World Bank Study of Ukrainian Healthcare
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Ukraine: The Social Sectors during Transition
A World Bank Country Study

Chapter 1
Social Conditions and Social Protection
Chapter 9
Health Services

Electronically Reproduced with permission of The World Bank

Chapter 1

---------------------- INTRODUCTION ----------------------

1. As part of the former USSR, Ukraine participated in a socialist society that tried to guarantee universal access to a minimum standard of living. Two statistics often used to assess the standard of living are life expectancy and infant mortality: on these indicators, Ukraine stood, on the eve of its independence, well below the West (and East) European countries but somewhat above middle-income countries from other parts of the world (see Table 1.1). Some analyses show that the former socialist countries fell behind Western Europe on these indicators in the past score of years, with adult mortality having risen perceptibly because of the higher incidence of circulatory and respiratory diseases, which were being brought under control by modern preventive medicine in the West. Ukraine was probably somewhat better off in terms of schooling attainment, ranking nearer its European neighbors and performing well in international competitions. An extensive system of day care facilities may have assisted early learning, in addition to permitting very high levels of women's participation in the labor force.

2. The system of social protection included state-provided education and health; pension benefits for the elderly, disabled, orphans and widows; family allowances and student stipends and subsidies for basic food and services that lowered living costs for all consumers. The cost was about 25 percent of GDP (8 percent each for social services, pensions, and food subsidies, and 1 percent for family allowances; see Table 1.2 and Executive Summary Figure S.1 [Latter is not included here]). About 40 percent of all Ukrainians were entitled to one or more cash benefits at the time of independence.

      Table 1.1: International Comparison of Social Indicators
                    (most recent year available)
                           GDP      Life Ex-   Mortality    Total
          Population   Per Capita   pectancy    Per 1000  Fertility
Country   (Millions)   (Dollars)    at Birth   Live Births  Rate
Ukraine         52        n.a.            71        20         1.9
Turkey          56.1      1,630           67        60         3.5
Poland          38.2      1,690           71        16         1.8
Chile           13.2      1,940           72        17         2.5
Mexico          86.2      2,490           70        39         3.3
Hungary         10.6      2,780           71        15         1.8
CSFR            15.7      3,140           72        12         2.4
Australia       16.8      14,360          77        8          1.9
UK              57.2      14,610          76        9          1.8
Italy           57.5      15,120          76        9          1.3
Netherlands     14.8      15,920          77        7          1.5
France          56.2      17,820          77        7          1.8
Germany         80        20,440          75        8          1.4
USA             248.8     20,910          76        10         1.9
Sources:  WDR 91, 92; IMF et al. 1991 report on USSR for Ukraine,
1989; and Poland social sector study (World Bank).
3. The collapse of output in enterprises, combined with the urgency of maintaining the real value of cash benefits and public salaries, led to a crisis in 1992 in which programmed spending for social protection reached an inordinately large proportion of a shrunken GDP. A major issue is how to continue to provide for social needs despite the extreme scarcity of resources. To help address that issue, it is helpful to review the basic demographic structure, how the labor force is deployed, what the safety net now provides, and what vulnerable groups require priority attention.

       Table 1.2: International Comparison of Public Spending
                  on the Social Sectors, 1989-1990
                     Percent of GDP Spent on Social Sectors(1)
                                    Education and
Country           Welfare(2)           Health              Total(3)
Ukraine               9                   8                    25
Turkey                0.9                 5.6                   6.5
Poland               16.1                 8.3                  24.4
Chile                11.1                 5.2                  16.3
Mexico                2.4                 2.9                   5.3
Hungary              19.6                 6.1                  25.7
CSFR                 15.5                 1.3                  16.8
Australia             7.9                 4.6                  12.5
UK                   12                   6                    18
Italy                18.5                 9.4                  27.9
Netherlands          22.1               12.3                   34.4
France               17.3               11.9                   29.2
Germany              14.3                 5.5                  19
USA                   6.7                 3.4                  10.1
Notes:    1.    Excludes state and local government spending for
                most countries, which distorts comparisons by
                making large federal systems, like the US, appear
          2.    Includes housing, amenities, social security and
          3.    Ukraine includes 8 percent of GDP in general
                consumer subsidies 
Sources:  WDR 91, 92; IMF et al.1991 report on USSR for Ukraine,
1989; and Poland social sector study (World Bank).
4. Ukraine's population is 51.8 million, making it one of the larger countries of Europe, and growing over the past decade by about 0.3 percent per year. Two-thirds of the population is urban, and one-third is rural. The three largest of the 26 oblasts are highly industrialized: Donetsk (5.3 million), Dnipropetrovsk (3.9 million), and Kharkiv (3.2 million). The smallest are the western oblasts of Chernivtsi (0.9 million), Volyn (1.1 million) and Ternopil (1.2 million) (see Table 1.3).

