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The government’s measures to regulate prices were supplemented with steps to regulate the designation and sale of medical drugs. Its Directive No.393 of April 8, 1999 introduced yet another list of medicines: a minimum range of medicines essential in providing health care services and required to be carried by every drugstore. It is expected to be broader than the list of vitally essential and indispensable drugs. Simultaneously, the new list provides a basis for rationing drugs to people entitled to free or cut-rate medicines. Under the above directive, prescriptions for free or cut-rate drugs outside the official minimum range to eligible patients can now be written out by a physician only on the basis of a resolution of a commission of clinical experts at a clinical institution or by physicians at cancer, tuberculosis, psychiatric, and other specialized health care institutions. The quantity of expensive medical drugs prescribed for free or at cut rates is, therefore, expected to be restricted by this more complicated prescription rule.

In principle, measures of this kind to hold down demand for publicly financed medicines are completely justified. They are particularly relevant in Russia’s conditions today, for they actually reduce the scale of government guarantees in the provision of medical drugs and shorten the gap between government guarantees and the funds available to finance them. The question now is how the new rules are going to be applied in practice. It will be easy enough to monitor compliance with the new prescription rules and impose more restrictions on the quantity of medical drugs physicians and commissions of clinical experts can prescribe. It will not be that easy to monitor the stocking of the mandatory minimum range of medical drugs by drugstores. As a result, some medication may be in short supply. If things come to this turn, the availability of free or cut-rate medicines for eligible segments of the population may be reduced more significantly than was intended.

The Beginning of an End of Mandatory Medical Insurance Back in 1996, the Russian Government submitted a draft law to the State Duma, with proposals to amend the RSFSR Law on Medical Insurance of the Population in the Russian Federation. It was intended to curtail the powers of MMI funds and medical insurance companies. These special interest groups successfully blocked discussion of the government’s bill by the State Duma. The government was not pressing too hard for its adoption from the start either, and even gave the impression of having clean forgotten about the bill, once the presidential election was behind it. In 1999, however, it suddenly awoke to the problem. It put a heavy pressure on the Duma deputies and bosses of the Federal MMI Fund. The State Duma passed the bill at first reading on June 11.

The majority of deputies unversed in the intricacies of medical insurance were persuaded that, if enacted into law, the bill would put the mandatory medical insurance system in order, save funds, cut out redundant intermediaries between the MMI funds and health care institutions, and reinforce public supervision over the targeting of MMI monies. Actually, however, the passage of the law will not so much put things in order, as place the MMI resources under undivided control of the executive branch, without a slightest guarantee that these resources will be committed as intended.

The bill provides for changes that radically alter the concept and content of the existing Federal Law on Medical Insurance of the Population in the Russian Federation. In actual fact, it is not about amendments to the existing law, but about its substitution with a law under a different name (Mandatory Medical Insurance) and different content. The bill gives medical insurance companies no role among mandatory medical insurance (MMI) providers. The functions of insurers within the MMI system will only be performed by territorial MMI funds. Each of these will enjoy a monopoly position on the territory of its respective Federation member. The bill allows a territorial MMI fund to recruit, at its own discretion, insurance companies to work as its insurance agents. The Federal Law on the Principles of Mandatory Social Insurance, No.165-FZ, passed on July 16, 1999, bans any intermediary business within the MMI system. This means that the exclusion of medical insurance companies from the list of MMI providers will amount to their virtual banishment from the MMI system.

The bill proposes to deprive MMI funds of the right to engage in financial and lending business. This privilege aroused burning irritation among bureaucrats in regional administrations and, in actual fact, bred abuse by the executive boards of some territorial funds.

The bill contains provisions allowing Federation members to modify the legal status of territorial MMI funds. The first part of the existing Regulations of a Territorial Mandatory Medical Insurance Fund, approved by the Supreme Council of the Russian Federation in its Resolution No.4543-1 on February 24, 1993, expressly provides that a territorial MMI fund operates in accordance with the laws of the Russian Federation and the above Regulations. This provision deprived Federation members of authority to approve fund constituent documents substantially at variance with the Federal Regulations. Under the new bill, the Government only approves a model statute of a territorial MMI fund. The actual statutes of MMI funds are to be approved by executive government authorities in Federation members. Not a word is said about any disparities being ruled out between such territorial statutes and the model statute. If these modifications find their way into the final text of the law, this would signal devolution of a considerable portion of rights to regulate the legal status of territorial MMI funds to Federation members. In particular, nothing would keep Federation members from placing territorial MMI funds under their health care management agencies, replicating, at the regional level, an administratively integrated health care management system. To do this, it would be enough for a territorial MMI fund statute to include a provision that the fund chairman is to be appointed on representation from the head of the local health care management agency, and also to oblige the fund to seek approval for its detailed draft budget from the health care management agency and to provide the agency with monthly budget execution reports. In the end, the MMI fund would find itself under the hard administrative heel of the health care management agency.

If a law of this sort is passed, no matter what, the MMI system will be robbed of a strategic perspective in a growing competition among insurers and instead a prospect would emerge of resurrection, even if in a new format, of the administrative health care control system to eradicate whose flaws the MMI system was set up in the early 1990s, in the first place.

