Keywords

1 Introduction

The Soviet healthcare system envisioned comprehensive, qualified medical care available to everyone in the population free of charge and organised as a single, unified service provided by the state. At the time of its introduction in the 1920s, it constituted substantial progress even in a global comparison; however, beginning in the 1970s, Soviet healthcare was increasingly falling behind Western standards because it was highly underfunded (Heinrich 2022). The severe economic crisis accompanying the break-up of the Soviet Union in 1991 further worsened the problems of the healthcare system. Within five years, the newly independent states on the territory of the former Soviet Union had on average lost over half of their budget revenues. Accordingly, they faced high reform pressure concerning healthcare financing. Starting from this initial state, complex processes involving healthcare financing reform began to unfold in all post-Soviet countries. The aim of this chapter is to highlight some of the key mechanisms that were driving these processes.

In general, there are three ways to finance health systems (Wendt et al. 2009; Rothgang et al. 2010; Isabekova 2019). The money can come from the state budget, as it did in the Soviet Union, which means the system is tax-funded and usually takes the form of a state-run national health service. At the opposite end, healthcare can be offered on a market basis by private for-profit providers with customers paying for services received. Alternatively, the state can arrange for a mandatory health insurance, which finances healthcare through a payroll tax, that is through contributions related to employment status and salary level, not based on individual health risks and needs.Footnote 1

This chapter will briefly describe the Soviet system as the common starting point of all reforms of healthcare finance in the former Soviet Union, thus presenting the initial state that was decisive for the different mechanisms to unfold. The focus of the following empirical analysis is the introduction of mandatory health insurance as the most popular reform model. First, the causal mechanism leading to its legal establishment is elaborated. Creating mandatory health insurance on paper can be explained by the resistance avoidance mechanism, indicating that—on the one hand—there were clear expectations from a majority of the population and no organised opposition to mandatory health insurance, and—on the other hand—there was no real interest in this model on the part of most policymakers. Actual implementation of mandatory health insurance schemes, then, faced severe problems. We identify two causal mechanisms which were at the core of these problems: The first is the fight for state funding mechanism, which explains the political conflict surrounding the sourcing of additional funding required for healthcare. The second mechanism that we identify as being crucial for the implementation problem is the informalisation mechanism, which indicates that medical personnel and patients often agree on informal payments, leading to unrecorded service provision. In several countries, this resulted in a failure to adjust policies to changing circumstances. We argue that against this background (partially) successful introduction of mandatory health insurance was only possible if the reform supporter mechanism occurred, meaning that a strong supporter in favour of the new healthcare model was created in the form of a central Mandatory Health Insurance Fund (MHIF).

In all post-Soviet countries where mandatory health insurance was formally introduced, the resistance avoidance mechanism was crucial, leading irreversibly to implementation problems, which can be further specified by the fight for state funding mechanism and the informalisation mechanism. However, those countries that created a centralised MHIF clearly outperformed those that did not. This reform supporter mechanism is illustrated for two cases with a central Fund, namely Kyrgyzstan and Moldova, and three cases with decentralised management of mandatory health insurance, namely Georgia, Kazakhstan and Russia. The conclusion summarises the complex causal mechanisms that explain the outcomes of the introduction of mandatory health insurance.

2 Initial State and Reform Decisions: The Collapse of the Soviet Healthcare System

In the Soviet Union, the healthcare system was an integral part of the planned economy. This system, named after Nikolai Semashko, the first Soviet minister for public health who promoted its introduction in the 1920s, was fully financed and organised by the central government. Soviet five-year plans for healthcare placed strong emphasis on quantitative targets based on input (i.e., number of physicians and hospital beds), while at the same time the health system was chronically underfunded, resulting in a poor quality of services. These inbuilt weaknesses of the Semashko system started becoming visible in the 1970s: health conditions deteriorated with stagnating life expectancy and high mortality rates, and disparities in health status and outcomes among the fifteen Soviet republics became striking (Heinrich 2022). In reaction to this situation, patients used informal relations, namely personal contacts and presents/bribes, to obtain preferential treatment in the healthcare system. The provision of health services thus became a part of the Soviet Union’s “economy of favours” (Ensor and Savelyeva 1998; Ledeneva 1998).

