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Health care system maintenance costs


TOTAL per capita


Source: RF Health Ministry.

The adoption of the federal program did not, however, win overwhelming support from all Federation members. Criticism was focused on two points. First, the federal program did not differentiate quotas according to regions, so program numbers were at variance with actual morbidity figures for many Federation members. Second, doubts were voice about the government’s idea underlying the development and approval of a program lacking financial backing.

The program is financed from the Federation members’ budgets and resources of the mandatory medical insurance (MMI) system. Outlays on health care from the budgets of Federation members have reached 2.1 per cent of GDP. According to data for nine months of 1999, MMI contributions by members of the work force and other receipts of MMI funds amounted to 0.7 per cent and 0.1 per cent of GDP, respectively. The federal program of government guarantees, therefore, had a financial backing of 81 per cent.

This estimate appears to be clearly exaggerated for two reasons. First, it is unrealistic to expect large-scale changes to be effected in the health care structure in accordance with the program within a single year. Second, the estimates of health care rates provided in the methodological recommendations to developers of territorial programs of government guarantees are below the funding requirements arrived at by the regions themselves. The federal rates were based on standard wages, costs of medicines, patient sustenance costs, and costs of maintenance services (such as utilities, for example) per health care service unit and the capacity utilization standards of therapeutic and disease prevention (TDP) institutions (such as an annual hospital bed occupancy rate, and so on).The actual capacity utilization rates of TDP institutions are below standard rates. Accordingly, the actual funding requirements to cover the maintenance service costs of the existing network of TDP institutions and to pay wages to their work force exceed cost estimate rates. In other words, federal cost estimates are not adapted to maintain the exiting network of TDP institutions on its present scale and at its present capacity utilization rates, but propose a restructuring of the network.

As territorial programs of government guarantees were developed in practice, the funds needed to implement them in 1999 were an estimated 40 per cent short of the actual requirements.

In order to carry through the federal program of government guarantees, it was decided to use the mechanism of tripartite agreements on cooperation in dealing with health care organization problems between the Federal Health Ministry, the Federal MMI Fund, and the executive government agencies in Federation members. The agreement provides for funds to be allocated within the framework of target programs financed from the federal budget, along with free treatment quotas at federal clinics, and Federal MMI Fund subsidies in exchange for a territorial government guarantee program to be adopted by each Federation members in line with the federal program and a pledge to restructure the health care system accordingly. In late 1998 and early 1999, work started in 52 Federation members to coordinate the objectives of territorial programs of government guarantees with federal program targets and to draft tripartite agreements on this basis.

The federal program targets for reductions in the hospitalization scale and pass on part of required health care to the outpatient clinic level, and the cost estimates contained in the methodological recommendations were received in the regions as totally unrealistic. The talks held with regional authorities resulted in agreement on numbers very close to what had initially been proposed by the Health Ministry and the Federal MMI Fund. These breakthroughs notwithstanding, the federal authorities cooled toward such agreements already in early spring 1999. One of the reasons was the slowdown in movement toward the signing of general framework agreements on a distribution of powers between the Russian Federation and it individual members. It turned out, besides, that the Federal Health Ministry was not prepared to give Federation members iron-clad guarantees of specific free health care quotas at federal health institutions and medicines and medical equipment to be provided within the framework of target programs. Continuing instability and, therefore, uncertainty of funds being appropriated under the federal budget to finance federal health care institutions and federal target programs were cited as reasons for hesitation at the Health Ministry. As a result, tripartite agreements were signed by year-end with 12 Federation members only, with another 25 ready for signing.

In the fall of 1999, the Government made adjustments in its program of government guarantees of free health care to the population (Federal Government Directive No.1194 of October 26, 1999). The idea was to reduce the scale of guaranteed emergency aid (by 6 per cent) and hospital care (by 3 per cent), to be replaced in the latter case with one-day hospital care (Table 6). Table 7 illustrates two scenarios of proposed funding for government guarantees in 2000.

