Medical treatment prices increase, while population’s health aggravates
A. Laliashvili
NEW WAY OF PAYING FOR MEDICAL TREATMENT
Population spends sizeable sums on health care services in Georgia. At present time, private formal and informal payments in Georgia amount 80% of expenses made on health care. It might happen so that family becomes insolvent due to health care expenses. Of course, this might happen in case if the family generally possesses such funds. Under the conditions of increasing prices of medicines and medical services, quite often patient simply cannot afford full medical service. What one might do in this case? What is government doing in order to make medical service affordable for the citizens in need?
Main directions of health care reform
Reforms are being carried out in health care and social protection fields since 1995. The main goal of the reform was arrangement of institutional and financial systems. Market economy set an urgent task of replacing old soviet health care system with more effective one. It is noteworthy that the period after the collapse of Soviet Union was characterized by social cataclysms in Georgia. Naturally, this had its affect on the quality and volume of medical services together with demand on it. Government spending per capita in 1992-1996 years was one USD a year. Under the conditions of worse off populations’ social and economic situation, part of the citizens found it more and more difficult to apply for medical services, both due to price increase and reduction of their incomes.
Even today, major part of the population is in hard financial situation and only few can afford high quality medical services. While for considerable part of the society, even cheap medical service has become a luxury.
Government worked out special arrangements in order to solve the problems of this category of the population. The arrangements are aimed to affordability of health care for the most unsecured, deprived part of the population and improvement of quality of medical services. Important part of reforms in health care system is regarded as replacement of present state health care programs with insurance products that implies purchasing of insurance product instead of directly buying medical services. Specifically, “State program of medical aid for the population living beyond the margin of poverty” has become operative. State has also actively started to purchase insurance for the people employed in governmental institutions (Teachers, security, defense and law enforcement agencies), new so-called “Cheap insurance” program is also active.
Medical aid program for the population living
beyond the margin of poverty
Government adopted a resolution in 2005, on “reduction of poverty level in the country and measures to improve social protection of the population”. Main goal of the resolution, together with reduction of poverty level, is effective and task-oriented arrangement of social aids. Reduction/overcoming of poverty and social protection of the population are one of the priorities of the document on main data and directions of Georgian government in 2007-2010. This goal was presented in the strategy for economic development and overcoming of poverty developed by International Monetary Fund in 2005, in National Anti-Corruption Strategy and Millennium Development Goals, in Europe’s neighboring policy action plan etc. However, the research on monitoring of health care, conducted by foundation “Open Society Georgia” is stated – “Despite the aid granted to Georgia for overcoming poverty, problem is sharp and quite often the steps made to overcome poverty are ineffective”. At the initial stage of reforms in 2007, state budget assignations for the health care and social security were in the first place with GEL 999.718 million (Before amendments in the budget project), and on a second place in 2006Y budget with GEL 775 million. Despite the fact that health care and social security is the second most financed sector after defense, the funds assigned to healthcare and social security are not enough though and at the same time, available resources are spent ineffectively. State is financing several programs in health care, educational and other sectors. One of the major state financed programs is “Medical aid program for the population living beyond the margin of poverty.
Experts of Open Society Georgia are giving following recommendations on this issue – “Unfortunately, most of the state programs were planned without preliminary economic analysis and estimations. Decision on some state program planning or execution quite often depends on political will instead of being oriented on some specific economic effect. Consequently, such programs or one-time actions do not yield desired results. Most part of the decisions are made centrally, on the basis of political processes and will, while the actual needs, analysis of effectiveness, and long-term results are not taken into account, (for instance reduction of poverty level). At the same time, public spending quite often, do not correspond to the system of average-term planning of expenses. It is important to coincide health care system financing and policy with the long-term strategy of country’s economic development.”
It is noted in the study that adoption of private insurance scheme was done without relevant preparations. First, insurance companies themselves were not ready for this. By the government’s initiative from September 2007, in the capacity of experiment, state purchased health insurance policies from private insurance companies for the beneficiaries registered in Imereti region and Tbilisi. Employees of Health and Social Program Agency were providing the distribution of vouchers. Agency employees were strictly forbidden to recommend some insurance company to the beneficiaries. On the other hand, insurance agents were forbidden to enter outpatient departments or schools.
Insurance companies took an advantage of low level of awareness of the population, especially in Imereti region and started so-called “trading” with vouchers. Agents of insurance companies were gathering beneficiaries in the villages and taking them by bus to regional centers for receiving vouchers. Insurance companies were offering financial remuneration and foodstuffs in exchange for received vouchers. As a result, 90% of already “insured” beneficiaries had no information about “chosen” insurance company’s basic insurance package or about contractor medical institution.