In the mid-1980s, the Soviet leadership started to discuss reforming the Semashko system through the introduction of quasi-market elements. As a result, several pilot regions introduced mandatory health insurance schemes in the late 1980s to improve the financial situation of their regional healthcare sectors. The break-up of the Soviet Union in 1991, however, prevented the wider expansion of these pilot projects and eventually an introduction at the national level (Twigg 1998, 585–86).

The fifteen newly independent states of the former Soviet Union thus inherited an unreformed Semashko system. Simultaneously, they faced a deep economic crisis, which led to steep declines in state revenues. Whereas this reform pressure favoured a leaner or privatised health system, the large majority of people in all these countries viewed a functioning health system as a key responsibility of state governance. At the same time, the population was used to employing informal relations and bribery in order to get access to state-run services. These conditions impacted not only the decision to reform, but also the implementation of reforms. This becomes clearly visible in a retrospective analysis.

Looking back at the longer trend of healthcare financing reform in the former Soviet Union, three groups of countries have emerged. The first group still runs a national health service. Four out of the fifteen post-Soviet countries (Azerbaijan, Belarus, Uzbekistan and Turkmenistan) made the conscious decision to keep the Soviet system largely intact. In a further two countries, Latvia and Ukraine, several reform attempts failed because of political deadlock, thus leaving these countries with a partly reformed national health service. In all six countries in this group, however, benefits were reduced drastically (if to varying degrees) due to a lack of financial resources. As a result, out-of-pocket payments contribute substantially to health financing in these countries. In Azerbaijan and Turkmenistan, the national health service exists mostly on paper, with citizens paying individually for over two-thirds of their health expenses, as Table 5.1 indicates.

Table 5.1 Sources of healthcare financing in the post-Soviet region (as a percentage of current health expenditure)
Full size table

In a small group, comprising just three countries, out-of-pocket payments officially dominate healthcare financing. However, only Georgia made a conscious political decision to introduce a market-based health system in the wake of neoliberal economic reforms in the early 2000s. In the other two countries, Armenia and Tajikistan, a deep economic crisis combined with armed conflicts led to a sharp deterioration of the national health system. Consequently, these states restricted the promise of free healthcare to small groups of the population and a large share of health service provision is now officially financed directly by patients.

The largest group of countries has introduced mandatory health insurance schemes. Actual coverage of services has to varying degrees been restricted by financial constraints, again often leading to a substantial role for out-of-pocket payments. In addition to the five countries which introduced mandatory health insurance permanently in the 1990s (Estonia, Kyrgyzstan, Lithuania, Moldova and Russia), Georgia and Kazakhstan also introduced mandatory health insurance but later cancelled it. Kazakhstan returned to mandatory health insurance in the mid-2010s. The relevance of this health insurance scheme in post-Soviet reform debates is also demonstrated by the fact that in the 2010s, Armenia, Azerbaijan, Latvia, Tajikistan and Ukraine were discussing its introduction.

3 Introducing Mandatory Health Insurance: The Resistance Avoidance Mechanism

The creation of new state structures after the break-up of the Soviet Union included the need for the formal reorganisation of the inherited Semashko system on the territory of the newly independent states. After the end of the socialist planned economies in Central and Eastern Europe, neoliberal concepts, summarised in the so-called Washington Consensus, and established models from OECD countries were often treated as standard solutions. Pension reform in the post-Soviet region is a case in point: International organisations, most prominently the World Bank, gained importance on this issue because they presented a clear model as a “blueprint” for reform (Orenstein 2008; Kaasch 2013). It has been argued that part of the popularity of this approach was a process of “competitive signalling,” in which numerous post-Soviet countries used the adoption of sometimes extreme neoliberal economic reforms to impress foreign investors (Appel and Orenstein 2016, 2018).

