The Russian Health Care Reforms and Changes of Its Administrative Systems in the Era of Post Communism

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    After the collapse of communism, Russia has reformed health care, pensions and social assistance systems. While the reforms of pensions and social assistance systems were stagnated by the Soviet privileges’ resistance, the health care reforms were well proceeded without troubles. The health care reforms focused on the administration systems. The main changes are as follows; First is administrative decentralization. It was changed from the centralization system which central government controlled all aspects of health care system to the decentralization system that central government plans and guides health care system and the local health insurance funds manage the health insurances. Second is the mixed system of financing. The governmental financing system was substituted by the mixed financing system which governments (budgets), enterprises(pay-roll taxes) and citizens(cost sharing) contribute together. Third is the third-party payment system. The socialist system which government directly gave budgets to the public hospitals was transformed to the insurance system which the third-party insurer gathers the contributions of governments and enterprises, and pays medical treatment fees to hospitals. These changes mean the rigid state monopoly system was changed to the mixed system which government and civilians co-share the responsibility of health care system. Under liberal society, it was a inevitable transformation.


    러시아 보건의료개혁 , 건강보험개혁 , 혼합체제 , 러시아

  • Ⅰ. Introduction

    Since the dissolution of Soviet Union in 1991, the Russia carried out the welfare reform together with the economic reform shifted from the state-planned economy to market economy. The privatization which was the core idea led the economic reform also applied to the welfare reform. In this welfare reform, the reforms in healthcare, social assistance, and pension were the representative three reforms.1 Compared to the reforms in pension (2003) and social assistance (2004) led by Putin’s Government (the representative welfare reforms in 2000s), the reform of healthcare (1993) was led by Yeltsin’s Government (the representative welfare reform in 1990s).

    Contrary to reforms in pension and social assistance proceeded slowly, the healthcare reform promoted in rather early times without disturbances. Reforms in pension and social assistance encountered with strong resistance of vested interests of pension recipients and old Soviet privileged class had been delayed for quite a long period of time however, the healthcare reform proceeded well because it introduced the health insurance by sustaining the existed national medical institutions and officials (=medical service providers) and the fees for medical cares were ascribed to enterprises that evaded the discontent of public.

    The healthcare reform changed the existed healthcare administrative system completely. The biggest change was the replacement of conventional free healthcare system with health insurance system. The guaranteed free medical care system through national medical institutions was changed into the third party payment system of health insurance through health insurance fund and private health insurance companies. It was an unavoidable choice to reduce the healthcare budget of government (Manning and Tikhonova eds. 2009).

    Transition of state monopolistic healthcare system into the cooperative system of public institutions and private sectors would be a major change in the administrative system. Entry of foreign hospitals and foundation of private hospitals were allowed in the monopolistic system of healthcare provided by national public hospitals that eventually led the previous system into ‘public-private cooperation system’. This was a way intended the successful introduction of health insurance system and to improve the quality of healthcare service.

    The most obvious feature of healthcare reform in Russia would be the build-up of public-private mixed system. Private insurance companies were supposed to participate in health insurance funds to collect insurance expense and to pay charges of medical care together as an insurer (the 3rd party); and the private hospitals were allowed to provide the public with shared health care services of national and private hospitals.

    The ‘public-private mixed system’ implies the reduction of government’s role to provide healthcare services (national hospitals in the Soviet Union solely provided healthcare services with dedicated finances). The share of finances for health insurance (insurance expenses of employees and non-employees were supposed to be paid by private enterprises and government), the permission of foundation of private hospitals, and the participation of private insurance companies as an insurer in health insurance funds were all measures to reduce government’s role and to expand the role of private sectors instead (Chubarova, 2003: 3).

    In this paper, it was intended to examine the changes in administrative system along with the healthcare reform in Russia situated in the era of post communism. The consecutive changes from previous healthcare system of Soviet Union to the reform of healthcare system after the dissolution of Soviet Union will be described along with examinations on the background of introduction of health insurance system and related issues; and based on this further issues and corresponding alternatives will be presented.

    Ⅱ. Healthcare System in Russia

       1. Healthcare System in Soviet Union

    Public medical institutions were introduced as one alternative of the reform of liberalism under the reign of the Alexander II of Russia in 1864. Initially, it aimed the cure of diseases of the poor in country sides. Accordingly, clinics and hospitals employed medical doctors were founded. And local governments took corresponding financial burden to provide free healthcare services. In 1890, 16% of medical doctors in Russia worked in the local medical institutions. Along with the increase of the number of urban laborers on the track of industrialization, the health insurance similar to social insurance system introduced by Bismarck (1815~1898) was also introduced for the first time, and it covered about 20% of industrial laborers.

