The same tendency is typical of the health care and culture spheres (Table 42). The volume of budgetary wages arrears in the social cultural sub sectors plunged as much as 2.8 times by late 2004, with the greatest volume of the arrears falling on the educational sphere (Table 42).

Table The Average Monthly Wages Due in the Social Cultural Sub Sectors (Less Social Contributions) per 1 Employee, as Rubles January March June September December Total 5932 6428 7003 6918 Education 3832 4126 4885 4231 To the nationwide average wages level, 65 64 70 61 as % Health Care 4254 4485 5259 4700 To the nationwide average wages level, 72 70 75 68 as % Culture 3927 4132 4595 4265 To the nationwide average wages level, 66 64 66 62 as % Source: Calculated basing on the Russsian Rosstat data.

The 2004 educational policy involved the continuation of an experimental refining of an instrument of the combined assessment of the final and enrollment examination, alias The Uniform State Examination (USE), mechanisms of funding of the higher education on the basis of State Individual Financial Obligations (SIFO). In addition to the above, the gov ernment adopts a series of strategic documents and legal statutes that substantially affect the essence and vector of the Russian educational reform efforts.

Section 3.

The real sector Table The Outstanding Budget Wages Arrears in the Social Cultural Sub Sectors (Except for Small Businesses), as Rb. Mln.

01.02.04 01.04.04 01.07.04 01.10.04 01.01.Total 2730 2652 2924 2654 Of which:

Social Sub sectors total 1741 1601 1821 1602 Including:

from the Federal Budget 10 9,5 12 10 from the budgets of the RF Subjects and local 1731 1591 1809 1592 budgets Education total 308 263 384 326 Including:

from the Federal Budget 7 7 9 8 from the budgets of the RF Subjects and local 301 256 375 318 budgets Health Care total 174 177 225 249 Including:

from the Federal Budget 0,3 1 0,3 0,3 0, from the budgets of the RF Subjects and local 174 176 224 249 budgets Culture total 64 66 96 72 Including:

from the Federal Budget 0,0 0,0 from the budgets of the RF Subjects and local 64 66 96 72 budgets Source: According to the Russian Rosstat data.

Outcomes of, and Prospects for the Nationwide Transition to USE In 2004, in compliance with government Resolution of 16 January 2004 No. 725 On Prolongation for 2004 of the Term of Conduct of the Experiment on Introduction of the Uni form State Examination, the Russian educational system proceeded with the given ex periment. Last year, the accent was put on probation of a few technologies of its conduct and enhancement of the quality of control measuring materials by expanding the participa tion of representatives of the polytechnic education in their design and evaluation. In addi tion to that, the government stressed the need for improvement of informational orienta tion available to those enrolling to the higher education and secondary specialized educational institutions.

As many as 65 RF Subjects voluntarily took part in the USE experiment, with some regions holding it by all 14 subjects. Notably, the number of participants in the experiment hit the record breaking 982,000, or at 1.3 times more than in the prior year. As many as federal ministries and agencies that have subordinated higher education and secondary polytechnic education institutions have expressed their consent to participate in USE.

When compared with 2003, the number of universities accepting students by their USE scores more than doubled, while the number of secondary polytechnic educational institu tions recognizing the USE scores accounted for 1,530 (Table 44).

RUSSIAN ECONOMY in trends and outlooks Table The Progress in the USE Experiment 2001 2002 2003 The number of the RF Subjects taking part 5 16 47 in the USE experiment The number of students that passed USE, 30 300 752 as thousand The number of USE subjects 8 9 12 The number of universities and their branches participating in the USE experi 16 117 464 ment The number of secondary polytechnic edu cational institutions participating in the USE 79 928 experiment Source: Basing on the data of the RF Ministry for education and Science.

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