# **1. INTRODUCTION**

Following the dissolution of the central planning economic system in the Eastern Europe and Central Asia (ECA) region, most ECA countries began implementing a series of health care reforms (Dulitzky and Hou 2007); Georgia was no exception. The government of Georgia initiated health sector reforms in the mid 1990s with an aim to salvage a health system that was in crisis. Despite a decade of reform efforts, which saw the development of many sector policy papers and strategies, the actual improvement in health sector performance has been limited. The health system is still oversized, of poor quality, under-funded, inefficient, inequitable, and with low utilization rates. The health status of the Georgian population remains poor, as indicated by a high infant mortality rate compared with other countries in the ECA region.

Until 2006, the government had refrained from taking any drastic measures to change the organization of the health care delivery system and thereby improve the distressed health sector conditions in the country. Following deep-seated reforms in other areas, Georgian authorities turned their attention to the health sector two years ago and unleashed a fundamental reform process with the objectives of expanding access to and utilization of health services by increasing allocations from the public budget and by partnering with the private sector. One of the initiatives was the Medical Assistance Program (MAP), which has as its main objective improving the poor’s financial access to health care services. Under this program, the government of Georgia provides a Supplementary Benefit Package (SBP)<sup>2</sup> to the eligible poor, which covers the cost of acute and planned surgeries and inpatient services without any copayment or deductibles. The program was launched in June 2006 nationwide.

This paper provides the first impact evaluation of the MAP based on data from June 2006 to December 2006. The paper has two main findings based on the analysis from a Regression Discontinuity (RD) design and a three-part model. First, the MAP has significantly increased utilization of acute surgeries/inpatient services among beneficiaries. Second, the MAP has been successful in reaching the poorest among the poor.

The paper is organized as follows. Section 2 provides background on the Georgian health care system, and Section 3 describes the details of the MAP. Section 4 describes the data used in the paper. Sections 5 and 6 present the methodologies and results for the first and second finding, respectively. Section 7 discusses the findings and some of the policy implications.

# **2. BACKGROUND**

Georgia’s health care system was severely damaged in the conflict and economic collapse following the breakup of the Soviet Union and independence. Real per capita public expenditures on health declined from about US $13 in 1990 to less than $1 in 1994 (European Observatory on Health Care Systems 2002). The physical condition of medical facilities severely deteriorated, as did medical technology and equipment. Not surprisingly, health indicators declined sharply in

> 2 At the beginning of the implementation in 2006, the Medical Assistance Program was called the Supplementary Benefit Package Program. Later in 2007, it was called the Medical Assistance Program for the poor in order to avoid confusion; the MAP offers a full coverage of benefits, not supplementary benefits in addition to basic benefits.

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