    The Soviet Government entered after the Russian Revolution in 1917 established the free national healthcare system to cure and to prevent diseases. The free healthcare system was one of major national functions in the Soviet country. The national responsibility, free healthcare service, importance of prevention of diseases, intensification of the specialty of medical care, scientific medical examinations and treatment, health promotion, and the continuation of treatment and rehabilitation were the principles of the single Soviet health care system wholly controlled and run by the government.

    In 1927, the social insurance fund was dismissed and the finances were absorbed into government budget. And all hospitals, pharmacies, and other medical institutions were nationalized. Then the nationalized medical institutions were situated under the direct administration of local healthcare bureaus. Required finances were appropriated from the central government budget and all healthcare human resources became public officials. Thus the complete national control system over public healthcare was established (Chubarova, 2003: 3). And in 1936, the People’s Commissariat of Health was founded to administrate overall issues on public healthcare.3 Special hospitals under direct management for certain occupations such as leading group of Communist Party, high class officials such as in Defense Department or Public Security Department, mine workers, workers in heavy industry, and laborers in railroads were also introduced (Grigorieva, 2012:3).

    In the meantime, doctors in the Soviet country were regarded as national workers. Governments of each republic composed the Soviet Union hired medical doctors and paid respective wages. Contrary to doctors in Western countries, they treated patients as members of respective community according to ‘Red Medicine’, and were obliged to maximize the labor efficiency of patients by promoting patients’ health. They thought that healthy people would make health nation as the invalid would make respective country invalid. Medical doctors placed in urban area prioritized the cares for factory workers constituted the backbone of Socialism compared to other patients in families, hospitals, or clinics. Level of compensation for medical doctors in Soviet countries were low. The level was equivalent to the level of teachers in elementary schools which was a little bit more than those of nurses. Compensations for medical doctors working in the primary, secondary and tertiary medical institutions were equivalent (Tragakes and Leggof, 2003: 167).

       2. Healthcare System in the Era of Post Communism

    Since the dissolution of Soviet Union in 1991, no significant changes have been made in quantitative and qualitative aspects of medical institutions. Above all, the extensive privatization in socio-economic fields have been accomplished since then except the medical institutions remained as public properties. The quantitative scale of Russian medical institutions and medical service providers is still quite significant. In 2010, there were 5,993 hospitals, 7,951 public health clinics, 2,330 ambulatory clinics, and 827 dental clinics from which numbers of sickbeds were relatively plentiful compared to current population. In 2008, number of medical doctors and nurses in Russia were 621,000 and about 1.3 million respectively. Average number of medical doctors was 42.8 per population of 10,000 people while it was 12.1 for the case of country sides.4 In spite of the significant gap of numbers of medical doctors between urban and rural area the average numbers of medical doctors, medical specialists, interns, dentists, nurses, and pharmacists per one people exceed those of EU. Levels of current medical services have been remaining almost the same since those realized in the era of Soviet Union. And the level of quality of medical service and compensation for doctors are still low. There are no established patients transfer system between local governments and no competition between each hospital. Payments for medical charges of patients resided outside of current region would be refused by local health insurance funds. And funds for the research in respective hospitals are rare (Davydov and Shepin, 2010:74-76).

    However, big changes have been made in the fields of financing and transfer of finances in healthcare system. In 1993, the mandatory health insurance was implemented, and in 1998, the free healthcare services to all the people was initiated (by government budget) and around 2005, the independent health insurance funds were established. With the introduction of health insurance system, the major source of finances for hospitals were moved from government budget to health insurance funds. Financial resources for hospitals consists of ① compensations for medical service providers, expenses for medicines, clothing and meals for patients paid by local health insurance funds and insurance companies ② investment expenses for hi-tech services (medical equipment etc.) and expenses for facilities maintenance and operation paid by local government, ③ fees for medical care paid by insurance companies, and ④ self-charged amount paid by each patient (World Bank, 2011: 20).

    Together with such changes, the entry of private hospitals would be one of significant changes. With the coming of 1990s, the foundation of private hospitals was allowed along with the private insurance companies. From the one dental clinic opened in Moscow for the first time, there are currently about 2,000~3,000 dental clinics in Moscow. Annual number of clients visited to private hospitals reached up to about 4 million. Besides dental clinics there are many ophthalmic and health examination clinics among private institutions. Private pharmaceutical companies have also appeared. Expenses for medicines have been excluded from insurance benefit thus the privatization of pharmaceutical companies have been advanced (Tragakes and Leggof, 2003: 41).