In the area of healthcare reform, however, international organisations did not provide such a “blueprint”: “Many international, bilateral governmental and non-governmental agencies and groups provide technical and financial assistance to the health sector in Eastern Europe. Most of these focus on specific projects; few address broader health policies and strategies” (Nelson 2001, 259). Accordingly, the reform of healthcare financing in the post-Soviet region remained in the realm of domestic politics.

In order to understand the domestic politics of healthcare reforms in the former Soviet Union, it is important to consider the difference between policies by design and effects of reform blockades. In all three groups of countries described above, there are those where coherent reforms have been implemented. Belarus is a clear case of a conscious decision to preserve the Soviet national health system as far as possible, based on the logic of the honouring one’s legacy mechanism and financed with economic subsidies from Russia (Cook 2007, 204–06). Ukraine, on the other hand, still runs a national health system because repeated attempts at reform have failed. While Georgia opted for a market-based healthcare system as part of radical neoliberal reforms aiming at “competitive signalling” to foreign investors in the 2000s (Appel and Orenstein 2018), the governments of Armenia and Tajikistan simply failed to finance comprehensive healthcare, forcing the population to rely on its own financial resources (i.e., out-of-pocket payments).

This difference is also visible in the third group of countries, which is analysed here: Estonia adopted a radical reform of the healthcare system in the first half of the 1990s when mandatory health insurance was introduced, with only incremental change since then (Jesse 2008). Kazakhstan, on the other hand, has been moving back and forth, introducing country-wide mandatory health insurance already for the second time in the mid-2010s.

At the same time, the dominant reform model in the post-Soviet region was clearly payroll-based mandatory health insurance. In the 1990s, only four countries in the region (Azerbaijan, Belarus, Uzbekistan and Turkmenistan) made an explicit political decision in favour of an alternative model. The resistance avoidance mechanism is able to explain the introduction of mandatory health insurance in all post-Soviet countries that adopted this model. The relative attractiveness of the mandatory health insurance model was mainly due to two popular perceptions.

First, the drastic decline in state revenues in combination with the bad image of the planned economy, of which the Semashko system had been an integral part, created pressure to move away from the national health service model. At the same time, mandatory health insurance provides the chance to obtain additional funding that is earmarked for health. The thinking went that a payroll tax would generate a stable source of funding because in the past the payroll of state enterprises had been large and easy to tax (Ensor and Thompson 1998, 208–09).

Second, socialisation in the Soviet system had created strong preferences among the populace for a comprehensive welfare state. In the representative Life in Transition Surveys, which capture public opinion in the post-Soviet states in 2006 and 2010, when asked about the first priority for additional state expenditure, healthcare was the most frequent answer; on average, over a third of respondents gave this answer. If the second priority is considered as well, over two-thirds of respondents were in favour of increased state spending on healthcare.Footnote 2 Consequently, purely market-based solutions were highly unpopular in the post-Soviet region.

With the Semashko system discredited and private insurance being very unpopular, mandatory health insurance was an obvious choice as a reform model.Footnote 3 Where this model gained the support of key political decision-makers, it was adopted swiftly. This logic worked especially well in Central Eastern Europe including two Baltic States (Estonia and Lithuania),Footnote 4 where universal mandatory health insurance was adopted early on, often with strong support from policy entrepreneurs and interest groups with backgrounds in the medical professions (see Preker et al. 2002 and Chap. 9).

However, in the post-Soviet region (with the exception of Estonia and Lithuania) there were no strong forces promoting the introduction of mandatory health insurance. As Cook (2007, 55–56) elaborates on the case of Russia:

The welfare state that Russia inherited was a top-down creation, established under conditions of society’s political exclusion. […] Trade unions served mainly as administrators rather than demanders of welfare. The professional groups that provided social services—doctors, educators, and so forth—belonged to mandatory associations but had no experience with organizational autonomy and little with interest articulation.