5. The age structure of Ukraine is very close to that of Portugal with 21.4 percent of the population less than 15 years of age, 66.4 percent between 15 and 64, and 12.1 percent 65 or more years of age. The population is somewhat older than that of Europe as a whole or the neighboring countries of Belarus and Poland, or North American countries such as Canada, but is younger than that of the United Kingdom or Sweden. This structure has several implications for social programs. First, the demands of the elderly are substantial and growing, particularly because women receive pensions beginning at age 55 and men at age 60, with some workers eligible for an even earlier pension entitlement. (Continuing to work does not reduce pension rights.) The pension-eligible population will grow from under 11 million in 1989 to over 12.2 million by the year 2000; there were 37 retirees for each 100 people of working age, and there will be 42 per 100 at century's end. The resource requirements for retirement benefits will grow accordingly, unless steps are taken to raise the age of retirement, now 55 for women and 60 for men, to the level of most OECD countries, which is 65 for both sexes. Second, the requirements for heavy spending on child health and education so familiar in developing countries should pose less of a burden. As evidence consider the high labor-force participation rate of about 50 percent. Only 40 percent of the population in most countries, both richer and poorer, are working; women in Ukraine usually have one birth or two (the total fertility rate is 1.9) and with maternity leave and day care are able to continue in their working careers. With relatively fewer children than most countries, the requirements for education spending could also be less burdensome. Finally, the mature demographic structure implies a more mature labor force that should as a result be more productive than one dominated by youthful and inexperienced workers. The age structure differs by oblast; those with the largest proportion of persons 60 or more years of age are Chernihiv (24.7 percent), Poltava (22.7 percent) and Cherkasy (22.5 percent) while those with the smallest proportion are Zakarpattia (12.6 percent), Kiev city (12.7 percent) and Crimea (15.0 percent).

6. Ukraine has a high female-to-male ratio. There were 116.7 females per 100 males reported in the 1989 census, a markedly larger ratio than 105.2 in Poland in the same year, reflecting losses during the Second World War. This ratio is more pronounced with increasing age and in certain oblasts. In Ukraine as a whole, 22.4 percent of women are 60 or more years of age compared to 12.8 percent of men, while in oblasts like Chernihiv, Poltava and Sumy, 28-31 percent of women are 60 or more years of age compared to 15-17 percent of men.

One in ten women in the country as a whole is 70 or more years old. One in seven is 70 or older in these three latter oblasts. The largest number of women 60 or older is found in Donetsk, Dnipropetrovsk and Kharkiv, the largest oblasts.

7. A World Health Organization (WHO) report estimates that 2 million pensioners in Ukraine live alone. Many of them are likely to be elderly women living without spouses, alone and in rural areas. Of the 0.5 million pensioners estimated to require daily social or medical assistance, only a third receive such care, much of it in hospitals and smaller health facilities. Health-service institutions care for the lonely elderly who cannot care for themselves. Elderly women make up a vulnerable group that is growing and deserves priority for social and health support programs. Dislocations expected during the transition to a market driven economy will add to the difficulties faced by this group in the future.

Table 1.3: Population Growth, Ukraine, 1981-1992 (in Thousands)
          1981(1)    1985      1990       1991(2)   1992
TOTAL     50,169.8   50,914.1  51,636.8   51,745.8  51,801.9
MALE      22,954.3   23,402.9  23,884.1     n/a       n/a
FEMALE    27,215.5   27,511.1  27,752.7     n/a       n/a
Sources:  1.    Years 1981-1990 WHO/EURO-ESR Unit May 19, 1992 Mid
                Year Estimates
          2.    Years 1991-1992, MOH. Ukraine 1992 is as of 1st
8. At birth, life expectancy in Ukraine was 70.5 years in 1990, up from 69.7 in 1981, but significantly below the target of 75 years set by the European Regional Office of WHO for its region (WHO) and actual experience in Europe. The average life expectancy at birth for 27 countries in Europe in 1989 was 74.0 years and for European Community countries in 1988 was 76.2 years. Prom birth, males had a life expectancy in 1990 of 65.6 years, an 87.9 percent chance of surviving to age 45 and a 59.7 percent chance of reaching age 65. Prom birth, females had a life expectancy of 74.9 years and chances of survival to ages 45 and 65 are 95.2 percent and 81.7 percent, respectively. This survival pattern to ages 45 and 65 is marginally worse than in neighboring Belarus and Poland, and much worse than in Portugal, the United Kingdom, Sweden, and Canada (see Table 1.4).

9. Since 1983 the birth rate in Ukraine has been falling more quickly than the death rate, which showed a relatively sharp upswing in 1990. Data for 1991 and the first quarter of 1992 show a net natural decrease in the population of -1.1 and -3.1 per hundred thousand population, respectively. The total fertility rate fell from 2.1 in 1985-86 to 1.9 in 1990; the net decrease in population is also linked to a deterioration in the health status of mothers and infants during the economic crisis (see Health Annex Tables 5, 6 and Figure 3). The collapse of output and declining incomes in 1991 and 1992 undoubtedly led to deferral of marriages and births. Ukrainian authorities fear that this demographic reversal of normal conditions (births exceeding deaths) will have negative implications in the longer run.

10. The demographic picture of an aging population with growth rates below natural replacement has important implications for the health system. There is a critical need to develop family planning policy that responds to the social and other factors contributing to demographic losses. A shorter-term need is to improve the care of mothers and infants. And, as in the industrialized countries, Ukraine must redirect its health system to respond to present and new needs in the next decade arising from an aging population and greater numbers of adults of working age. The redirection will affect the training of health care workers, the present structure of different levels of health facilities and their roles and locations.