    In 1999, chain of foreign hospitals opened one hospital in Moscow. Rich people typically visit private hospitals charging expensive fees for medical cares. Costs for medical cares are normally calculated by ‘fee for service’ basis and paid directly by patients. In 2008, there were about 30,000 private hospitals but few of them participated in the mandatory health insurance. About half of the services of medical care provided by private hospitals would be covered by health insurance benefit. For the case of dental care, only the basic medical cares were supposed to be covered by health insurance benefit and elsewhere it would be the self-charged amount of patients. Due to this self-charged amount the profit-making hospital can secure the ground for its foundation (World Bank, 2011: 27).

    On the other hand, large-scaled enterprises or medium sized corporations make contracts with hospitals for respective employees or operate hospitals of their own under direct administration. The quality of free medical services from such hospitals are typically higher than those from national hospitals. About 30% of the whole population take medical services from such hospitals. Police officers, staffs of railroad administration or universities, and high class officials use dedicated hospitals free of charge. Doctors in Russia have been kept the status of public official since the dissolution of Soviet Union and most of them are working in the national/public (local) medical institutions (hospitals) (Teplova, 2007: 315).

    Types of the roles of medical institutions which have been maintained its basic framework since the dissolution of Soviet Union can be classified into following. The ‘hospital/public health clinic’ placed in countryside typically consists of 20~50 beds as a primary medical institution. Each one of pediatrician and surgeon in such institution would be mainly faced with outpatients. They can conduct comparatively simple surgical operations. The ‘district hospitals’ placed in each rayon of Russia would be secondary medical institutions typically consisted of 200~500 beds. One such hospital would usually cover the population of 40,000 ~ 150,000. It typically provides inpatients with medical cares and equipped with almost all kinds of clinics with corresponding specialists.

    The policlinics in each district5 would be placed in elementary local government and has all clinics and specialists dedicated for outpatients. The oblast hospitals are placed in each oblast (=the regional government). The hospitals typically cares patients transferred from hospitals or policlinics of each district. Such hospitals typically equipped with all kinds of clinics with high level specialists. They can conduct complex operations and teach medical students. Policlinics in oblast is a medical institution specialized for outpatients typically care for patients discharged from hospitals. Special hospitals or policlinics may be the medical institutions specialized for children or women equipped with groups of specialists in pediatrics and obstetrics and gynecology. They can also care patients suffered complex diseases and transferred from other medical institutions.

    Enterprise hospitals, governmental hospitals, and policlinics are secondary medical institutions attached to each enterprise or government ministry and/or offices. They are also specialized for outpatients with dedicated medical specialists. Few enterprise hospitals provide in-patient cares. They manage exclusive medical services for employees of enterprises or workers in government ministry and offices through finances funded by each enterprise. Some of them have quite high level of medical care service. With the implementation of health insurance system enterprises have to bear the dual burdens of health insurance payment and expenses for operations of hospitals under direct management. Some of them gave up the operation of hospital due to financial difficulties. The hospital directly managed by department of defense would the representative governmental hospital. The hospital is a secondary medical institution that provides all kinds of medical care services.

    The Federal Hospital and Federal Policlinic are tertiary medical institutions and most of them are placed in Moscow. They are big scaled and highly specialized. They can also conduct researches in medical sciences. The sanatoria wholly responsible for treatments and rehabilitation mainly cares for alcoholics, mental illness patients, and disabled persons. Proper exercises, massages, or acupunctures prescribed by dedicated medical doctors are provided.

    In the meantime, the remuneration reform in public sector of Russia was carried out in 2008.6

    It was an introduction of the elastic new remuneration system (NRS) emphasized the relationship between performance and compensation which had been employed in the business sector, and thereby extended to hospitals. By this reform, the principal medical doctor was endowed with the right to raise or lower the level of compensation of individual doctors in the extent of the whole amount of remuneration. Thus doctors and nurses manifested high performance or productivity can get more rewards (performance fee). However, effects of such incentive reinforcement in healthcare sector revealed by performances before and after the reform are still uncertain, and it has been estimated that it could be attributable to the resistance against the reform (Kolosnitsyna, 2012: 118).

    Yeltsin’s Government well recognized that the running of Soviet National Healthcare System in the society of post Communism would be impossible due to financial limit. Accordingly, issues of the reform of healthcare system was put on tables except the model of laissez-faire supposed the individual payment of medical care expenses.




    As an alternative, the British National Health Service (NHS) and German Social Insurance System were reviewed. The British NHS was a model of single payer (=nation) that would actually be identical with previous model of Soviet Union thus it was unable to accept it. Instead, the German Social Insurance model was surfaced as the most probable option.

