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

The "collapse of the centrally run Soviet administrative system and its replacement with a looser, more federalist system has critically affected the way in which vital policies, including those involving health, are formulated and brought to life," said Alexandra Vacroux, a Kennan Institute Title VIII-Supported Research Scholar in a 30 May 2006 lecture. In her talk at the Kennan Institute, she focused on this policy-making process, specifically on "some of the problems that the health care sector has confronted, and also the solutions and the unintended consequences of those solutions."

Vacroux discussed the progress of health care reform in Russia in 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 stated, have run into problems and have had unintended consequences. Although policies that do not work as planned are not 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 changed over the past 15 years.

Vacroux gave a brief overview of the scope of the challenges 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 fraction of the amount 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 accounting for 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 structures embedded in the health care system make 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 with the onset of federalism, as Russia's 89 regions started taking over responsibilities from Moscow. Vacroux characterized the decentralization process saying it "was chaotic, it was disorganized, and it was undertaken with no prior preparation or training of officials, who then assumed responsibility for Russia's 89 health care systems." 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, more often than not, 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 of the areas in which President Vladimir Putin has supported the consolidation of power at the federal level. However, Vacroux argued that recentralization today is unlikely to fix the problems caused by past uncontrolled decentralization. Russia's health sector has not been provided with the necessary 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 said, centralization at the federal and regional levels is creating new problems of its own by decreasing competition and transparency, and increasing corruption.

Vacroux said one of the reasons she chose to look at the Russian policy-making process rather than at health statistics themselves is the difficulty inherent in studies of public health systems. "You can't look at policy outcomes per se, like life expectancy, or incidence of diseases, or infant mortality, and be sure that you're looking at a result that tells you something about the health care system itself," she said. Because there are so many factors that can affect health statistics, the health care system cannot be studied in a vacuum.

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. "As it is currently envisioned, at least in health care, recentralization cannot correct for the problems created by decentralization and, indeed, it runs the risk of creating serious new ones instead," she stated.