Instead, policymakers in the state executive and legislature simply adopted related laws to get the healthcare finance reform off the table. This development has to be understood in the context of the former Soviet Union in the early 1990s. Many policymakers were inexperienced or had a background in the Communist Party. They had to pass fundamental reforms addressing nearly all aspects of political, economic and societal affairs. At the same time, they were used to “policies of promises” from Soviet propaganda as well as overly optimistic neoliberal reform expectations. As a result, there was a tendency to adopt laws first and check their content later. Cook (2007, 77) quotes “one of the architects” of the introduction of mandatory health insurance in Russia with the statement that “there were only about 12 people at the time who really understood the implications [of the health insurance law,] so it was easy to get it through the legislature.” Adopting a law on mandatory health insurance was thus the path of least resistance.

However, this resistance avoidance mechanism, which explains the formal introduction of mandatory health insurance, has important implications for its actual implementation. As no strong political actor promoted its introduction, none was really interested in making it a success. In Russia, for example, parliament did not pass any legislation to regulate the private medical practices which had been introduced with the mandatory health insurance law, thus leaving them in legal limbo (Cook 2007, 27). In an even stronger case of initial neglect, Moldova passed the law on mandatory health insurance already in 1998, but only created the MHIF in 2001 and finally implemented the health insurance system in 2004. Kazakhstan created, abolished and reintroduced mandatory health insurance within two decades.

4 (Not) Running Mandatory Health Insurance: The Fight for State Funding Mechanism and the Informalisation Mechanism

The following analysis of the actual implementation will focus on five countries which introduced mandatory health insurance in the 1990s, namely Georgia, Kazakhstan, Kyrgyzstan, Moldova and Russia. They faced substantial challenges. Two major problems were related to, first, the fight for funding between different state and public actors and, second, the practice of healthcare personnel and patients to engage in informal interactions, often related to corruption.

We argue later in this chapter that partial success of mandatory health insurance was only possible in cases where a strong supporter in favour of the new healthcare model was created in the form of a central MHIF. The decision about centralised or decentralised financial management thus turns out to have enormous implications for the further development of healthcare reform. Only in countries which opted for a strong central MHIF, namely Kyrgyzstan and Moldova, did the mandatory health insurance reform “lead to demonstrable positive achievements” (Kutzin et al. 2009, 295).

4.1 Fight for State Funding Mechanism

With the shift to a mandatory health insurance scheme, insurance contributions became linked to employment (Dixon et al. 2004, 59). However, the transition in the former Soviet Union was accompanied by a severe economic recession which led to a huge increase in unemployment and rising informal employment, which is difficult to tax. Countries with little formal employment and a large informal economy, like all post-Soviet countries apart from the three Baltic states, were faced with the problem that insurance contributionsFootnote 5 were not viable. Thus, general state revenues often continued to play a significant role in healthcare funding, despite the switch to mandatory health insurance. This led to political conflict about the sourcing of this additional funding.

All former Soviet Union countries that enacted mandatory health insurance in the 1990s initially opted for a decentralised system, which was meant to counter the over-centralisation of the planned economy and to bring the organisation of healthcare closer to the citizens. At the same time, many national governments found it hard to resist regional and local aspirations. Russia’s President Boris Yeltsin, for example, famously remarked that the regions should “take as much sovereignty as they can swallow” (Teague 2002, 207). This also relieved financial pressure on the national budgets of the respective states.

Thus, in Russia, regional and local governments were supposed to contribute to the mandatory health insurance on behalf of the non-working population. “Initially, however, no national norms for these budgetary contributions were adopted. This led to wide variation in practices and, by 1997, twenty-seven out of the country’s eighty-eight regions were making no compulsory health insurance contributions from their budgets” (Sheiman et al. 2010, 102). Contrary to reform plans, local governments rarely redirected all of their health revenues to the territorial MHIFs, instead continuing to finance their healthcare facilities directly. In reaction to this problem, payroll tax collection for the mandatory health insurance was shifted in 2001 from the federal and territorial MHIFs to the general tax authority (Sheiman et al. 2010, 109). However, this was not enough to solve the related problems. A decade later, implementation of mandatory health insurance still differed strongly across Russia, suggesting a high dependence on the commitment of regional authorities (Popovich et al. 2011, 146).