    On the standpoint of government, there were no reason against the introduction of health insurance system in social insurance model which would be funded by the insurance premium from enterprises. Doctors dissatisfied with the low level of compensation agreed with the introduction of such health insurance system expecting the improvement in their rewards. Newly founded insurance companies also approved of this health insurance system with anticipations of new healthcare market to be created. There were also no public oppositions against the introduction of this health insurance system. For people who have experienced the free healthcare services from medical institutions under Soviet Union could not find reasons against this because they thought that they could use existing medical institutions without further financial burden. Anyway, the Yeltsin’s Government determined the introduction of mandatory health insurance (MHI) system.7 The ‘Mandatory Health Insurance Act’ was legislated in 1991 for the first time and it was amended(complemented) in 1993. Amendment of the ‘Health Insurance Act’ in February of 1993 stipulated the principle of mandatory insurance of all people(universalism) and provisions expressed the installation of federal and local health insurance fund. And in the partial amendment in June of 1993, the legal ground of the responsibility of local government for insurance expenses of non-workers such as the unemployed, children, and aged people was also stipulated. And further, the method to pay for medical care expenses from health insurance was stipulated in October of 1993. According to the stipulation, an option among various payment methods could be selected. For example, in cases of outpatient care, fees could be calculated on the basis of for person or for medical cares; and for cases of in-patient cares, fees for beds or for medical cares could be claimed(Chubarova,2003:4-5).

    Health Insurance Reform in 1993 was the core of the welfare reform in 1990s in Russia and thereafter it became the framework of the Russian Health Insurance. Details are as the following: First, the Federal and Local health Insurance Fund was introduced. The health Insurance Fund was an independent non-profit institution to be operated by a board of directors. Directors consisted of representatives from government, central bank, health insurance companies, doctor’s community, labor union, and health insurance fund (164 health insurance companies, 79 local funds, and 587 branches of health insurance fund in 1994). Second, the finance was supposed to be wholly appropriated by the funds from enterprises. The rate of insurance was set to be 3.6% of the whole wage amount. 3.4% of the amount would be paid to local health insurance fund and the rest of 0.2% was supposed to be paid to federal health insurance fund. The federal health insurance fund was entitled to use the fund to support local health insurance fund in need of the fulfillment of deficient finances (=the local redistribution function). Insurance premium for non-workers (the unemployed, students, children, and pensioners etc.) was supposed to be paid by local government (calculated as a certain portion per one people in local residence or as an average level of insurance premium per one employee). Third, the participation of private insurance companies was permitted. Fourth, the parties of the insurance contract with medical institutions were supposed to be each branch of health insurance fund and insurance company. And finally, charges for each medical care was supposed to be determined by an agreement between local health insurance fund, local healthcare administration, local government, and medical doctors’ association (Marquez, 2008: 2).

    The most outstanding feature of Russian healthcare reform would be an involvement of private insurance companies as an insurer of health insurance. The system both the health insurance fund (public institution) and private insurance companies coexist as insurers is called as ‘a private-public mix of health care provisions’ and such system was also introduced to other Eastern European countries following the case of Russia. And it also has a color of social insurance system but in respect of the payment of insurance to be wholly paid by enterprises, it is called as ‘a pseudo-Bismarckian model‘ (Tragakes and Leggof, 2003: 12).

    In the meantime, the Russian Federation elucidated that it would be a social state implementing policies to guarantee necessary conditions to realize free, valuable lives and self-improvement through the constitutional amendment in December of 1993 (provision 1 of Article 7 in the Constitution). In addition, the amendment also expressed clearly that the Russian Federation was also has the responsibilities to protect jobs and health of all people; to guarantee the minimum wage; to support family, maternity, children, disabled people, and the aged; and to establish the system of social welfare service, national pension, allowance, and other social security (provision 2 of Article 7). It also made clear that all the Russian people also have the right to have medical support and health protection; and the Federal & Local Government were obliged to set up the budget associated with public healthcare, insurance and other procedures together with the financial responsibility to run the healthcare program (Article 41). And this became the solid ground for health insurance that could provide all the people with free healthcare services.