   Table 1.4: Life Expectancy and Survival by Gender, Ukraine and
Selected Countries
                Age:   0         1         15        45         65
Ukraine 1990
     L                65.6      65.6       52.2      25.8       12.5
     S               100.0      98.5       97.6      87.9       59.7
Belarus 1990
     L                66.2      66.1       52.6      26.2       12.9 
     S               100.0      98.6       97.8      88.4       60.7
Poland 1990
     L                66.5      66.7       53.1      26.1       12.5
     S               100.0      98.2       97.6      89.7       61.8
Portugal 1990
     L                70.1      70.0       56.5      29.3       13.8
     S               100.0      98.8       98.0      91.5       72.4
United Kingdom 1990
     L                73.0      72.6       58.9      30.4       14.2
     S               100.0      99.1       98.7      95.3       78.2
Sweden 1988
     L                74.2      73.7       59.9      31.5       15.0
     S               100.0      99.3       99.0      95.2       80.3
Canada 1989
     L                73.7      73.3       59.6      31.5       15.3
     S               100.0      99.2       98.8      94.5       78.4
                Age:   0         1          15        45         65
Ukraine 1990
     L                74.9      74.8       61.2      32.6       15.8
     S               100.0      98.9       98.3      95.2       81.7
Belarus 1990
     L                75.8      75.5       62.0      33.2       16.5
     S               100.0      99.0       98.5      95.6       82.8
Poland 1990
     L                75.6      75.6       61.9      33.1       16.2
     S               100.0      98.6       98.2      95.6       82.8
Portugal 1990
     L                77.3      77.0       63.4      34.6       17.0
     S               100.0      99.0       98.5      96.0       86.6
United Kingdom 1990
     L                78.7      78.2       64.4      35.3       18.1
     S               100.0      99.3       99.0      97.2       86.3
Sweden 1988
     L                80.1      79.5       65.7      36.6       18.8
     S               100.0      99.5       99.3      97.3       88.9
Canada 1989
     L                80.6      80.1       66.3      37.3       19.8
     S               100.0      99.4       99.1      97.1       87.9
Note:     L:    Life Expectancy at Age X. For example, a male age
                0 has a life expectancy of 65.6 years in Ukraine;
                a male age 65 has a life expectancy of 12.5
                additional years.
          S:    Percent of the Population Surviving to Age X. For
                example, 98.5 percent of males survive to age 1 in
                Ukraine; 59.7 percent survive to age 65.
Source:   1991 World Health Statistics Annual, WHO Geneva 1992
11. The relatively poor health status of people in Ukraine compared to other European countries demonstrates the effects of age and chronic conditions. It also points to the need to deal with communicable diseases, to ensure safe food, water and air, to provide for ongoing acute care needs, and to meet the needs unique to the ecological conditions of the country.


12. The leading causes of death in Ukraine are much the same as for the OECD countries. Over 75 percent of deaths are from diseases of the circulatory system (44.9 percent M, 60.0 percent F), malignant neoplasms (19.1 percent M, 13.5 percent F) and injuries, adverse effects, homicide and other violence (14.4 percent M, 3.8 percent F). Respiratory diseases are the fourth leading cause of death. The crude mortality rate is 1,219 per 100,000 (1,246 for males, 1,196 for females).

13. The Standardized Death Rate (SDR) for Ukraine, 1,142 per 100,000, is comparable to Poland but 6 percent higher than Belarus, 20 percent higher than Portugal, 30 percent higher than the European average, and 57 percent higher than Canada. The SDR for circulatory diseases is 45 percent greater than Portugal's and two times the rate for Canada. The cerebrovascular SDR is particularly high, 29 percent higher than Belarus', 2.6 times the rate in Poland and 3.7 times the rate in the United Kingdom. Mortality from malignant neoplasms was the third highest in the former Soviet Union including trachea, bronchus and lung cancers, and has been increasing. Mortality rates from ischemic heart disease, injury and poisoning and motor vehicle injury are relatively high and are increasing. 14. Infectious disease continues to cause avoidable deaths. The SDR for infectious diseases is 55 percent higher than in Belarus, 33 percent higher than in Poland and three times as high as in the United Kingdom. About 4,500 people died of tuberculosis in 1990. Except for persons 75 and older, age-specific SDRs for tuberculosis in Ukraine are greater by two to nine times than in Poland, which is generally acknowledged as having one of the significant tuberculosis problems in Europe (see Health Annex Tables 7, 8, 9). The World Bank's World Development Report 1993, "Investing in Health," gives special emphasis to tuberculosis control as one of the highest priorities and most cost-effective, public health interventions.


15. Infant mortality has been gradually decreasing over the past decade and reached a low of 13.0 per thousand live births in 1990, but then began a sharp upward swing reaching 15.0 in the first quarter of 1992. This high rate is still well within the WHO/EURO Region target of 20 per thousand live births and is 25 percent less than Poland, but it is 25 percent higher than Belarus and Portugal and more than twice as high as Canada and Sweden. Some local studies, e.g., in Ivanofrankivsk, have shown rates well above 20.

