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Journal of Health Sciences Management and Public Health STRATEGIC PLANNING AND IMPLEMENTATION TO ACHIEVE HEALTH CARE FINANCING OBJECTIVES Akaki Zoidze1, Levan Kobaladze2, Ioseb Bregvadze3, Merab Kavtaradze4, Tamara Gotsadze5, Nina Moroshkina6 Abstract In the article we discuss the main activities necessary to achieve the identified health care financing objectives.

The objectives are as follows: Improve mobilization of public finances for health; 1.
Improve management of public finances and decreasing regional disparities in allocations 2. for health; Improve public purchasing of health services; Improve risk pooling for substantial out of pocket spending on health; Increase the public and private financial resources available for financing the basic package of health services.

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In a previous article (“The Role of Health Care Financing Strategy in Implementation of National Health Policy”, Journal of Health Sciences Management and Public Health) we analyzed the role of Health Care Fi- nancing Strategy (HCFS) to the Na- tional Health Policy and discussed the main goal and objectives of HCFS.

In this article we present our vision of achieving these objectives.
It is necessary to implement all ac- tivities below to achieve the health care financing objectives outlined above.

Objective 1.

Improve mobiliza- tion of public finances for health and decreasing the level of informal pay- ments Planned Activities: 1.

For Mandatory Health Insu- rance Contribution: 1.1.
To transfer a responsibility for all aspects of administration of the man- datory health insurance contribution 1 Deputy State Minister of Georgia 2 Head of Coordination Department of International Pro- grams of NHMC 3 Deputy Director of State Medical Insurance Company 4 Chairman of Supervisory Board of State Medical In- surance Company 5 Projects Officer, Human Development Unit, Europe and Central Asia Region, World Bank Resident Mission Georgia 6 Health and Social Projects Implementation (payroll tax) to the tax “owner”, - Uni- fied Social Insurance Administration (SIA).
This is planned to be created under the framework of comprehensive social insurance reform.

The mandatory health insurance contribution will be- come a clearly defined portion1 of the unified social insurance contribution (premium) paid by employer and em- ployee.

This step will also imply crea- tion of a unified social insurance pack- age, individual social insurance ac- counts, and databases for taxpayers.
This includes key stakeholders, legal persons, and other relevant measures aimed at improvement of tax adminis- tration.

It is expected that this meas- ure will significantly increase the col- lection of tax in the first year of imple- mentation.

At least 10% more funds will be collected due to improved ad- ministration of taxes.
The tax collection body in this case (when SIA adminis- ters payroll tax) will avoid competing priorities in collecting different taxes as the current tax-collecting agency – Min- istry of Tax Revenues, and has become more focused.
This measure will mini- mize the leakage of tax revenues in favor of the central budget and illegal 1 The portion of the Unified Social Insurance Con- tribution used for financing the mandatory health insurance programs will be determined each year by the Parliament of Georgia, during the budget adoption process.

136 Journal of Health Sciences Management and Public Health deals between tax inspectors and busi- nesses.

This often leads to avoidance of paying health tax by businesses while paying others.
The experience of other countries in the region (Estonia, Poland) suggests tax administration is better and that higher revenues are collected when this responsibility is assigned to the “owner” of the tax – the health or social insurance agency.

This activity will be implemented during the years 2002-2003.

1.2.
1.2.

To conduct an evaluation of the existing tax environment and pre- pare proposals for widening tax base for mandatory health contribution in- cluding those self-employed, farmers and small businesses.

Additional, or alternative options could also earmark a defined portion of existing taxes and obligatory license fees (excise, or so called “sin” taxes on tobacco, alcohol, environmentally hazardous substances, etc.

one-time license or permit fees for self-employed and small businesses).
It is essential to consider the economic and administrative burden of introduc- ing any new taxes (on land, or on crops, etc,).

It is important to assess the feasi- bility of earmarking certain portion of existing taxes for health, particularly the effect of such measures on the revenues to the central budget.