       2. Current health Insurance System

    1) Insurers

    There are dual insurers running the health insurance system. One is the Health Insurance Fund (Public institution) and another is the Insurance Company (Private institution). The Health Insurance Fund collects insurance premiums from Enterprises (Employees) and from the State (non-workers), and pays expenses for medical cares to medical institutions. Private Insurance Companies receive allocated insurance fees from the Health Insurance Fund and pay expenses for medical cares to medical institutions. As illustrated in Figure 2, the Health Insurance Fund is an organization consists of Federal Health Insurance Fund-Regional Health Insurance Fund-Branches of Local Health Insurance Fund corresponding to the Russian Administrative structure composed of Central-Regional-Local governments.


    ] Systems of Russian Administration and Health Insurance Fund


    Besides, there was a reason introduced the dual payment of expenses for medical care from Health Insurance Fund Branches and Insurance Companies to medical institutions. In most area, expenses for medical cares are paid from regional/local health insurance fund → insurance companies → medical institutions while in major cities such as capital of states the regional/local health insurance fund pays such expenses to medical institutions directly.8 However, in some regions there are no insurance companies. In this case, the regional/local health insurance fund has to pay medical care expenses to medical institutions through its own branches. About the quarter of states have no insurance companies, and 16% of insurers are regional/local health insurance funds and the branches occupied the portion of 9%. Insurance companies and regional/local health insurance funds coexist in one fourth of states, and half of states holds only insurance companies(there also exist regions residing no insurers; the dead zone of health insurance).

    The flow of payment of medical care expenses is as follows. The health Insurance Fund collects insurance fees of employees from enterprises, and also collects insurance fees for non-workers (children, pensioners, the unemployed etc.) from regional/local government. The financial resource made from collected insurance fees then be allocated to branches and private insurance companies. As an insurer, the regional/local health insurance fund and insurance companies make contracts of medical care service with service providers (the medical institutions). Insurance companies can found hospitals under direct management (legally permitted). The regional/local health insurance funds paying the medical care expenses to medical institutions by collecting insurance fees from enterprises and government and the insurance companies also pay medical expenses using insurance fees received from respective health insurance funds have to make healthcare service contract with medical institutions that could provide patients with high quality medical services at low cost to realize incentives or profits.

    Since 1993, insurance companies have been made contracts of total amount of medical care expenses with health insurance fund and thus they collected the lump sum medical care expenses per each insurance policy holder. However, there occurred insufficient medical care services due to the operation aimed for the profit maximization. (Under the contract of total amount of medical care expenses, the profit would grow together with the reduced medical care services.) Consequently, the regional/local health insurance fund changed the way of payment and introduced the retrospective payment system to reimburse payments of each fee-for-service to be calculated after completion of each medical cares to protect the profit maximization operation of insurance companies. And to guarantee the sales profit of insurance companies, the difference between annual budget of insurance companies and annual expenditures to medical institutions was complemented by regional/local health insurance fund (The profit ratio was supposed to be controlled by the regional/local government). Contrarily, the Health Insurance Fund has been in the status of chronic deficit operation which would be the biggest pending issue (World Bank, 2011: 18-19).

    Insurers would monitor the quality of medical care and financial statuses, and would insist the importance of primary healthcare and prevention of diseases. In 2003, there were 300 insurance companies but the number of companies has been decreasing due to mergers & acquisitions and bankruptcies. The reform intended to see the efficiency of market however organizations became bureaucratized and wasteful. The Russian health insurance is called the competitive, market-based model in that it involved the private insurance companies as insurers of health insurance (Tragakes and Leggof, 2003: 40-41).

    Patients can select one of insurers (among private insurance companies and (branches of) the health insurance fund) and one of medical institutions. But actually the patients’ right to choose either insurer or medical institution would be nothing but nominal one due to the collusion between insurers and medical institutions (hospitals). Effectiveness of the patients’ right to select medical institution would also be doubtful. Doctors would find no reason to do their best to coming patients unless they could see or expect incentives otherwise patients would mean an extra burden to them (there are hospitals provide doctors with incentives and there are also hospitals operating without incentives) (World Bank, 2011: 13-15).

    2) Insurance Fees

    As mentioned before, the insurance fees for Russian mandatory health insurance fees are wholly paid by enterprises and would be accumulated to Federal Health Insurance Fund and Regional/Local Health Insurance Fund. In midst of 1993 when the reform of health insurance began, the insurance premium rate of mandatory health insurance was 3.6% of the wage. Enterprises would pay the lump-sum insurance fee aggregated the fees for health insurance, pension, childbirth insurance, and family allowance etc.).

    As an integrated financial resource for social insurance, the insurance fees for social insurance was reformed into the unified social tax (UST) in 2000. The unified social tax was a replacement of existed insurance fees born by enterprises and as a financial resource for pension, health insurance, and family allowance; and in the financial allocation of pension fund (22.9%) and health insurance fund (3.1%) from the UST (26% of total wage amount); it remain unchanged but the differentiated insurance premium rates were introduced by putting the two staged ceiling of wages (280,000 rubles and 600,000 rubles per year) to impose insurance fees (see Table 3).


