AGENDA

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Reforms in the Health System in Low-Middle Income Countries

August, 2013

a practical experience in Georgia

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Agenda

Background -

The Semashko model - achievements and collapse

Post Soviet era situation

Handling the crisis - The Georgian experience

From state to private service

Four reforms in 10 years

Challenges

Final remarks

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Background - Who contributed to the Soviet Union collapse?

Perestroika & Glasnost

Strategic Defense Initiative (Star Wars)

Clark Kent

Nikolai Aleksandrovich Semashko  (9/1874 – 5/1949)

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The Semashko Model

Very significant achievements

life expectancy (both sexes)

• The USSR made massive strides in reducing the spread of infectious diseases

• Drastic reduction in epidemic diseases, particularly in the cases of TB, typhoid fever, typhus, malaria and cholera

• Main characteristics of the system:– Full government responsibility for health, highly centralized control and policy

making (Moscow)– All health care personnel became employees of the centralized state, which

paid salaries and provided supplies to all medical institutions– The main policy orientation throughout this period was to increase numbers

of hospital beds and medical personnel

32

43

59

47

63

47

01020304050607080

1900 1938

Russia

France

USA

64.373.4 74.7

66.873.7

67.3

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Men Women

Russia

France

USA

Life expectancy in 1965

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The collapse and post Soviet era situation

The Semashko model became unsustainable: Economically Efficiency wise Quality of service:

Equipment , technology and know how Corruption

Lack of responsiveness and adaptability to local needs

Common characteristics (from Sofia to Almaty) Underfunded Over dimensioned Corrupted Inefficient

The status of the Semashko model at the end of the soviet era:

Falling apart

Georgia

• Georgia is one of the poorest countries of the former Soviet Union region

• According to official statistics, approx. 30% of the population lives below the poverty line, civil-society groups estimate that half of the population is living below it

• People living in rural areas, where unemployment was traditionally very high, were much more likely to be poor and had little or no access to basic services such as health care

• In theory, health care in Georgia was free, in reality almost all patients had to pay to receive care

Georgia

• Since gaining independence in 1991, Georgia suffered a rapid and dramatic decline including a catastrophic drop in public health expenditures

• During this time, the Georgian government was weak and ineffective, corruption was endemic

• Following the Rose revolution (2003) the government made progress in revitalizing the economy and fighting corruption

• Public spending on health care remained inadequate (approx 20% of health total expenditure compared to 75% in developed countries)

• Inadequate state financing of the health sector means: Approx 80% of health financing are private expenditures (out-of-

pocket payments) compared to 20%-30% (WHO) European region Only 6 per cent of general government expenditure goes to health,

compared to 14.7 per cent within the (WHO) European region

Georgia

The first reform (From 2004 to 2006)

PHC Master Plan I (funded by the World Bank, the EU and the UK)

Aimed to provide universal access to quality basic medical care through a

publicly owned and managed system

No one would be more than 15 minutes away from a PHC centre

Included plans to re-train medical staff delivering PHC, and rehabilitate facilities

The second reform (2007-2008) - privatization in the health sector

Bringing health policy in line with the broader national economic policy to

promote greater private-sector involvement

The main reason: “Government does not have sufficient funds and capabilities

to operate the public system well”

Dramatic policy change

Abandoning the universal care ideal

Private insurance companies to provide a limited cover to PUPL’s

Insurance premiums to be paid by the government

Georgia

The Third Reform (2009 - 2012) Responsibility of provision of care and building of new health facilities was shifted to the shoulders of private insurance companies Introduction of new social plans

Results• The state health programme increased poor people’s access to health care and reduced inequality in access to care between rural and urban areas, and among different social groups

• Expectations were that privatization of public services (including health care) and adoption of a free market model will miraculously solve existing problems “for free”, including inefficiencies, access, availability, equitable distribution, as well as quality, financial mismanagement and corruption issues

• However, it’s not only money… • The biggest item of expenditure for households is drugs• Pharmaceutical expenditure as a percentage of health expenditure is 60%• Surprisingly… the drug market is Oligopolistic

Video

Georgia

In Georgia insurance market means health insurance 80% of net earned premiums are health insurance premiums (200 M US$

in 2012) Limited (and reducing) number of insurance players Premiums and conditions dictated by the government (165 & 218 decrees

and public employees)

Our participation in the Georgian market Social programs Corporate segment Health provision and building of new hospitals

New administration, fourth reform? (2013) Back to state provided universal cover? Budget issues Operational capabilities issues

A word about Archimedes Health Developments

In Georgia: Started from zero, experienced enormous growth Ever changing environment Cooperation with authorities – critical Biggest challenge: lack of visibility

In Kazakhstan Started from Zero, third largest player Growing organically and waiting for a health reform

Main investors in AHDL:

Georgia

Final remarks

Private sector played a significant role in improving the availability and equitability of health care for the poor in Georgia

Private sector mobilized funds and management capabilities not available at the governmental level

Transparency, uniformity and access to care improved

However, miracles don’t abound… Underfunding Lack of visibility and a clear direction Market failures

Are representing a significant threats to the progress achieved

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Thank You !!!

Yaron@archimedes-insurance.com