This measure must be implemented in the 2nd Quar- ter of the year 2002.

1.3.
1.3.

To implement the adjustments to the tax code based on the tax envi- ronment assessment after achievement of consensus with respective ministries and approval thereof by the parliament.

For Central Budget transfers 2. on health expenditures: 2.1.

To clearly delineate the obli- gations of the central budget in financ- ing the basic package of health services.
The central budget should either (a) finance those public programs that do not meet the criteria of the so- cial medical insurance program, where there is almost no uncertainty as of how many insured cases are anticipated during the year and does not meet “soli- darity criterion”, for example renal di- alysis, psychiatric care, etc., or (b) become one of the insurers in the social insurance system and trans- form the central budget transfer into the premium on behalf of those that cur- rently are not contributing the public insurance system (pensioners, disabled, other vulnerable groups, farmers and self-employed).
The latter principle of state becoming one of the insurers in the social insurance (or health insurance system) has been utilized in a number of countries throughout the region (e.g.

Latvia, Estonia Hungary, Poland, etc.).

In the case of adopting of one of the two options, the central budget transfer will become clearly targeted and will acquire a defined basis for cal- culation and planning of annual fund requirements.
This measure must be implemented and the decision on as- signing such purpose to central budget transfer must be made respective to leg- islative changes.

These should be in- troduced before the 2nd Quarter of the year 2002.

It is important to note that if the central budget transfer is planned by this principle, the central budget obligation before SIA will drastically increase due to the specifics of the ex- isting state programs.
Considering the present level of fulfillment of the cen- tral budget and the amount of transfer for social insurance, mandatory health insurance could be increased for incre- mental implementation between 2002- 2005.

2.2.

To strengthen the existing trend and unconditionally observe the priority of health expenditures as set in the budget law and conduct transfers to State Medical Insurance Company (SMIC) or SIA on a regular basis in com- ing years (starting from the Year 2001).
For Municipal financing of 3. health expenditures 3.1.

To increase health allocations for financing municipal health care pro- grams from local budgets up to 10% of total expenditures, as determined by the Laws of Georgia on the 2000 and 2001 State Budgets.

Respective adjustments should be made in the law on self-gov- 137 Journal of Health Sciences Management and Public Health ernance and other basic laws defining the division of responsibilities between the central and local governments.
Ex- isting legal loopholes leave opportuni- ties to local governments and elected rep- resentatives to often ignore this provi- sion in Law on State Budget (Years 2000-2001).

3.2.

To raise awareness in the gen- eral population regarding the obliga- tions of local budgets in financing es- sential health services to raise the ac- countability and responsiveness of lo- cal governments and elected sakrebulos towards their electorate.
A communi- cation strategy should be devised and implemented for these purposes.

A public monitoring system with partici- pation of local NGOs, civic society rep- resentatives and community groups may be established to monitor the proc- ess of financing on the local level for basic social services.

These measures will be implemented for achievement of the due effect for the next two to three years (Years 2002-2004).

Objective 2.
Objective 2.

Improve management of public finances and decreasing re- gional disparities in allocations for health Planned Activities: 1.

To merge the municipal and federal sources of financing on a regional level for “curative health pro- grams”, i.e.

for those federal and man- datory municipal programs that mainly cover secondary and tertiary care serv- ices.
In order to accomplish this activ- ity, the following steps should com- menced: (a) To design and implement pilot projects of combining federal and mu- nicipal sources of financing in selected regions of Georgia (Poti and Ajara) Merging of Regional Municipal Funds (RMF) and regional offices of SMIC will occur.

Transformed regional offices of SMIC will manage the unified basic package of health services financed through allocations from SMIC.
This will be managed for each respective re- gion within the framework of existing state medical insurance programs and earmarked transfers from the munici- pal (regional) budgets within the pilot region for secondary and tertiary care (Year 2002).

(b) To roll out the pilot regions na- tionwide with the adoption of respec- tive changes in the legislation (Law on Medical Insurance, Law on Health, Law on State Budget and other laws and legislative acts).
This model will be implemented throughout the years 2002-2004.