    ] Unified Social Tax


    In January of 2010, the UST was replaced with the Social Security Contribution. 26% of insurance premium rate was remaining as before but the fund was divided into four funds to be operated independently such as the National Pension Fund (the public pension fund before the introduction of mandatory health insurance system), the Social Pension Fund (pensions for people lack of qualifying conditions to receive legal pension), the Federal Health Insurance Fund (the health insurance for employees), and the Regional/Local Health Insurance Fund (the health insurance for local people alienated from federal health insurance fund). And the one threshold of the upper limit of insurance fee was set (In 2010, it was 415,000 rubles/year). Incomes exceeded this limit were exempted from the imposition of insurance premium. And the government was supposed to determine and notify the limit every year based on the average wage increment.9 In 2011, the insurance premium rate for social insurance was increased abruptly from 26% to 34%.10 The insurance premium rate for health insurance was also increased from 3.1% to 5.1%. And the effect of this increase was calculated as an increase of 15 billion USD/year in financial revenue. The government appropriated the increased amount of budget to improve the quality of healthcare service and health care delivery system. Through this appropriation, the government expected the increases in delivery rate, average life, and the reduced death rate (World Bank, 2011:41).

    In 2012, the limit imposed on the insurance premium was cancelled temporarily for 2 years (2012~2013) and the rate of insurance premium was increased to 40%. That was an application of the 30% of insurance premium rate to wages below the upper limit, and for portions exceeded this limit, additional 10% of tax (=insurance premium rate) was applied (The increased revenue was added to the pension fund. The additional 10% rate was supposed to be abolished in 2014 thus from this abolition in 2014, the insurance premium rate would be reduced to previous level of 34%). All such measures were employed to reinforce the financial soundness for social security.

    3) Payment for Medical Care Expenses

    Traditionally, the Russian clinical charge has been prepared and paid by government based on the line item budget calculated by summing each cost (labor, medicine, overheads etc.) proportional to the number of sickbeds. Policlinics took the charge of regional outpatients’ care were paid according to the number of outpatients. Total amount of clinical charges of medical institutions has been gradually increased by the government considered the inflation and economic growth rate. As medical institutions in Soviet Union have been paid respective clinical charges from the government there have also been no rooms in there for incentives to provide quality service or to reduce costs (budgets).

    But the introduction of health insurance also introduced the rooms for incentives to reduce expenditures. That is, medical institutions provided medical services and contracted with insurers found that they could find respective incentives by providing quality service with reduced costs (market economy). Efforts to reduce hospitalization period of patients or for efficient diagnoses/examinations became unavoidable in the environment of mutual competitions between medical institutions. Through competitions like this, the costs for quality service could be reduced.

    Besides, new methods to evaluate clinical charges in medical institutions became necessary along with the introduction of third party (= health insurance companies) payment of medical care expenses in the health insurance system. The government prepared the system to make contracts for the ‘basic package of care’ between the Health Department of Federal Government and Medical Institution(s) in September of 1998. This was the ‘guaranteed package programme’. It stipulated the forms and scopes of clinical services to be provided to the public which was supposed to be determined and revised annually by considering available resources i.e. the budgets and financial capacities for health insurance funds of federal and regional/local governments. The type of DRG (diagnostic related group) (considered the cared periods per diseases + clinical cares & examination packages, clinical criteria etc.) occupies the majority in the current system of payment for clinical charges11.

    However, the reimbursement of payment for medical care expenses by third parties would have been the source of problems for the system. That is, since medical institutions claim clinical charges to health insurance companies after completing clinical cares thus they have no reason to reduce medical expenses. This reimbursement of payment for clinical charges also cause problems to health insurance companies. Health insurance companies pay the clinical charges of each patient and then they claim the paid clinical charges to the health insurance funds and then be reimbursed. Accordingly, health insurance companies have no way to restrict the number of patients. Thus possibilities of deficit operation always exist around them. Consequently, health insurance companies tend to find respective revenues from commissions on each claim of clinical charges rather than from the reduction of costs. Health insurance companies also do not have rooms for incentives to ask medical institutions to reduce the number of clinical cares or to reduce the expenditures (for unnecessary(?) clinical cares). Actually, current health insurance companies now became rather the simple intermediary of payment of clinical charges than private companies searching for profits.