16. Infectious and parasitic diseases, respiratory infections, and birth defects are the main causes of infant mortality in Ukraine. The SDR for infants (less than one year old) from infectious and parasitic diseases was 82.5 per 100,000 for males and 64.6 per 100,000 for females in 1990. This was better than Poland, worse than Belarus, and worse by a factor of 8-9 than Canada, where the 1989 rates were 8.9 for males and 6.3 for females per 100,000. The SDRs for diseases of the respiratory system are twice the level of infectious diseases: 162.3 per 100,000 for males and 136.4 for females. Two thirds of the rate is due to pneumonia. Canadian rates for respiratory diseases were 15.5 for males and 12.5 for females, per 100,000. Most infant deaths, however, were from congenital malformations, birth trauma and conditions originating in the perinatal period. These birth defects account for two-thirds of all infant mortality on a standardized basis. One quarter of all mortality is from congenital birth malformations (414.4 M and 355.5 F per 100,000). Mortality from birth defects in Ukraine is generally comparable to Belarus, better than Poland, but much worse than Portugal, the United Kingdom, Sweden or Canada. The SDRs for the United Kingdom for congenital birth deformations, for example, are 173.9 for males and 139.8 for females, per 100,000.

17. The maternal mortality ratio was 32 deaths per 100,000 live births in 1990, the same as that for Belarus and an improvement from 44.5 in 1980. The rate is well above the WHO/EURO target of 10 and is triple the rate in Poland, four times the rate in the United Kingdom, and eight times the rate in Canada. Approximately 45 percent of maternal mortality is caused by obstetrical conditions and abortions. Age-specific abortion mortality rates are comparable to Belarus but higher than Poland, four times as high as Portugal and the United Kingdom, and significantly higher than Sweden and Canada (see Health Annex Figures 5,6,7).

18. Maternal and infant health remain poor despite the fact that all births occur in hospitals, and primary and secondary care services are widely available. Improvements are necessary in laboratory and technical equipment for diagnosis of prenatal and perinatal conditions.

19. Abortion is the principal form of contraception due to lack of information and access to modern contraceptives. Estimates indicate that up to two-thirds of the population is uninformed about modern contraceptives. The incidence of contraception for women of fertile age (15-49) including abortion, oral contraceptives and intrauterine devices (IUDs) is 17.9 percent and varies among oblasts from a high in Zhytomyr of 31.0 percent to a low in Lviv of 4.9 percent. The incidence of abortion as the sole means of contraception for Ukraine is 8.3 percent and ranges from 14.2 percent in Zaporizhzhia to 3.7 percent in Lviv. Ukraine does not produce its own contemporary contraceptive products. Access to contraceptives will deteriorate with price increases and curtailment of imports in the transition to a market driven economy. The abortion rate was 155 per 100 live births in 1990, among the highest of former Soviet Union countries. The rate has been increasing since 1987 when it was 145. This is equivalent to 82.6 abortions per thousand women in the fertile age and compares to 55.7 live births per thousand women in the same age. The total number of abortions has decreased from 1.66 million in 1986 to 1.02 million in 1990, but the numbY? of live births and females of fertile age has also decreased. Many women have multiple abortions.

20. The impact of abortion on the health of women and on health system costs is significant. In Ukraine 30 percent of women who had an abortion suffered from subsequent inflammatory diseases of internal genital organs, 50-60 percent from secondary sterility, 50 percent from complications of pregnancy, 22 percent from miscarriages and 13-15 percent from uterine bleeding during deliveries. Because of these complications of abortion, the health system must provide added numbers of gynecological beds and resources for treatment that would be unnecessary with fewer abortions. Hospital costs of treatment for complications of abortion have been estimated at 3-4 billion rubles in 1991 (see Box 1.1).

Table 1.5: Ministry of Health Estimated
Demand for Contraceptives for 1991
                                    Value in
                                    Million            $US
Denomination          Number         Rubles         (Million)
Condoms              468 million      702             14.04
Hormonal             9.9 million      114             18.05
  Contraceptives        packs
Intra-uterine        2.4 million      39.6            40.32
  Contraceptives        items
TOTAL                                                 72.41
Source: Ministry of Health
21. The combination of poor infant and maternal health, the high rate of abortions, and demographic patterns of net natural decrease in the population indicate a need to make family planning policy an important social priority. Progress towards a national program is slow, indicating insufficient government support. A priority within the new policy must be to ensure access to modern contraceptives as an alternative to abortions. Family planning services need to be strengthened. They are available in theory in marriage counseling centers and from health workers, but their focus is on diagnosis and treatment of infertility rather than on the provision of advice on family planning methods. Only 30 percent of contraceptive needs are being met. The Ministry of Health estimated the cost of meeting the contraceptive needs of the population at 846 million rubles in 1991, significantly less than the 3-4 billion rubles estimated as the cost of hospital care for treating post-abortion complications. A decrease of 14 percent in the total number of abortions between 1986 and 1990 is attributed to the greater availability of contraceptives. This trend needs to be supported by further increasing the availability of contraceptives and family planning services (see Table 1.5). External technical and financial assistance could play a critically important role in providing such services until the availability of foreign exchange eases with the expansion of export earnings.