Despite the fact that implementation and development of insurance system in Georgia is the matter of special importance, current situation made it clear that adoption of private insurance system based on such principles was rather ill-timed. First of all, insurance companies were not ready for this process. One should take into consideration the circumstance that beneficiaries belonged to socially unsecured part of the society and they were unaware of own rights and frequently find it difficult to choose.
“Cheap Insurance Program”
Since 1 March 2009, cheap insurance program was started in Georgia. Ten insurance companies were involved in the project. State assigned GEL 11 750 000 for the program this year. Cost of basic policy is GEL 60 or GEL 5 a month. The sum to be remunerated by insurance companies amounts GEL 8000. Physical bodies pay Gel 19.80 from overall cost of policy, while government assigned GEL 40.20 from the budget. Initially it was planned to involve 500 thousand people in Cheap Insurance program. After four months from the start of the program, only 40 thousand people respond to the initiative. There were many talks about the failure of government’s initiative. Once again, one of the main reasons of this failure is low awareness level of the population.
At the initial stage of the program, only government arranged an information campaign. Conducted campaign had low accessibility level among the population and it was perceived to be used for political aims. Political debates around the program and absence of relevant economic studies and analysis made it unable to evaluate the program rationally.
Uninsured people are problematic in every country. It is especially difficult to involve self-employed people in insurance system. The number of uninsured people is very high in Georgia. Many experts reckon that aim of Cheap Program was to reach self-employed people and by means of financial stimulus, where government would cover one third of insurance and thus simplify people’s involvement in the program.
It is fact that there is low culture of insurance in Georgia and these relations are not developed well. Georgia is a country with very low incomes that means it is hard to talk about providing full medical service to the citizens without proper functioning of insurance system. These issues were discussed at the round table held by organization “Partnership for Social Initiatives” on 1 July. The discussion was dedicated to health care financing and insurance subjects.
Health care financing and insurance
The president of the Association of Actuaries and Financial Analysts Mr. Aleksandre Omanadze addressed the meeting. The data that the speaker presented to the audience is quite interesting. Hereinafter are given diagrams which show public spending on health care by their financial sources (Diagram No 1) and health care public spending financial agencies (Diagram No 2) in 2006. In other words, since the period when actual changes were made in the financing of health care system.
It can be seen from the diagrams that the main characteristic of health care financing in Georgia is major part of payments from pocket.
Moreover, another important thesis that I want to offer you – said Mr. Aleksandre Omanadze – is 72% that are expenses of the population. Actually, this is ineffective spending of money. It is hard to imagine a person, especially sick one as a qualified buyer at health care market. It is very difficult for such a person to be full-fledged opponent to the seller. In fact, better results can be derived if one spends this money more efficiently.
State’s share in health care financing is minor. Georgia is a country with low incomes, therefore at an initial stage of the reform, one question was aroused – what policy should take the state? To distribute funds among all the classes of the society, just spread thin layer of butter on every bread, or to select target groups and direct scarce state funds in that direction?
The choice was made in favor of target groups in 2006: socially unsecured population and elderly age people. As a result, one-third of Georgian population is enjoying state financing. The rest part of the population cannot receive benefits. After the decision is made that funds assigned for healthcare should be spent on target groups, another matter is put – how to deliver this sum to the population. Three variants can be listed: 1. State produces final product, or medical service that will be delivered to the target groups; 2. State buys medical services; 3. State buys protection from financial risks or actually an insurance.
The last model has been chosen. In fact, this means that state becomes a payer party, person is an insurance contract party. This implies even more deregulation of the field that is already regulated very weakly. It might be noted that this is encouraging private relations. This is important, if considering that we have 400 thousand people in the poverty base. Their involvement in these processes means that in the future these relations will become deeper and stable. Various state programs encourage development of insurance relations and culture. As a result, we have a picture of constantly increasing number of insured people.
Head of insurance organization Mr. Devi Khichinashvili spoke about this matter.