Georgia had a similar experience. In 1995, it amended the constitution and in a “devolution type of reform” consigned the responsibility for healthcare to the regional authorities (Sehngelia et al. 2016, 350). In 1997, the Law on Local Self-governance “set the responsibility for funding health care facilities, as well as planning and implementing local health care programmes at the municipal level” (Chanturidze et al. 2009, 18). To ensure common standards across the country, the Georgian government designed a Basic Benefit Package to cover standard healthcare needs of the population, jointly funded by the mandatory health insurance, municipality health funds and the Ministry of Health (Chanturidze et al. 2009, 16–17; Sehngelia et al. 2016, 350).

However,

the government was unable to meet its revenue and expenditure targets, which led to (1) across-the-board expenditure cuts in the 1998, 1999 and 2000 budgets; (2) the continued accumulation of large arrears in reimbursements for health facilities, wages and pensions; and (3) increasing reliance on private out-of-pocket payments to finance health care. (Chanturidze et al. 2009, 17)

In 2003, revenues generated from mandatory payroll contributions accounted for only 5% of total health expenditure. Due to these shortcomings, the Georgian mandatory health insurance system was abandoned in 2004 (Chanturidze et al. 2009, 17). In a radical shift towards a market-based healthcare system, the government decided to recentralise the system and to develop a private health insurance scheme along with the privatisation of public healthcare facilities (Sehngelia et al. 2016, 349–50).

The fight for healthcare funding developed along the same lines in Kazakhstan, which introduced mandatory health insurance in 1996. Some regions withheld almost all their required transfers for healthcare (Ensor and Thompson 1998, 214). There was also a lack of coordination with the local government authorities, as they withdrew from health system funding. As a result, the mandatory health insurance system was cancelled by the end of 1998 after failing to meet financial commitments to healthcare providers (Sheiman et al. 2010, 103–05).

In summary, the fight for state funding mechanism is relevant for countries where a high level of unemployment and/or informal employment render a payroll tax insufficient to finance a developed healthcare system. In such a situation, the social insurance-based system needs substantial financial support from the state budget. If the system is decentralised and local or regional authorities are able to reject or boycott such support, the results are arrears, underfinancing and potentially—as in the cases of Georgia and Kazakhstan—the breakdown of the system of mandatory health insurance.

4.2 Informalisation Mechanism

The lack of sufficient healthcare funding in all post-Soviet countries has provoked a discussion about reducing coverage and limiting benefits packages. However, in the regional context both citizens and politicians “see comprehensive and free health care as a right, and are not ready to accept cuts in benefits. Providers, who depend on the income, similarly oppose it” (Dixon et al. 2004, 66). As a result, healthcare systems are based on promises which cannot be realised in practice.

Concerning coverage, a major issue is people who do not directly make insurance payments. For instance,

anecdotal reports from Kazakhstan […] indicate that those who do not pay insurance contributions directly (and there are significant numbers in the region, such as the self-employed, those in small informal businesses, farmers, the unemployed, students and pensioners) are treated as “uninsured.” […] This highlights the importance of distinguishing between being theoretically insured and “functionally insured” (that is, actually having physical and financial access to needed care at an affordable cost). (Dixon et al. 2004, 64)

Concerning benefits, the World Bank has encouraged the development of a basic package of services which excludes the bulk of inpatient treatments provided by the health systems of the post-Soviet region. While most governments have recognised the need to define basic services, few have been able to do so. In Kazakhstan, “a basic package, funded by insurance, and a guaranteed package, funded from the budget were developed. But together they account for almost all services that could be provided. Some countries, such as Russia, have excluded cosmetic surgery and dentistry” (Ensor and Thompson 1998, 212).