2.

To merge the municipal and federal sources of financing on rayonal (municipal) level for primary care programs, i.e.

for those federal and mandatory municipal programs that cover primary care services - outpatient care and preventive measures.
For ex- ample, the federal program for addi- tional medical assistance to the popu- lation of rural and mountainous areas, federal program for immunization and mandatory municipal program for am- bulatory- outpatient care.
Following steps include: (a) To design and implement pilot projects of combining federal and mu- nicipal sources of financing in selected rayons of Georgia (to be selected), where local Public Health Centers (lo- cal government structural units) will serve as conduits for both sources of fi- nancing: Federal – managed by the MoLHSA’s Public Health Department and its Primary Care Unit and ear- marked transfers from municipal (rayonal) budget for primary care.
(Year 2002) (b) To roll out the pilot regions na- tionwide with the adoption of respec- tive changes in the legislation (Law on State Budget and other laws and legis- lative acts).

(Year 2002-2004) 3.

To merge the Municipal and Federal Financing sources at the regional level for all health programs.
This activity accomplishes the ultimate objective of improving the management of public finances through combining the federal and municipal sources of fi- nancing for the basic package of serv- 138 Journal of Health Sciences Management and Public Health ices.

The modified SMIC (SIA) through its regional offices will be responsible for the management of the unified basic package of health services on all levels.
This activity is planned for implemen- tation by the year 2007 resulting from the sustainable and regular financing improved management of public funds.

This will be insured for both primary care and “curative” health programs through the mechanisms and institu- tions described in activities 1 and 2.
It is assumed that this sort of staged ap- proach in merging the municipal and federal sources of financing is more fea- sible to implement based on the follow- ing considerations: (a) Separate management of fi- nances for primary care and the clear demarcation between the public alloca- tions for primary care and curative pro- grams set in the budget law (as PHC programs will be earmarked to the MoLHSA and PHD in the State Budget Law as a separate line item) will ensure protected revenues and expenditures for primary care.
This is important when scarce financing of health and competing priorities between financing primary care or programs addressing immediate curative needs of patients, for example, dialyze-affected patients.

Immediate needs often prevail over more cost-effective primary health care programs with long-term effects.
Such marked delineation in the state budget between the expenditure items for pri- mary health care and insurance pro- grams ensures the “protection” and priority of the revenues and expendi- ture needed for primary health care.

(b) Local governments (municipalities) will be more reluctant to embrace the unification of local and federal obliga- tions.
If they are forced to transfer the entire local health budget expenditures to the regional level (as evidenced by the current situation in the operation of regional health care funds).

The municipalities will be less reluctant to adjust to the changes if they are able to retain control over local health care ex- penditures allocated for the primary care.
In this case, local Public Health Centers that are formally subordinated to the local government’s office ensure the unified management of both local and central budget allocations for pri- mary health care under contracts signed with local health care providers and PHD of the MoLHSA.
(c) Local Public Health Centers have the experience of managing con- tracts with primary care facilities un- der several federal programs (programs for immunization, additional medical assistance for the population of rural and mountainous areas), which will ease the process of implementation.

After all institutional changes have been finalized, managerial and con- tracting capacity in respective institu- tions will be developed.
Financing for health care will have stabilized creat- ing conditions for the final stage: merger of federal and municipal sources of fi- nancing under one institution (SMIC- SIA) for the entire basic package of health services.

This activity will be implemented by the year 2006-2007.

Objective 3.

Improve public pur- chasing of health services Planned Activities: 1.
To conduct revisions in Ba- sic Benefit Package (BBP) at the central and municipal level to improve budg- eting and priority setting within the public budgets.

During 1999-2000, a working group was established consist- ing of representatives from MoLHSA and SMIC to appraise the existing BBP and provide recommendations on changes in content, structure and pri- ority-setting within federal programs for year 2001.
The group was supported by TNO through the Georgia and Ar- menia Health Fund Development Project.