Table 7

Financial backing for government guarantees for free health care services for the population (in per cent of GDP)



2000 forecast



GDP, in Rb billions





GDP deflator, per cent





Government expenditure on providing guarantees for health care services





of which:

Budgets of RF constituent members





MMI contributions by the working population





Other revenues of MMI funds*





Requisite costs of providing government guarantees**





of which the cost of the basic MMI program





Level of financial backing for government guarantees, per cent***





* Revenues of MMI funds from bank deposits, fines and penalties, and other revenue.

** Estimates for 1998: the cost of the actual scope of health care services. Estimates for 1999 and Forecast 1 for 2000: the cost of the government guarantee program. Forecast 2 for 2000: the cost of health care services, the scope of which is consistent with the relevant indicators for 1998

*** The indicator is calculated by dividing the amount of expenditure from the budgets of RF constituent members, MMI contributions by the working population and other revenues of MMI funds by the estimated value of government guarantees for health care services for the population.

Source: estimated from data provided by the RF Statistics Agency, RF Health Ministry, RF Ministry of Economy, and the Institute for the Economy in Transition.

Both scenarios were based on statistical estimates of macroeconomic performance in 2000, prepared by the Institute of Economy in Transition (see above), which forecast a GDP growth of 2.0 per cent and an inflation rate of 124.4 per cent.1 Budgetary outlays on health care in Federation members calculated as percentages of GDP are estimated at 2.15 per cent, or approximately equal to the average outlays in the past two years. Added up to MMI contributions by the working population and other MMI fund receipts, this figure rises to almost 3.0 per cent of GDP. In the first forecast scenario, the costs of the officially adopted federal government guarantee program were adopted as the costs required to back up government guarantees. The second forecast scenario assumed that the structure and scale of health care would remain approximately the same as they were in 1998. In that case, the costs of health care for the population would reach 3.7 per cent of GDP.

In the first forecast scenario, financial support for government guarantees will come to 93 per cent of the requirements. If, then, health care financing from Federation members’ budgets increases, in real terms, by 14 per cent from 1999, the government guarantees under the federal program will be brought into full balance with available financial resources. It is not to be forgotten, though, that implementation of this program would require the following steps to precede it:

Hospital would have to be scaled down by almost 20 per cent and shifted on to one-day hospitals and outpatient facilities;

The guaranteed volumes of free medicines available to hospital patients would have to be reduced;

No funds would be available to maintain the existing network of health care institutions, and instead health care would be paid for by volume; this would means withdrawal of some therapeutic and disease prevention institutions, that are redundant as far as available funds are concerned, from the public health care system;

A comprehensive territorial health care planning system would have to be set up to ensure a rational commitment of the aggregate resources of regional and municipal health care institutions;

Transparency would have to be improved and stringent controls imposed with respect to targeted utilization of public funds.

It is highly problematic that budget outlays on health care can realistically be raised and all the above conditions are met till the end of 2000 and over the next year or two. In approaching this option, however, attention is be paid to the fact that a profound restructuring of health care would require quite a considerable time.

Under the second forecast scenario, there would only be 80 per cent of the funds needed to provide health care services to the population on a required scale. In this option, government guarantees of free health care services to the population would have to be revised to create normal economic conditions for health care development. Such revision would propose legalization of fees charged to the population for health care services provided. Today, the shortage of public funding for health care services is made up by unofficial charges paid by the population. Evidence of this is provided by sociological surveys of Russian household spending on health care, which were conducted in January 1998 and January 1999 by the Institute of Social Studies within the framework of a project to support legislative proposals in health care of Boston University in 14 Federation members.2 Drawing on the poll returns, household expenditure on medicines and health care in 1997 can be estimated at 4.1 per cent of GDP, and 4.5 per cent of GDP in 1998. Expressed in GDP percentages, public expenditure on health care fell from 3.6 per cent to 3.1 per cent in the same period. The total public and personal expenditure on health care, therefore, did not change appreciably at all (Table 8).

Table 8

Expenditure on health care (in current prices)




Rb trillions

% of GDP

Rb billions

% of GDP


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