              Box 1.1: Indicators of Hospital Resource
                     Allocated to Abortion, 1991
1.   Supply of gynecological beds (including
     abortion cases)                                          37,055
          y rate per 10,000 total population                     7.2
          y estimated rate per 10,000 females                   13.4
2.   Excess average days occupancy of gynecological
     beds over average occupancy of total beds                6 days
3.   Number of women undergoing abortion                     957,000
4.   Cost of an abortion in Kiev                          650 rubles
5.   Percent and number subsequently treated for
     complications of inflammation disease as a
     result of abortion                                   30 percent
6.   Proportion and number that can expect to be
     cured with one treatment                                   half
7.   Proportion and number requiring treatment for              half
     resulting chronic condition                             143,550
8.   Average number of courses of treatment for
     chronic condition                                           5-6
9.   Average courses of treatment                            21 days
10.  Average 1991 cost per treatment                    3,505 rubles
11.  Number of women undergoing treatment for
     infertility (largely associated with 
     complications of abortion                                52,161
Source: Khodorovsky, G., 1992
22. More than for mortality, interpretation of data on morbidity is difficult in Ukraine, as in other former Soviet Union countries. An all union institute in Moscow developed norms for supply and utilization of facilities and services. Expectations were clear that the norms should be met. Politically safe morbidity data often followed, resulting in information that now presents an ambiguous picture of the use of health services. Based on the number of outpatient consultations and admissions to hospitals, the estimated rates for morbidity reported in Ukraine are among the highest in the former Soviet Union. Incident and prevalent cases of respiratory disease account for the largest proportion of reported morbidity, 53.5 percent and 33.9 percent, respectively. Incidence of diseases of the nervous system and sense organs is next highest (8.1 percent), followed by diseases of the skin and subcutaneous tissues (5.5 percent). For prevalence, circulatory system diseases are next, (16.3 percent), followed by diseases of the nervous system and sense organs (9.3 percent).

23. WHO reports that circulatory disease morbidity accounts for 21 percent of all adult morbidity, the highest in the former Soviet Union, similar to Belarus. Respiratory morbidity in children accounts for 60 percent of childhood diseases and 25 percent of adult diseases. Since the accident at Chernobyl, the incidence of certain respiratory diseases, particularly pneumonia and asthma, has reportedly been increasing. Children suffer at the highest rate of congenital anomalies among the former Soviet republics. There is particular attention paid to the diagnosis, monitoring and treatment of increasing thyroid-related pathologies, cancers, related hematological diseases and genetic defects in newborns of parents at risk. Reports indicate that 60 percent of children have some degree of thyroid modular hyperplasia, particularly in highly irradiated areas of the country.

24. Mortality from infectious and parasitic diseases is about twice the European Community (EC) average. Diarrheal diseases are reported on the increase partially due to the decreasing quality of the water supply. According to WHO, diarrheal diseases caused by bacterial infections are rarely diagnosed. A UNICEF/WHO mission in early 1992 estimated the real coverage for infants in 1991 by vaccination for DPT is 75-79 percent rather than the much higher reported levels. Coverage was 89 percent for measles in children under age two, and 81 percent for polio myelitis for infants. BCG, measles, and DPT vaccines were found to be in short supply. WHO standards on cold chain maintenance were not always met.

25. An increase of 29 percent in reported Hepatitis A is one indicator of poor sanitation and hygiene conditions. There is a risk that Hepatitis B may be transmitted through inadequately sterilized syringes that are reused. At the end of 1991, 257 HIV positive cases were reported and identified; 8 cases of AIDS have been documented, which have resulted in 6 recorded deaths. Authorities believe there are some 500 HIV infected individuals in the country.

26. Incidence of alcoholism in Ukraine was the second highest in the former Soviet Union republics, 136.4 per 100,000 in 1990. Incidence of drug abuse was also the second highest at 7.1 per 100,000. There is concern at the Ministry of Health about levels of tobacco use but apparently no survey data. Interest is emerging among the international tobacco industry firms in marketing tobacco products in the country and exploiting Ukrainian-produced leaf products. These developments could pit the health of the population against immediate economic gain for a few. The government should develop public health policies to limit tobacco use by means of education, limits on advertising, and other measures to convince the young not to start smoking. If they are successful, thousands of lives could be saved a dependence on a disease causing product avoided.

27. Food consumption patterns in Ukraine traditionally relied on satisfactory levels of cereals, potatoes and meat; diets were relatively high in dairy products and sugar. Price increases and shortages are distorting these patterns. In 1991, reports indicate people ate 58 percent less meat, milk and eggs than in the previous year and the consumption of fruits and vegetables dropped by 20-30 percent. Health promotion requires an effective nutrition, food, and health policy. Changing to a healthier diet with less fat and cholesterol but more fiber, fruits and vegetables could solve the current high levels of adult mortality caused by stroke, heart attack, and cancer.


28. High rates of occupational injury are documented most notably among miners in Donetsk oblast. Occupational diseases are under-reported, but pneumoconiosis, chronic dust bronchitis, and other occupational diseases are documented, mainly in coal miners. A large secondary lead smelter in Konstantinovka accounts for the very high exposure of its 1,600 workers, and many of the city's residents, to lead poisoning. Other heavy-metal and chemical- exposure-related incidents and illness have been reported in industrialized areas.

29. High concentrations of pollutants in ambient air, including dust, oxides of nitrogen, and carbon monoxide, are documented in concentrations considerably higher than the guidelines of the former Soviet Union and of the United States would permit. Metallurgical plants in a number of cities account for most of their total air pollutants. Resultant illness, such as exacerbation of chronic lung disease or occurrence of lung cancer, cannot be readily documented with public health statistics. The Ministry of Health, however, reports that morbidity from oncological, skin, blood and urinary-system diseases is higher than average in certain cities, suggesting that illness may be attributable to elevated levels of industrial pollutants. The rate of spontaneous abortions (miscarriages) in two industrial cities with high air pollution has been found to be twice the rate of a clean control city. The rate of congenital anomalies was found to be three times the control rate in the same study.