The working group developed a proposal that was used by the MoLHSA and Parliament for revising the format and content of SMIC’s medi- cal insurance programs for the year 2001.
It was considered that some of the most “radical” recommendations proposing elimination of certain less 139 Journal of Health Sciences Management and Public Health cost-effective programs from publicly funded benefit package were not feasi- ble for implementation.

This was due to the social and political economy fac- tors.
Nevertheless, MoLHSA continues to work on revising the content of BBP with the intent to allocate any addi- tional resources available each year for health to more cost-effective programs (e.g.

MCH, Program for Additional Medical Assistance to Vulnerable, etc) and increasing the coverage under these programs, while keeping less cost-effec- tive programs (e.g.

Program for Renal Dialysis, Program for Cardiac Surgery) at the level of funding reached in the year 2000-2001.
Further efforts will be directed towards revising the actual content of programs.

These include subgroups and a list of health services covered.

The intent is to set more ad- equate budget targets for those cost ef- fective programs that best match the poverty reduction objective.

2.

To change price-setting prac- tices for health services (state tariffs and standards) and reimbursement methods to health providers (providers and per- sonnel) participating in federal and municipal programs.
Efforts to this end were launched in the year 2001 to in- troduce reimbursement to strategic health providers according to the glo- bal budget, capita principle of financ- ing, simple payment modes in primary health care program (Program for Ad- ditional Medical Assistance to Vulner- able), and increase state medical stand- ard tariffs in some priority programs.

For the same purpose, state health care procurers (SMIC and PHD) purchase medications and health care instru- ments in a centralized manner.
This is to cut the cost of health care services under the state programs and propor- tionally increase accordingly the ad- equacy of state tariffs1.

This measure will be implemented throughout the years 2002-2003.

The embarkation of strategic partner health providers on a flexible global budget financing will be accomplished by the end of the year 2002.

This mode of financing will de- pend on the financial and qualitative indicators of delivered health care.
At the same time, up to 1200 state health care standards will be revised to incor- porate them into larger groups such as DRGs.

Further upward trends in state tariffs will help reach the actual mar- ket rates for health care and reduce in- formal payments from patients.

This will work against a shadow economy.

Plans attempt to introduce competitive state tariffs in all the state programs by the end of the year 2004.
The so-called internal standards will be simultane- ously unified in order for the state to implement a unified health care qual- ity control system.

The price-formation on unified standards will be continu- ally governed by market mechanisms2 and the standards unification will help eliminate the existing damping price practices.

3.
3.

To introduce new contract man- agement practices and enhances mana- gerial capacity of public agencies and critical health providers through train- ing and skills development.

Observance and evaluation of selective contracting principles and further optimization of providers participating in programs will continue to serve as an important ele- ment of the health care financing strat- egy for the next 4 years.
Any tangible effect through selective contracting may be achieved only through contracting medical care providers by state pro- curement organizations and improve- ment of managerial capacity.
Institu- tions participating in state programs must be selected in strict compliance with the provisions of the Law on State Procurements irrespective of their form 1 It should be mentioned that under the central tenders arranged in 2001, significant savings of 40% of total cost will be achieved as a result of the difference of the prices of medications under state standards and standard health care deliv- ery instruments against those fixed by tender 2 However, the question on introducing thresh- old prices on vital urgent medical acre and essen- tial medications and/or profit thresholds is under consideration 140 Journal of Health Sciences Management and Public Health of ownership.
However, attention must also be focused on the health care mar- ket specifics and the process of hospital sector restructuring that is underway in the country as provided by the Mas- ter Plan approved by GoG.

Further modifications must be made in the pro- cedure for the selection of providers to participate in state programs to ensure health care delivery quality require- ments for health providers and essen- tial protection of the rights of insured population.
This requires due and ad- equate training of personnel both within procurement organizations and respec- tive health care providers.