As a result, many formally free healthcare services are only available after some additional, usually informal out-of-pocket payments have been made. These payments are often perceived as bribes by those involved as well as by the legal regulations in the respective countries. In contrast to presents, these out-of-pocket payments have to be made in advance and are directly linked to the performance of specific services (Lewis 2002; Stepurko et al. 2015). In this context, Cook (2007, 10) speaks of “informalized welfare states that were to a significant extent governed neither by state authorities nor by market principles.”Footnote 6

A representative study of corruption in everyday life in Russia, conducted in 2001 and 2005, found healthcare to be the most corrupt area with 80% (2001) and 62% (2005) of the respondents stating their willingness to offer bribes. The authors of the study estimated that this amounted to annual informal payments of about US$600mn and US$400mn, respectively (INDEM 2005).

A coordinated attempt to reduce informal out-of-pocket payments has been made in Kyrgyzstan. The country has introduced a State Guaranteed Benefit Package (SGBP). The SGBP clearly defines the rights and obligations of patients and the state with regard to provision of health services and clarifies the entitlements of different population groups. (Ibraimova et al. 2011, 15; World Bank 2007, 43–44, 292; World Bank 2014, 3–4). As a result, “according to the Kyrgyz Integrated Household Surveys between 2000 and 2009, the proportion of the population that reported that they needed health care but did not seek it because it was too expensive or too far away fell significantly, from 11.2% in 2000 to 4.4% in 2009” (Ibraimova et al. 2011, 140). Though this is substantial progress, it also highlights the persistence of informality.

In summary, the informalisation mechanism unfolds similarly in most post-Soviet countries, though with varying degrees of importance. As formal funding is insufficient to provide the legally guaranteed coverage and benefits (and as some people lack access to additional healthcare services they desire), medical personnel and patients often agree on informal payments, leading to unrecorded service provision. These out-of-pocket payments are partly used to fund actual services, while another part, more similar to a bribe, increases the income of individual medical professionals. As these informal payments provide patients with additional services and medical personnel with additional income, they are hard to abolish. At the same time, they decrease reform pressure on the formal healthcare system, as many patients can find a way to get along without it. However, they also increase social inequality as some patients cannot afford out-of-pocket payments and receive reduced, delayed or inferior health services. Moreover, they make the system less reliable as real costs and quality of health provision are hard to predict and compare.

5 Making Mandatory Health Insurance Work: The Reform Supporter Mechanism

A key feature of social insurance is the existence of institutions with a certain organisational autonomy towards the state, including finances that are managed separately from the general state budget (see also Chap. 14). Accordingly, together with the introduction of mandatory health insurance an MHIF is established to administer the insurance scheme. The decision about the competencies and powers granted to the MHIF is crucial for the implementation of mandatory health insurance. This can be illustrated by a comparison of the countries that introduced a central Fund, namely Kyrgyzstan and Moldova, and those that opted for decentralised management of mandatory health insurance, like Georgia, Kazakhstan and Russia.

Where the MHIF is weak, it has been torn apart, as the fight for state funding mechanism outlined above explains. Russia, for example, opted for a decentralised MHIF in line with its federal political order. In the case of healthcare reform, this meant that the switch to mandatory health insurance was to a large degree left to the regions, thus becoming dependent on the attitudes of regional authorities. As a result, by the mid-1990s “the federal ministry of health had almost lost control over the health care system” (Ensor and Thompson 1998, 215). Regional fragmentation produced remarkable variation in access to healthcare (Borisova 2011). As of 2018, the average life expectancy at the regional level ranged from 64 years in Chukotia to 78 years in Moscow, while the country-wide average stood at 73 years. In summary, “despite nearly 30 years of post-Soviet reforms, Russia has not developed an effective system of mandatory social insurance” (Gontmakher 2019, 447).

