Decentralization - Bad; Recentralization - Worse? What Failed Health Care Reforms Tell Us about the Russian State

At a recent Kennan Institute talk, Alexandra Vacroux, Title VIII-Supported Research Scholar, Kennan Institute, discussed the progress of health care reform in Russia as illustrated by three areas: the introduction of a national insurance program to improve financing of health care; the development of regulations for new pharmaceutical markets; and efforts to control diseases such as HIV/AIDS and tuberculosis. All of these reforms, Vacroux contended, have run into problems and unintended consequences. Although policies that do not work as planned are by no means unique to Russia, understanding the nature of the problems encountered in Russian health care reform provides insights into the Russian state and how it has adapted to the many changes of the past 15 years.

Looking into the three areas of interest, Vacroux gave a brief overview of the difficulties that Russia's health care system has faced. First, the system is under-funded; Russian public spending on health (as a percentage of GDP) is less than that spent by other middle-income countries such as Turkey, Poland, and Mexico, and a much smaller percentage than that spent by high-income countries such as the United States. Second, in the area of pharmaceutical regulation, federal and regional governments have struggled to write effective legislation while coming to terms with Soviet-era rules still in force. The market is both over- and underregulated. Rules overlap and sometimes contradict each other, and enforcement is often ineffective. In the area of disease control, Russia is facing mounting threats from HIV/AIDS and drug-resistant tuberculosis. The incentive structure in the health care system makes it difficult to implement and sustain effective programs to combat these diseases.

To understand the current state of affairs, one must understand the Soviet health system and its collapse, according to Vacroux. By the start of WWII, she said, the Soviet government had institutionalized a highly centralized health system. The Ministry of Health created policy, and the role of the republican, regional and local departments was to implement it without question. This changed radically after 1991, as Russia's 89 regions started taking over responsibilities from Moscow. Vacroux explained that the process of decentralization was extremely chaotic. The Ministry of Health, which provided neither funding nor leadership, had no control over the process. The full responsibility of implementing market-oriented reforms in the health system fell to regional and local bureaucrats who had no experience with independent management and, often, little desire to see market reforms succeed in health care. While a handful of regions had effective and experienced leaders who were able to devise and implement successful health care reforms, most regions were not so fortunate.

The Ministry of Health reclaimed some control of the national health system in the second half of the 1990s, and health care is one area in which President Vladimir Putin has supported the reconsolidation of power at the federal level. However, Vacroux argued that recentralization is unlikely to fix the problems caused by uncontrolled decentralization. Russia's health sector still lacks both leadership and funding at the national level, and it is unlikely that Ministry-led policies will be an improvement over many regional policies. In addition, she continued, centralization is creating new problems of its own, decreasing competition and transparency, and thereby increasing corruption.

Vacroux said that her conclusions about the health sector have relevance for other policy areas. The problems of the health sector, she argued, demonstrate three important things about the Russian state: first, the continuing importance of the Soviet legacy to understanding the Russian state bureaucracy and current policy issues; second, the difficulty of designing effective policies and of implementing them; and, third, the risk that recentralization alone will not solve the serious domestic problems confronting Russia today.