The Perilous Road From Centralism to Federalism

1. The Perilous Road From Centralism to Federalism The Case of the Russian Health Care System by Dov Chernichovsky -- HNP

2. The Challenge Transition from a highly centralized and failed system (at the end), to a decentralized functional federal system

3. The Risk Atomization and fragmentation of the health system with potentially worst consequences than the centralized system

4. The Basic Issue (Especially in Health Care) Not the state’s involvement in the system, but the nature of this involvement

5. The General Context • Goals of the Health System: • Health • Equity • Macro-economic efficiency – contain ‘uncontrolled’ rising cost of care • Micro-economic efficiency – efficiency in the production of quality care • Client satisfaction, mainly through accountability • Systemic Functions --subject to devolution and decentralization: • Policymaking • Financing • Organization and Management of Care Consumptions • Provision of Care • Training and medical education • Research and development Chernichovsky, D. -- Draft -- Nov. 2003

6. The Soviet Record • Health • Eradication of communicable diseases • Missing the ‘epidemiological transition’ to non-communicable diseases that eventually led to inferior health outcomes • Equity • Fairly equitable system with relatively wide access to care • Efficiency • In spite of low levels of spending, inefficient especially when quality of care is considered • Client satisfaction • Dismal, not a concern Chernichovsky, D. -- Draft -- Nov. 2003

7. The Soviet Failure - Ineffective Government (a’la Weaver and Rockman 1993) • Not setting and maintaining the right priorities over time • Ineffective targeting of resources • Not promoting innovation (Of course, to a substantial extent by not eliminating market forces) Chernichovsky, D. -- Draft -- Nov. 2003

8. Structural Antecedents of Soviet Failure - Centralism • Amalgamation of responsibilities under the Federal Ministry of Health: Medical care; Medical industry, including pharmaceutical; and Training • Issues: • limited span of control • Priority give to industry, not to care • Medical training a vocation rather than a science • Vertical Integration of all systemic functions • Issues: • No checks and balances • No scope for internal or any market mechanisms for efficiency and responsiveness to clients Chernichovsky, D. -- Draft -- Nov. 2003

9. The Antecedent of Soviet Failure – Centralism (Contin.) • Rigid top-down allocation of resources and management • Issues: • A lack of analysis of local information for policy making • No attention to local concerns and aspirations • Depression of local initiatives • Accountability ‘upward’ to authorities rather than ‘downward’ to clients and patients • ‘Political vacuum’ at the top – detachment from realities Chernichovsky, D. -- Draft -- Nov. 2003

10. The Risky and Unstructured Transition – Major Steps (since 1991-2) • Separation of health promotion and education from Federal MOH (1991), while • Medical Care responsibilities, including financing, delegated to local government • 1991 (aborted) legislation tries to base financing on private insurance • 1993 legislation establishes a social health insurance system with a federal and state pools Chernichovsky, D. -- Draft -- Nov. 2003

11. Structure of System in 1996;Dysfunctional Blend of Old and New Chernichovsky, D. -- Draft -- Nov. 2003

12. Intended Structure Chernichovsky, D. -- Draft -- Nov. 2003

13. Consequences • Weakening policy making - leadership • Federal MOH stripped of practical powers • Local ministries lack policy making capacity • Undesirable decentralization of finance, with weak equalization mechanisms • Failed devolution and decentralization of care provision –highly centralized local systems with little policymaking and management capacity, and limited accountability to anybody • Failed development of internal markets • Lopsided reform – decentralization of finance and a lack of decentralization of provision Chernichovsky, D. -- Draft -- Nov. 2003

14. One Outcome: Worsening Regional Distribution of Health Resources Figure 1 Lorentz Curves of for Regional Health Exepnditure and Product per Capita Legend: a - simulated 'need-based' local health expenditures, 1992; b - local health expenditures, 1990; c - local health expenditures, 1992; d - GDP estimate, 1992. Chernichovsky, D. -- Draft -- Nov. 2003

15. Reasons • A lack of leadership and resolve – weak Federal MOH • Strategy of change not clear to, and ‘owned’ by, at least local authorities • Resistance of those authorities to relinquish control over medical facilities • No real plan for ‘denationalization’ of these facilities Chernichovsky, D. -- Draft -- Nov. 2003

16. Risks • Growing regional inequalities • Undermining universal access to care • No mechanisms for system stabilization and long term reform through innovation • Growing inefficiencies due to weak mechanisms to deal with externalities and economies of scale Chernichovsky, D. -- Draft -- Nov. 2003

17. Conclusion: Tasks to Complete • Clarify the concept of ‘functional federalism’ • Re-define the roles of different levels of government and institutions, mainly government as a non-provider of care • Build policy making, regulatory, and management of mainly local government • Devolve the provision of care to non-state institutions • Provide financial and regulatory measures for a federal system Chernichovsky, D. -- Draft -- Nov. 2003