In Georgia and Kazakhstan, similar problems even led to the cancellation of mandatory health insurance reforms, as described above. It has been argued that

a central factor in the failure of reforms in some countries has been the lack of capacity of health ministries to adopt [related] new functions. Two key contributory factors to this failure are the rapid turnover of public sector employees migrating to better paid jobs in the private sector, and the chaotic decentralization of authority to health insurance agencies and/or regions that has left ministries with accountability for implementation but little authority or capacity to drive reforms forward. (Figueras et al. 2004, 30)

While these often-cited factors are important elements of failure, we argue that they are not the root cause. In Kyrgyzstan, which has been categorised as a fragile state due to violent power struggles and “revolutions,” and which is marked by exceptionally high staff turnover in the Ministry of Health (Isabekova and Pleines 2021), mandatory health insurance has been a relative success story.

The core reason for the failure of mandatory health insurance in the post-Soviet region is the lack of any relevant political force or interest group strongly supporting it. As elaborated above, the resistance avoidance mechanism can explain the formal decision to introduce mandatory health insurance, but does not explain to what extent mandatory health insurance is also implemented. Successful implementation of mandatory health insurance is only possible if a strong supporter for the new system emerges.

As the cases of Georgia, Kazakhstan and Russia show, implementation of mandatory health insurance is politically controversial, while public expectations are unrealistically high. It is, therefore, highly unlikely that any political force will “burn its fingers” by supporting it. At the same time, there are no relevant interest groups that would benefit from a health system with general rules that is chronically underfunded (as opposed to individualised informal bargaining). For an MHIF, on the other hand, supporting the health system is the only reason for its existence. A strong MHIF can thus become the motor for successful mandatory health insurance implementation, as can be illustrated by the cases of Kyrgyzstan and Moldova.

When Kyrgyzstan introduced mandatory health insurance in 1997, it started with a decentralised MHIF like Georgia, Kazakhstan and Russia. Initially, the MHIF in Kyrgyzstan did not collect revenues itself; instead, it received transfers from the Social Fund and the federal budget on behalf of defined categories of “insured” persons. “Owing to chronic deficits across the social security system, however, these transfers were in many cases not made or delayed, and substantial arrears built up. Health insurance funds were often obliged to provide health services to the whole population, despite the lack of contributory income” (Dixon et al. 2004, 61).

In this situation, Kyrgyzstan opted for a substantial reform. In the early 2000s, the country shifted to a single-purchaser model by integrating general budget revenues and mandatory health insurance contributions (Dixon et al. 2004, 75). In 2001, the pooling of budget funds and insurance contributions was established in two pilot regions.Footnote 7 Each year, additional regions established regional health financing pools until the entire country was covered by 2005. The regional pools were merged at the national level in 2006, ending both the fragmentation of health resources and the duplication of services (Giuffrida et al. 2013, 5; World Bank 2014, 4).

The single-payer reform in 2001 changed the role of local governments “from direct funders and controllers of health facilities to funding sources for the regional MHIFs” (Sheiman et al. 2010, 107). The first result was similar to developments in Russia and Kazakhstan. Local authorities feared a loss of control over their local health system, which led them to divert funds for other uses. This, in turn, caused a decline in budget allocations for the health system (Sheiman et al. 2010, 107). As a result, opponents “managed to block key activities, most importantly the restructuring of tertiary hospital facilities in the two major cities” (World Bank 2008, xii). Resistance to efforts to rationalise the health sector came also from medical staff fearing job losses and from patients in catchment areas of facilities being closed (World Bank 2008, 10).

In this situation, it can clearly be seen that the MHIF had established itself as an important political player:

During 2002, the situation became so grave (with under-payment of providers and growing informal payments) that the MHIF—backed by international partners supporting the health reform process—pushed the government to amend an existing agreement with the IMF so that, beginning in October 2002, the Social Fund was required to remain current in its cash transfers to the MHIF (i.e., no new arrears would be allowed). (…) In the Kyrgyz context, it was only possible to overcome this problem by engaging powerful external agencies. (Sheiman et al. 2010, 106)

If Kyrgyzstan’s MHIF had not engaged external agencies, funding practices would not have changed.