In the second half of 1999, a working group of the World Bank, assisted by the Federal MMI Fund, carried out a survey of territorial MMI funds, their branches, and medical insurance companies.5 The survey was conducted by questionnaire, with responses received from around 80 per cent of insurance companies and territorial MMI funds and half of these funds’ branches. An analysis of the responses shows that medical insurance companies have significantly greater resources than branches of MMI funds, which also fulfill the functions of insurers within the MMI system. Insurance companies have relatively more specialists per thousand insureds and more advanced automated systems. There is actually no competition between medical insurance companies for underwriting health care institutions, but it exists over policyholders and insureds in many regions. Medical insurance companies are generally more assertive in performing the functions of insurers within the MMI system. True enough, this appraisal is valid in respect of approximately half of the insurance companies that responded to the questionnaire questions.

To enhance the potential of each insurance company within the MMI system to exert a positive impact on the quality of health care services to the insureds and the efficiency of fund utilization within the MMI system, it is important to scale up requirements to medical insurance companies so that they can no longeer derive incomes by merely siphoning off cash from the MMI funds to health care institutions. It is important to impose clear-cut rules requiring the insurers to provide necessary information to the insureds, examine their complaints, provide economically sound grounds for contracts with health care institutions, exercise supervision over the need for hospitalization of the insureds and compliance with economic and medical treatment standards, and so on. These rules must be incorporated in the list of conditions to be met for taking out a license to engage in MMI business. Put within this framework, the insurers’ activities would be channeled in the required direction.


Last year was, in general terms, a fruitful one for the education system both for the number of new legislative acts adopted to regulate this area and from the viewpoint of improvements in clearing the backlog of arrears in wages. A closer look is taken below at both these achievements.

In 1997 and 1998, the Government discussed a wide range of issues related to organizational and economic restructuring in education, including reallocation of managerial functions between the Federal Center and territorial authorities, greater economic independence for educational institutions, changes in ownership relations, involvement of extra-budgetary funding sources, and so on. Discussions gradually tapered off with a change of government in the fall of 1998. A new boost was given to efforts to reform education in late March 1999, when the President sent to the Federal Assembly his annual message Russia at the Watershed, a section of which was devoted to watershed problems of education. The need for an urgent passage of a Federal Education Development Program was spotlighted as a general political objective in restoring respect for the teacher and creating decent living conditions for people in this profession. Improvement in the organizational and economic mechanisms to sustain the viability of the educational system was formulated as a common mission for authorities at all levels. The annual Message emphasized that it is a long time we moved to develop mechanism for promoting extra-budgetary funding [and that] additional funding sources must only be introduced alongside, not instead of, budgetary sources.

The Message outlined the following basic guidelines for reform in school and university education:

  • aiming the education policy at making education accessible to every child and adult;
  • sustaining the quality of education and giving more weight to its humanistic content, introducing a system of independent evaluation of the quality of acquired knowledge, and adopting education standards expanding the potentialities of school without restraining the teacher’s initiative;
  • enhancing the flexibility of the educational system and its responsiveness to change.

Some challenging problems typical of education today, however, were left out of the reform framework drawn in general outline in the Message. First, interbudgetary relations, above all a lack of effective mechanisms to ensure the targeting of federal funds transferred to the regions to meet educational needs. Second, the call to sustain the quality of education is hard to accept, because it proceeds from the assumption that Russian secondary and post-secondary education boasts high quality standards. This is a long way from the truth. The claim often voiced by education officials, particularly in the middle echelon that everything is fine in Russian education, except that there is not enough funds, only betrays their unwillingness to really raise the quality of education, rather than testifies to its really high quality. Third, no attention was given to an important issue related to the policies of municipal educational institutions. In particular, municipalities as local government agencies do not, under the existing Constitution, enjoy the status of state structures that only include two levels - federal and Federation members. This brings the guidelines into collision with the basic principles of the legislative framework of the educational system in the Russian Federation, within which the educational system has a predominantly public character.

On March 17, 1999, the State Duma passed a Federal law amending the previous Federal Law on the preservation of the status of public and municipal educational institutions and a moratorium on their privatization. The Law focuses on two important points: first, it puts a ban on privatization of educational institution for an unspecified time and, second, it expands the list of institutions exempt from privatization by adding infrastructure components of education to the list, such as experimental and shopfloor training facilities and other research, design and manufacturing enterprises, institutions and organizations conducting research and promoting the operation and development of education.

An important development that worsened conditions for non-public post-secondary educational institutions was the ruling made by the Federal Constitutional Court in October 1999, waiving military service deferral for students of non-public post-secondary educational institutions without state accreditation. Less than half of the 349 non-public post-secondary educational institutions having the required accreditation, a significant number of young people were faced with the prospect of being drafted right from the college>

On June 24, the Federal Government adopted a Federal Program for the Promotion of Education (FPPE) and sent it to the State Duma, which promptly passed the Program unanimously. Remarkably, the Program has a long prehistory. As early as 1992, the government invited tenders for an acceptable program. The winning project was canvassed at a cabinet meeting in April 1994 and sent to the State Duma to be enacted into law. The Parliament dragged out its passage for so long that a refreshed program was required in tune with the new times.

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