The utiliza- tion of domestic and international as- sistance resources in 2002-2006 must ensure the completion of formation of the critical mass of managers at local and mid levels who will aquire neces- sary training to become effective man- agers in the health sector.
Adoption and implementation of a comprehen- sive human resources development plan in the health management sector is seen as one of the core components of the WB-supported hospital restruc- turing and Primary Health Care Devel- opment Project.

Objective 4.

Improve risk pooling for substantial out of pocket spending on health Planned Activities: 1.
To introduce tax incentives for employers and persons purchasing pri- vate medical insurance to promote the development of private voluntary health insurance market.

This is an ac- cepted practice in many coutries such as USA and Germany where the mechanism of tax privileges has be- come a prevailing stimulus over private health, life and pension insurance.

This also leads to the establishment of a de- veloped insurance market and creation of the system for pooling costly risks.
During the initial stage starting in the year 2001, the tax privilege is proposed to account for 25-30% of payroll fund in order to prevent any abuse of this mechanism.

These fictitious amounts of insurance contributions through il- licit dealings with private insurance companies under weak administration of payroll taxes and mandatory contri- butions.

This would further reduce state resource mobilization for basic health care package financing.
The implemen- tation of this step requires finalizing, through respective econometric meth- ods, the optimal balance and, conse- quently, tax concession mechanism ena- bles maximizing strengths and mini- mizing any possible negative results.

2.

To promote development of com- munity-based voluntary health insur- ance and drug reimbursement schemes.
Community-based voluntary health in- surance and drug reimbursement schemes under various international programs have been piloted in some regions of Georgia throughout the years 1999-2001.

The IMC, DFID, WHO and MCI have launched in Imereti, Kakheti and Tbilisi.

At this stage it is early to assess ultimate success or failure of these projects.
Nevertheless, according to the available estimates, the nationwide de- velopment of community-based volun- tary health insurance and drug reim- bursement schemes or some of their components will have a markedly posi- tive effect on risk pooling and financial access to basic health care and medi- cations.

This requires adoption of ad- equate regulatory and normative acts to make it possible to develop such schemes on a larger scale.
Conse- quently, the pilot projects will have been assessed by the 2nd half of the year 2002 to produce subsequent recommen- dations in respect of the community- based voluntary health insurance and drug reimbursement mechanisms to en- sure successful implementation through- out the country (Year 2003-2004).

Objective 5.
Objective 5.

Increase the state and private financial resources that will be used in financing basic health care package The fulfillment of this objective re- quires implementation of several regu- latory and institutional changes to ra- 141 Journal of Health Sciences Management and Public Health tionally spend existing state and private resources within the unified health care financing policy.
The national health care accounts, available versions of at- tracting and combining health care fi- nancing alternative sources, and co- payment and risk pooling alternatives were utilized.

This was done within the grant to prepare WB Primary Health Care Reform Support Project (see Jim Mays, Moly Shiefer, Georgia Health Fi- nancing Study).

The assessment pro- posed a perspective model for further assessment of which should be taken on a practical level through pilot projects.
The monitoring and study of pilot projects will help assess the factors af- fecting accessibility, social equity and access to essential health care if this model is implemented.

Successful pilot projects or their components will spread throughout the country in order to achieve the five core objectives of the Georgian health care financing system.
jandacvis dafinansebis miznebis misaRwevad saWiro RonisZiebebi da danergvis gegma akaki zoiZe, levan kobalaZe, ioseb bregvaZe, merab qavTaraZe, Tamar gocaZe, nino moroSkina statiaSi aRwerilia is ZiriTadi RonisZiebani, romelTa gatareba aucilebelia jandacvis dafinansebis miznebisa da amocanebis misaRwevad.

amocanebi ki Semdegia: 1. jandacvisaTvis gamoyofili saxelmwifo finansuri saxsrebis mobilizebis 2.

3. gaumjobeseba.
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Semotana; im saxelmwifo da kerZo finansuri resursebis gazrda, romlebic gamoyenebuli iqneba samedicino momsaxurebis sabaziso paketis dafinansebisaTvis.

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