Thus, the creation of a strong, centralised MHIF put Kyrgyzstan’s healthcare system on a different path. The MHIF was established as a parastatal organisation under the Ministry of Health outside the core public bureaucracy. As a parastatal entity, it was freed from the Soviet-era input-based budgeting mechanisms. This created incentives for downsizing and savings (Jakab and Manjieva 2008, 297). This development led to a more equal distribution of funds between regions, improved financial protection and laid the foundation for a considerable reduction of informal payments, as outlined above. In summary, “the new institutional structure created a platform for profound reforms in pooling and purchasing that led to demonstrable gains in equity and efficiency in the Kyrgyz health system” (Sheiman et al. 2010, 107).

Similarly, in Moldova the MHIF was the key instrument in the health financing reform. It became “the single institution responsible for the pooling and managing of funds; it purchases services by contracting with autonomous health care providers. In this way, the 2004 introduction of mandatory health insurance represents a fundamental shift away from the financing mechanisms used in the Semashko system” (Turcanu et al. 2012, 16–17).

In summary, the creation of a strong reform supporter in the form of an MHIF can at least partly neutralise the implementation problems related to the fight for state funding mechanism and the informalisation mechanism. In Kyrgyzstan and Moldova, the reform supporter mechanism led to a more equal distribution of funds between regions. Moreover, it allowed for the consolidation of healthcare finances.

6 Conclusion

For the fifteen states which became independent after the dissolution of the Soviet Union in 1991, the creation of new state structures included the need for the formal reorganisation of the national part of the inherited Semashko healthcare system. The drastic decline in state revenues in combination with the bad image of the planned economy, of which the Semashko system had been an integral part, created pressure to move away from the national health service model. At the same time, socialisation in the Soviet system had created strong preferences for a comprehensive welfare state among the population. As a result, purely market-based solutions were highly unpopular.

With the Semashko system discredited and private insurance being very unpopular, mandatory health insurance was an obvious choice as a reform model. As a result, in most post-Soviet countries mandatory health insurance was not adopted because it was promoted by policy entrepreneurs or interest groups, but simply because it looked like the least controversial option. The resistance avoidance mechanism can explain why nine of the fifteen former Soviet Union countries have introduced mandatory health insurance at some point after independence.

However, as there was no influential promoter of mandatory health insurance, implementation did not receive much attention in these countries. In some of them, governments did not bother at all about the implementation of mandatory health insurance schemes for several years. In others, responsibility was passed on to the regional and local levels. This was not enough to overcome the substantial challenges of implementation, as the fight for state funding mechanism and the informalisation mechanism show.

We argue that implementation is only successful when a fourth mechanism unfolds, namely the reform supporter mechanism. If the national government continues along the path of least resistance, the mandatory health insurance is not able to function properly. In countries with weak governance systems, like many in the post-Soviet region, this means that the national level largely loses its coordinative function. Instead, regional governments take over responsibility for public healthcare. This immediately leads to differences in the level of healthcare financing. In the longer run, it also leads to divergent institutional reforms and (especially in larger countries with stronger regional socio-economic disparities) to considerable differences in healthcare provision and health outcomes. Moreover, in the case of increasing financial deficits, it may lead to the failure and abolishment of mandatory health insurance.

If, on the other hand, the government makes a significant attempt at reform and manages to (re)centralise healthcare competencies into a coherent national MHIF, this creates a strong supporter for country-wide healthcare development. As the MHIF is not a direct part of the government, but a parastatal entity, it has more leeway and can build strategic coalitions. As occurred in Kyrgyzstan and Moldova, the MHIF then ensures a more equal distribution of funding and, thus, healthcare provision. In the post-Soviet situation of severe underfunding of the healthcare sector, the MHIF is also likely to promote reforms to increase efficiency in order to cut costs. Healthcare in Kyrgyzstan and Moldova has for this reason performed relatively well, although both countries have—in a regional comparison—low levels of GDP per capita, weak governance capacities and regular political crises.