       3. Issues of Health Insurance

    Effects of Russian healthcare reform is not positive. Despite the operation of public healthcare system providing the people with free healthcare services through national medical institution, the level of health of people remains unimproved. For instance, the average life expectancy was decreased from 69.6 years (1989) to 68.7 years (2009) (male 62.8 years, female 74.7 years; average EU 80.4 years) (Popovich et al. 2011: 10). The main reason would be attributable to the high death rate of workers. The death rate have increased from 1,160 (1989) to 1,402 (2006) per 100,000 population (40% increase after 1990). The average death rate of Russia would be 1.5 times higher than that of countries in EU. Also the number of carriers of AIDS virus was increased rapidly from 272 (1989) to 39,207 (2006); and the structure of population is also unstable. The population since 1992 has been decreased contrarily. Total population in 2009 was 141,903,979 that has been remaining almost the same with those in early 1980s and it was still 141,927,000 in 2010 (Davydov and Shepin, 2010: 76). After all, the healthcare reform introduced the health insurance system seems failed.

    It would also be difficult to accept the reform of Russian health insurance positively. Current Russian health insurance system has serious problems. They are, first, the chronic deficit operation of health insurance funds12. There are still enterprises or local governments which cannot pay necessary insurance fees due to respective economic incapability. And the amount of payments to medical institutions alway s exceeds the amount of received insurance fees. Nevertheless, the Health Insurance Funds have no measures as an insurer to control financial issues of medical institutions and insurance companies. And in addition, the preservation of loss of insurance companies by local health insurance funds to guarantee a certain level of sales profit also seriously affects the finance of health insurance funds.

    Second, the supervision on health insurance system should be carried out properly. Along with the rapid decentralization the link of supervision-cooperation between Health Department of Federal and Regional (oblast) Governments has been lost. Because the regional health insurance funds took independent charges of the roles since the introduction of Health Insurance. The authority of Federal Government to regulate or supervise the relationship between healthcare service providers (medical institutions) and payers (insurers) is not effective. And the supervision upon payments to medical institutions also is quite loose. These may aggravate the distrust of the public (Tragakes and Leggof, 2003: 18-20).

    Third, the finance of health insurance funds are being threatened due to wastes of medical resources. Medical institutions occupied the most part of state owned hospitals have been run inefficiently. Hospitals would not make efforts to improve qualities of medical cares or to reduce expenditures because they cannot see or find any incentives. This might be the very negative legacy from the Soviet Union but there seems no entities trying to improve efficiencies of medical institutions. Insurance companies, health insurance funds, and even governments are indifferent to them. They also cannot see or expect incentives from such efforts.

    Fourth, it would be difficult for insurance companies to control the extent or amount of clinical charges due to the reimbursement of payment for such charges. Medical institutions claiming medical care expenses after completing clinical cares do not have any incentives to reduce expenditures in respective clinical cares. Insurance companies also have problems. They pay clinical charges to medical institutions and then receive reimbursements of such payments from the health insurance funds. Therefore, they do not have measures to control the number of patients (Marquez, 2009: 17).

    Ⅳ. Conclusions

    The Russian reform of healthcare system and health insurance proceeded in the era of post Communism have been reviewed.

    In the course of the reformation above, significant changes appeared in the healthcare administration system and they can be summarized as the following.

    First, it was the decentralization of administration. The centralized system where the central government (Department of Health) took exclusive charges of the whole (planning, supervision, and/or financing etc.) became decentralized by the ‘Ministry of Health and Social Development (MoHSD)’ responsible for planning and supervision of healthcare system and the regional Health Insurance Funds took charges of operation of health insurance system.

    Second, the mixed system of financing for healthcare system was introduced. The sole financial system where the government took the whole charge of the financing of all public hospitals became the mixed financing system consisted of government (budget appropriation), enterprises (insurance fees), and the public (self-payment of clinical charges).

    Third, the third-party payment system was also introduced. The previous method of Socialism where patients would took free medical care services from public hospitals operated by budgets appropriated by the government changed into the third-party payment system of health insurance where the insurers would pay medical institutions for clinical charges after collecting corresponding expenses from enterprises and governments.


    ] The Reform of Healthcare System and Changes in Administrative System


    In short, the changes in Russian healthcare administrative system after dissolution of Soviet Union can be viewed from above three aspects and these were actually the shift from rigid state monopolistic system to mixed system supported by government and private sectors.

    It would be an unavoidable choice on the path from state-planned economy to market economy.

    That is, the shift from the system wholly controlled by the state to sharing of functions for administration, supervision, and financing with central government, regional government, and private sector in the system of capitalism consisted of market and civil society would be regarded as a natural consequence.

