Ukraine Health Profile 2012

Organizational structure of the health care system

Ensuring health care for the population is, officially, one of the key functions of the state set out in the 1996 Ukrainian Constitution, with Article 49 stating that “the state creates conditions for effective medical services accessible to all citizens”. The formal health care system is supervised  by the state, and as in other former Soviet republics, lines of accountability are fragmented. In theory, the national Ministry of Health has responsibility for health policy. In practice, its influence is limited as it only directly manages a few specialized facilities. Most health care is delivered in facilities owned and managed at regional and district level, and funded by the respective tiers of government from allocations provided by the Ministry of Finance or raised locally. In practice, therefore, the scope of the national Ministry of Health is confined to issuing guidance and norms and to matters of national health policy.

The majority of health care services are provided by publicly owned health facilities. By the end of 2000, Ukraine had 24 166 such institutions, including the national Sanitary and Epidemiological Service, spas and health resorts,
health centres, orphanages, blood transfusion stations, centres for medical statistics, institutions for the training of health personnel and for postgraduate training of physicians, research institutes and institutions for professional training of middle-level health staff. In contrast, the network of private health facilities is poorly developed. At the end of 2000, only 5860 private individuals and 1050 legal entities were registered to practice medicine independently. The role of voluntary health insurance is relatively small; although over 100 private companies offer health insurance, they cover only up to 2% of the population; this is largely because of the high costs of commercial insurance premiums, which are unaffordable for the majority of the population. Although there are legal provisions for public participation in the health sector and a number of professional medical associations and various patient groups had been created recently, they have not played any noticeable role in decision making, with the possible exception of the physicians’ association.

Main system of finance and coverage
Unlike many other areas of the economy, health care financing in Ukraine has essentially retained the Soviet tax-based approach, providing universal and theoretically free coverage. Officially the provision of free services in state-owned health facilities is guaranteed by the Constitution of 1996, which states in Article 49 that “in state and community health facilities care is provided free of charge; the existing network of these facilities may not be reduced.” Article 49 also secures the right of citizens to health insurance and further requires that the state “encourage the development of health facilities of all forms of ownership.” Most health facilities are still public property despite the slow development of a private health care sector. Government budgets therefore remain the major official source for health care finance, with some 80%
based on local budgets and the remaining 20% on the state budget, respectively supervised by the regional authorities and the Ministry of Health. The overall budget in Ukraine is mainly derived from inland revenues (about 60%), non-fiscal income and revenues from trade with capital and official transfers. Local budgets are derived, in part, from income, land, road and business taxes, license fees on certain entrepreneurial activities, environmental pollution payments and local taxes, dues and duties. The state budget comprises all revenues excluding those that are allocated to local budgets and payments for services provided by facilities that are funded by the budget. With the Budget Code of 2001, a system of inter-budget transfers was introduced to even differences between regions and to provide subsidies for social protection
programmes. The post-independence economic crisis led to a significant fall in state income, which also had a substantial impact on health care funding. Although the actual share of the health care budget is about the same now as it was at the
time of independence – at about 3% of the GDP – the sharp decline in GDP has meant a drop of over 60% in real-level health expenditures (2). Also, while nominal spending almost doubled between 1996 and 2000 because of the high rate of inflation, real spending in 2000 constituted only 70% of the 1996 level (34). This shortage of public funds is increasingly leading to patients being indirectly charged for services in public facilities, camouflaged as “donations” or “voluntary cost recovery” (33). In addition, the population is burdened by expenditures not covered by the state, such as pharmaceuticals, medical devices or hospital food. Fee-for-service appears to be of minor importance, at about 2% of total health care spending, as is the role of voluntary health insurance. However, under-the-table payments for health services are very common.

Since independence, Ukraine has succeeded in creating a legal framework characterized by fragmentation and complexity, with overlapping and often ambiguous lines of accountability, against a background of inadequate resources to meet its stated goals. However, despite these many problems, some limited reform does seem possible, as shown by the example of primary health care. It has also created the legal prerequisites for the development of a private health care sector and for the manufacturing and distribution of pharmaceuticals. Voluntary health insurance has begun to develop. The newly
established legal framework could also have permitted innovation in health care financing had it not been overruled on constitutional grounds, and could offer ways in which authorities at all levels could – within the limits of the existing system – improve clinical and economic efficiency of the health care system. However, the transformations that have taken place in the system so far can hardly be called reform since they were not sustainable in a way that would create structural changes in the system and major improvements to the way it operates. Lack of experience in strategic planning and management coupled with lack of political will for rapid implementation of reforms, concerns about taking unpopular but necessary decisions to match the new economic environment and a propensity of politicians towards grand but unworkable declarations have all contributed to the rather slow pace of reform. This has led to the peculiar concentration of Soviet-style principles of resource allocation and capacity planning for public health care facilities and, at the same time, has created new problems through the substantial mismatch between state guarantees of universal, unlimited access to free health care and the actual availability of health care funding. The situation has been further complicated by failure to
apply effective means of cost containment or to increase efficiency; the only exceptions were measures to reduce oversupply of hospital beds and health care staff. However, as in other countries, the economic impact of such methods, in the absence of more comprehensive reform, was rather limited. This complex  interplay of factors along with the difficult economic situation in the country has resulted in a drastic reduction in the quality of and accessibility to health care, with unofficial payments and other forms of charging for health services having become widespread and deaths that should be avoidable, such as those of young people with diabetes, increasing rapidly. There is an understanding that improving the financial basis of health care in Ukraine will require overall economic growth in the country. Even if the draft law on mandatory state social health insurance were to be adopted eventually, it would not fundamentally change the economic situation of the health care sector. At the same time, experts, politicians and citizens have become increasingly aware that acute problems in the health care system are not onlydue to shortage of funds but also to its inefficiency in financing, planning and regulation. Efficient use of methods of cost containment and optimization is a decisive factor for improving the health care system regardless of the type of funding chosen for the future. Given the limitations in mobilizing resources, the importance of measures that ensure highly efficient use of what resources are available is growing considerably. In view of recent developments, it is now anticipated that in the foreseeable future the major strategy for restructuring the health care system in Ukraine will consist of improving the management of the existing system.