30. Apart from reported increases in thyroid cancers, and an indication of increased mortality and morbidity of congenital defects over the past few years, data from the Ministry of Chernobyl has not yet revealed clear-cut evidence of health effects from the Chernobyl disaster. More time will be required before there are sufficient statistical data to relate leukaemia and various cancer incidents to the release of radioactive materials. A recent Lancet editorial dated October 3, 1992, reviewed 30 scientific studies of mortality and concluded that "environmental pollution is unlikely to result in gross excess mortality, and, therefore, cannot be responsible for variations in death rates between populations.

Chapter 9

1. This chapter reviews the organization and management of health services, health finance, and current issues that need to be addressed to enhance sector efficiency and effectiveness. Between July, 1992 and March, 1993, the Government of Ukraine started to implement a number of the reforms suggested here.


2. Health system goals need to focus on reducing illness derived from preventible communicable diseases, chronic diseases, respiratory infections in children, tuberculosis in adults, alcoholism, smoking, and pollution. The challenge will be to redirect the present system so that it takes advantage of progress made internationally in the conceptualization of health and information on its determinants to meet new chronic-care needs of an aging population, and to contribute to the health and well-being of the whole population.

3. Priority for protecting the health of adults and the elderly, as well as for the ongoing needs of children and vulnerable persons, will have to be maintained in the special context of added requirements to respond to the Chernobyl disaster and other ecological insults that undermine health status, and to the international interest such events have generated. It will be particularly important to separate real from imagined health effects of Chernobyl by relying on sound scientific principles and findings and limiting unnecessary institutionalization of separate programs to deal with them. Otherwise, the drain of Chernobyl-associated programs on the economy, and the attention and resources they divert from other area of real health needs, will leave parts of the population less well cared for than is necessary.

4. The Minister of Health is part of the executive level of government and functions as the chief executive officer of the Ministry. The Ministry is organized around five functional lines of which four are headed by Deputy Ministers. The First Deputy Minister acts in the capacity of the Minister when he is away. The fifth line is headed by the Chief Financial Officer. Three key top level committees are the Executive Committee, the Academic Medical Council and the Pharmaceutical Committee. This senior level structure has direct responsibility for certain health care facilities, scientific research and teaching institutes, and general administrative and professional practice control over other health care institutions. The Ministry also has general administrative control over state distributing and manufacturing enterprises for pharmaceutical, general and medical supplies and medical technology. Sanitary epidemiological services, delivered through 780 centers and core public health services through 700 centers, are provided directly by the Ministry. Health programs, facilities and education are managed by the Ministry of Health, health offices reporting to oblast and regional governments, the Ministry of Education, and other ministries and enterprises (see Figure 9.1).

5. The Ministry of Health (MOH) manages some specialized and teaching hospitals and clinics, research centers, and medical schools. In addition, the office has informal links with, and informal supervision of, oblast-level health offices. The Ministry of Education sponsors secondary-level health services training schools and schools for disabled children that combine education and health facilities. Some other ministries run their own clinics. The Ministry of Social Welfare operates specialized programs and facilities for the elderly and disabled. Some enterprises operate sanitariums and clinics, and these are subsidized by the Social Insurance Fund. The Chernobyl Fund subsidizes Chernobyl victims' health care services provided by most of the above health care providers. Each oblast has its own health office reporting to the oblast presidential delegate. These offices run specialized hospitals and supervise and support regional-level health offices. Regional health offices report to regional governments and run the overwhelming majority of the nation's hospitals, polyclinics, sanitariums and public health projects.

6. Health services are funded almost entirely by general government revenues and accounted for 7.4 percent of GDP in 1992 (see Table 9.1). Resources raised through the Social Insurance payroll tax, 3.4 percent of health funding, subsidize workers' visits to sanitariums. The Chernobyl payroll tax accounted for about 2.3 percent of sector resources, and supported a variety of health care for Chernobyl victims. Private individuals' expenditures finance only 3.3 percent of health services and are incurred primarily when public sector practitioners see patients in state-run facilities after official office hours. In addition, enterprises often provide clinics and sanitariums for workers and their families. Enterprise support for worker health care is shrinking rapidly as firms' profits decline.