– “Unfortunately we do not have numbers reflecting result of the reforms carried out within last two years and their influence on the standard of living. We will have some numbers this year and this is very important. The main problem is that most part of the population does not understand importance of the reform. We might do some technical regulations, but people who are beneficiaries know nothing about this and cannot see their place in whole story. Naturally, this considerably suppresses the stability of a reform. The situation is very unstable. The main reason of this is that there is a black PR of a reform and society has wrong perception of a picture, cause-effect connections, and of the problems that this reform is facing. However, it should be noted that number of people insured with non-governmental programs has increased by 160 000 in a year and a half and I assure you that despite economic crisis at the end of 2009, this number will be increased even more”. To evaluate results of the reform, the effect that is actually achieved is that the funds spent by the government are now spent by means of insurance mechanisms.
However, it might be said that one of main goals of the reform is still to be achieved – availability of insurance for the people working in informal, or even in formal sector.
Medical Insurance Mediation Service
Above, we have already mentioned lack of information within the population about insurance procedures and rules. However, some steps are made in this direction in the country. Medical insurance mediation service is operating in Georgia already a year. Organization structurally belongs to Insurance Association of Georgia. About the functions and reasons of establishing such organization is speaking the head of the mentioned organization Mr. Archil Tsertsvadze.
G.E. – How the idea of founding such service appeared and what are the goals of the organization?
A. T. – As you know, the process of insurance is started intensively in Georgia during the recent period. Up to 2007, medical insurance was only voluntary in Georgia. People become insured themselves. Corporative segment of insurance was mainly developed. In 2007, state started insurance of the population beyond the poverty margin, first in Tbilisi and Imereti region. This was a pilot program. The process was spread in whole Georgia in 2008-2009 and as a result, quite a number of Georgian citizens became insured. Afterwards, public school teachers and technical personnel were insured either. This is quite a big contingent. Imagine that suddenly big number of insured people appeared. State was paying premium to insurer instead of the population. Together with large contingent of insured people, some resources became available also. Cheap Insurance program was started recently. The program is for the people of 3-60 ages. Before the age of 3 and after 60 state insurance programs are operating.
Therefore, today we have quite a big number of insured people who are being involved in insurance schemes for the first time. They have never had relations with private insurance companies and quite frequently, they experience lack of information concerning procedures and rules of insurance companies. This might be resulted in some confusion. Naturally, due to all the above-mentioned necessity to establish some circle that would discuss and solve the problems between insurers and insured. Our service has taken the role as a result. We try to solve disputes between insurance company and insured people before the suit will be filed in the court. Court is connected with some expenses. Even though incapable person is freed of court taxes, but there are advocation expenses also. Moreover, the term of cognizance and procedures is quite lengthy. However, in case of medical insurance it is necessary to take a decision immediately. Therefore, main function of the service is to solve disputes by non-judicial way. We try to keep people informed and ensure their awareness by means of various sources.
G.E – Is your service free of charge?
A.T. – We offer our services free. People do not have to pay anything. Invitation of additional experts is free either, in case if medical need is to be determined. We are offering medical and juridical consultation also. We offer the services cost free as our donor organization USAID is financing us.
G.E. – What kind of disputes is your organization dealing with?
A.T. – There are three categories of disputes. First, this is when people are applying for information. They are asking for explanation of the rules of relating with some insurance companies or program. In other words, first category is so-called inquiry type.
Second category is simple mediation. When some case is solved easily – we contact the company, help some person, give the explanation, and not only give dry information, but also direct him/her in the right way.
Third category of applications is complicated mediation. When specifically formulated dispute is to be solved. Parties do not agree with each other and intervention of mediation service is required. In this case, we have to find out who is right and wrong and make correct decision. Both insurance company and insured person can apply to our services. However, insured parties are applying for our service more often.
As Mr. Archil noted during the conversation, the number of applications from March 2008 to 31 April 2009 made up 2606. 1266 of all the applications were of inquiry type, 1166 – simple mediation cases, while the number of complicated disputes made up 174.
Today, it is hard to say, whether reforms of healthcare system in Georgia proved their value. However, one thing might be said for sure – state programs arouse need and interest in medical insurance. If few years ago real estate insurance was in the first place among insurance products, now the situation is changed in favor of medical insurance. Under the conditions of constantly increasing expenses on medical services and medicines, people started to understand the necessity of medical insurance. According to the data published by the Agency of Financial Supervision, medical insurance is most popular among other insurance products in the first quarter of this year. Insurance premium attracted in this field amounted GEL 83 938 463. This might be the only way to make medical services available for the needy families. For instance in Czech Republic insurance is obligatory for any employed person, where everyone has to pay for insurance from his or her salary. Simultaneously citizen can chose insurance company, while state pays insurance for whole family. Everybody is insured this way in Czech Republic.