    Meanwhile, the Russian government promoted the reform in the field of healthcare continuously after the introduction of health insurance system.

    In 2006, the Putin’s Government announced the ‘National Priority Project “Health Care”’. This was a project to expand the healthcare finances and to improve the infrastructure.

    The project mainly consisted of the improvement of medical equipment in medical institutions and ambulance service, the expansion of public health clinics, the implementation of national vaccine distribution system, the free health examination, and the improvement of labor conditions for healthcare service providers working in the primary medical institutions (salary raise for doctors13 and expanded educational training).

    The federal and regional governments shared the required budget together (Tompson, 2007: 22).

    In 2007, demonstration projects in 19 regions were carried out to improve the qualitative level of healthcare service, that is, to improve the financial mechanism and structure of healthcare service.

    The projects were as follows.

    First, it was the transition to single-payer financing. The finances for healthcare were unified into mandatory health insurance fund.

    Second, the clinical charges for in-patient cares were paid according to healthcare-economic criteria and performances (assessments) of medical institutions.

    Third, the wage system based on performances of healthcare service providers was introduced.

    Fourth, the system to monitor the quantity and quality of healthcare service was established (World Bank, 2011: 39-40). So much, the Russian government tried to improve the healthcare service system.

    However, reactions upon such efforts seemed unfavorable. Because, the consequences expressed by representative indices of population, average life, and death rate etc. were comparatively unimproved compared to the outstanding economic growth (During 1999 ~ 2008, the Russian economy marked over 5% annual growth).

    Lewandowski (2011: 4-5) attributed the reason of this dissatisfactory consequences to the systematic inefficiency and methods employed for the reform.

    According to his view, the results of reform was dissatisfactory because the objective of reform was too conventional and depended upon political needs despite continuous efforts in the fields of healthcare service.

    In other words, the reform put targets on infrastructure and resources which would comparatively be easy to accomplish, and did not presented the causes of problems and results of reform; and intentionally avoided the objective comparison of the results with those of Western Europe to escape from political criticism.

    And the biggest problem of Russian healthcare system would be the inefficiency.

    Number of beds and medical doctors in Russia would be as well as those in European countries but the poor performance in healthcare service might be attributable to the inefficient healthcare service system requiring proper supervisions and even distribution of medical resources.14

    After all, such criticism points out the necessity of systematic reform of current healthcare service system. And the answer could be found by introducing or intensifying the competitive system which would be the most advantageous driver of market economy.

    Despite the series of reforms including the inducement toward competition, there are few competitions in current healthcare service system.

    It would be difficult to expect to see efforts of doctors, hospitals, or insurance companies to improve quality services or to achieve efficient/effective institutional operations under current situation of non-competition among hospitals, doctors, and companies.

    Since the healthcare has been one of the representative public goods thus entrusting to complete competition of market might be unfavorable, but neglecting this as it has been under current bureaucratic and retrospective operation would also impede the right of health of the public and waste healthcare resources.

    Endowing medical institutions with further discretion could be potentially prospective alternative.

    The case the England endowed the administration of public hospitals with professional managers through NHS reform and improved the efficiency of the operation of hospitals would be the good example one may profit by.

    The argument pointed out the incentives given to healthcare service providers that could improve the quality of healthcare service would be quite correct (World Bank, 2008b: 11).

    Finally, the significantly low portion of healthcare expenditure in Russia should also be pointed out. In 2000s, the expenditure has increased somehow. (It has been increased from 2.2% of the whole governmental expenditure in 1989 to 5.2% in 2005)

    But it still stays on the lower level compared to 8.9% of average European countries (WHO, 2009). As long as the government spares expenditures for healthcare the improvement of public health and healthcare system to be expressed by health related indices would remain far away over.

    However, according to the outlook from the World Bank, it was estimated that the budget for healthcare service could be increased from 4.5% of GDP in 2010 to 5.5% (2010) and to 6% (2020) (World Bank, 2008b: 9).

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    • [<Table 1>] 
    • [<Table 2>] Systems of Russian Administration and Health Insurance Fund
      Systems of Russian Administration and Health Insurance Fund
    • [Figure 1] The Administrative and Financial System for Health Insurance
      The Administrative and Financial System for Health Insurance
    • [<Table 3>] Unified Social Tax
      Unified Social Tax
    • [< Table 4>] Insurance Premium Rate for Social Insurance
      Insurance Premium Rate for Social Insurance
    • [<Table 5>] The Reform of Healthcare System and Changes in Administrative System
      The Reform of Healthcare System and Changes in Administrative System