Figure 9.1:  Organization and Financing of the Health System
                |  State General Revenues  |
                |     Primarily VAT &      |
                |  Enterprise Profit Tax   |
                /-------------------------- \
              /             |               \
            |/_            \|/              _\|
      ------------    --------------     ----------------
     |  Ministry  |  |   Ministry   |   |Other ministries|
     | of Health  |  | of Education |    ----------------
      ------------    --------------        /    \
       /     \    \                |      |/_     \
     |/_      \    \               |   ---------  _\|
 ------------- \    \_________     |   |  Own   |  -------------
| Specialized |_\|            |    |   |clinics |  |Programs for|
| hospitals & |  ----------   |    |    --------   |pensioners  |
| clinics     | |Research  |  |   \|/              |and disabled|
 -------------  |& training|  |   ------------     ------------
                 ----------   |   |Vocational |
                              |   |health     |
   Subsidy (in theory)  _____\|   |training   |
   & non-binding budget      /|    -----------
   advice                     |                                   
 ------------            -----------        --------------
|  Oblast    |_________\|  Oblast  |______\| Specialized  |
| government | Primary /| health   |      /| hospitals &  | 
 ------------  funding  | offices  |       | clinics      |
      /|\                ----------         --------------      
       |                          |
 --------------------             |Subsidy and
|Oblast general      |            |binding budget
|revenues (primarily |            |advice
|central government  |            |
|revenue sharing)    |           \|/
 --------------------            ----------------
 \            __                | Regional       |
  \            /|               | health offices |
   \__________/                 /----------------
                               /     |     |   \
 Funds redistribution         /      |     |   _\|
 across regions              /       |     |    -------------
                            /       \|/    |   | Sanitoriums |
                           /   ----------  |    -------------
            Primary______\/   |Hospitals | |   
            funding      /     ---------- \|/
                        /               ---------
 ---------          ------------       | Clinics |
|Region   |_______\| Region     |       ---------
|general  |       /| government |
|revenues |         ------------
\       _ 
Funds redistribution
across regions
             ---------              -------------
            | Profits |__________\ | Enterprises |
             ---------           /  -------------
 -----------         -----------       -------------------
| Earmarked |       | Social    |     | Enterprises'      |
| Payroll   |______\| Insurance |____\| clinics, hospitals|
| Tax       |      /| Fund      |    /| & sanitoriums     |
 -----------         -----------       -------------------
7. Health care spending was budgeted at 17.5 percent of 1992 social sector spending, and 7.7 percent of GDP. Approximately 87 percent of health care spending is devoted to treatment facilities, and hospitals alone account for two thirds of disbursements. Research and education account for about 3.3 percent of expenditures; public health, 2.7 percent; 39 pharmaceutical subsidies, 2.3 percent; and other expenditures, 4.7 percent. Each of the above-mentioned categories' share of total spending has been relatively constant over time (see Table 9.2). June 1992 forecasts called for wages to account for 27 percent of expenditures by the Ministry of Health and local health offices in 1992; equipment, 11 percent; drugs, 8 percent; and all other inputs (primarily maintenance of, and supplies for, facilities), 54 percent (Table 18).

8. High and uneven inflation across health care inputs and increasingly restrictive budget constraints have precipitated large changes in the composition of spending over the last three years. Since January, 1992 average health sector wages have been required by law to equal average industrial wages. Despite this legislation and the resultant real wage growth in the health sector, wages will account for about 27 percent of total spending in 1992, down from 53 percent in 1989. Maintenance of, and supplies for, facilities absorbed 25 percent of resources in 1991, up from only 13 percent the year before. The Chief of Finance for the Ministry of Health predicts that these inputs' share of total spending will continue to increase over time as their costs are rising much faster than general inflation. Equipment spending increased from 3.9 percent of the health budget in 1989 to 11 percent in 1992. Pharmaceuticals accounted for 10.6 percent of health care expenditures in 1989. While pharmaceutical prices have risen faster than those of almost any other input, it has become extremely difficult to obtain drugs so that quantities available have fallen dramatically. Construction outlays declined from 5.2 percent of total spending in 1989 to 0.1 percent in 1992, reflecting the fact that the state is focusing on immediate needs during the current budget crisis.

9. In the past, budgeting was done on a top-down basis. The Ministry of Health developed a budget for the entire Republic that had to be approved by the Ministry of Health for the USSR. This budget was funded from USSR general revenues. Ukraine's Ministry of Health then distributed funds to each of the nation's oblasts and these funded regions which funded individual hospitals, clinics, and programs. Budgeting was based on the number of hospital beds in service. The state established how many hospital beds and clinic positions should be available per 10,000 people in a geographic area and, in turn, these requirements determined staffing and equipment levels and budgets. No consideration was given to policy priorities, demographic characteristics of individual areas, or usage levels of individual facilities.

Table 9.1: Uses of Health Care Funds, 1992
                       Total          Percent of     Percent GDP
                     (million           Total
Facilities            183,611             87.0           6.7
  Hospitals           140,613             66.6
  Sanitariums          21,980             10.4
  Ambulatory Clinics  11,820               5.6
  Other Health Centers 5,171               2.5
  Ambulance Services   2,368               1.1
  Blood Transfusion     1,459              0.7
  Capital Construction   200               0.1
Public Health(1)        5,778              2.7           0.2
Education               5,342              2.5           0.2
Subsidies for           4,835              2.3           0.2
Research                1,608              0.8           0.1
Other(2)                9,860              4.7           0.4
Total(3)              211,032           100.0            7.7
1.   Additional public health expenditures are included in the
     budgets for specific facilities.
2.   Additional treatment for Chernobyl victims and private
     payments for health services not included elsewhere.
3.   Does not sum exactly due to rounding
Sources:  June 1992 Drafts of the 1992 Budgets for the Ministry
          of Health, Social Insurance Fund, Chernobyl Fund,
          Pension Fund and Employment Fund.
10. In 1992, the budgeting process was reversed from top-down to bottom-up (Figure 9.1) so that individual hospitals and clinics prepared budgets that consolidated at the regional level into a health budget to be approved and funded by the regional government. While funding for regional health facilities is derived from regional budgets, oblast governments can require regions to modify their health care spending, and sometimes provide subsidies to poorer regions. Also, oblasts redistribute revenues from richer to poorer regions, thereby reducing the disparity in social sector spending across regions. Since health care is funded primarily at the regional and oblast level, if a person receives treatment outside his home oblast, his city must compensate the facility for costs incurred.

11. The MOH consolidates oblast budgets with budgets from national level facilities. The Ministry remains in a position to exercise control over methods and procedures in the delivery of treatment and care at the sub-national level, but it no longer has formal control over financial activities. In theory, the MOH can provide subsidies to poorer oblasts, but in practice the economic crisis has prevented it from doing so. The choice of budgeting procedures varies even within regions and is left largely to individual facilities. Budgeting is based either on the number of beds or people, or on the usage of specific services during the previous year. The Ministry of Health would like all budgeting to be done based on past usage of services. It cannot require this change in planning procedures, but has convinced many hospitals to make the switch voluntarily. Nevertheless, the Head of Finance of the Ministry of Health estimates that over one-half of Ukrainian hospitals used the norm-based budgeting system in July 1992.

12. In previous years, budgeting was a once-a-year exercise. Due to the uncertainty of prices, wages, and government revenues, budget makers have revised their 1992 spending estimates every other month since November 1991. Revision is time consuming because the budgets are not computerized. In Kiev blast not even the oblast-level hospital uses a computer for this purpose. According to the Chief of Finance for the Health Office of Kiev oblast, most regional hospitals have computers, but they lack the software and training to use them for budgeting.

Table 9.2: Percentage Distribution of Ministry of Health
Spending on Local Health Inputs, 1989, 1991, and 1992
                                     Percent of Total
                          1989            1991           1992
Inputs                   Actual          Actual        Forecast
Wages                     53.3            47.4           27.0
Maintenance and Supplies  13.4            25.4            NA
Pharmaceutical            10.6             6.3            8.0
Food                       8.2             6.9            NA
Construct                  5.2             2.1            0.1
Capital Repair             4.0             3.6            NA
Equipment                  3.9             5.9           11.0
Other                      1.4             2.4            NA
Total                    100.0           100.0          100.0
Source: Ministry of Health


13. The Ministry of Health oversaw 24,464 health facilities in 1991 which together employed 1,351,482 people, an increase in personnel of 2 percent from the previous year. The facilities include 48 scientific-research institutes (0.7 percent of total staff), 18 institutes of higher health education (1.7 percent of staff), 3,766 hospital facilities, 6,423 ambulatory centers as well as various other institutions such as ambulance centers and blood transfusion stations. The 3,766 hospital facilities had 671,096 beds (129.6 pY? 10,000 population). They are organized into a hierarchy of facilities at the district, central regional, city and oblast levels, as well as various specialty centers. There were 201,923 physicians employed (39.0 per 10,000) and 539,940 mid-level health personnel (104.2 per 10,000). The administrative complement was 61,219, or 5.7 percent of health care facility staff, which includes the 203 persons working for the Ministry and 15-30 staff for health administration at the oblast level. The Ministry staff is far too small to ensure both strategic management of the health system and responsiveness to questions and requests for information from the press, the public, and the legislature.

14. There were 144 non-MOH hospital facilities in Ukraine and 501 ambulatory facilities with a total of 28,376 beds and 23,257 physicians in 1990, all run by other ministries and enterprises. The bed-and physician- supply ratios for Ukraine, with these facilities added, were 135.5 beds and 42.9 physicians per 10,000 in 1990, levels that are very high compared to the lowest OECD levels. For example, the low OECD bed supply rate is 21.0/10,000 and the low physician supply rate is 7.3/10,000, about one-sixth of the levels in Ukraine. The hospital admission rate in Ukraine in the Ministry of Health facilities is 24.3/100 population compared to the low OECD rate of 5.5/100; patient days per capita are 4.0 compared to the OECD low of 0.7; and length of stay is 16.5 days compared to the OECD low of 6.1 days. 15. Even taking into account the poor status of facilities, equipment and their quality, there is a clear case for reducing the number of hospitals and staff. Closing some wards and whole facilities will permit re-deployment of resources to ensure their more effective use in health promotion, illness prevention, treatment, and rehabilitation. Removing expired and technologically inappropriate resources from the system would limit expectations that they will be replaced or modernized. Closing facilities will also make possible significant budget cuts to reduce the strain on the government budget.

16. The MOH needs a strategy for the pharmaceutical industry to secure inputs for production of basic drugs, supplies and equipment. The government should also encourage a major private sector role in the industry within an effective regulatory framework. In the past, Ukraine produced one third of the 2,200 medical products produced in the former Soviet Union, but with many key inputs of raw materials coming from Russia, other former Soviet Union republics and the West. Only 8-10 percent of raw material inputs for production in Ukraine could be procured from within the country.

17. Ministry officials report that in 1991, the equivalent of US$800 million of drugs and raw materials were imported to Ukraine principally from Soviet republics. In 1992, the value of imports dropped to zero because of the breakdown of exchange in the former Soviet Union and a hard currency shortage in Ukraine.

18. The pharmaceutical and medical products industry is near collapse for lack of inputs. Barter among health care facilities was being used to obtain required drugs. Extensive substitution was common, often for drugs not considered an optimal choice for treatment. The most urgent needs identified by a visiting WHO team include the following items:

a) drugs--insulin and oral anti-diabetics, hormones, including creams and ointments, anesthetics, bronchodilators, broad spectrum antibiotics and analgesics;

b) supplies--glass and disposable syringes, needles, cold chain equipment, and renewable, basic, medical and surgical supplies; and

c) equipment--insulin purification equipment/technology, clean room for aseptic production/technology, diagnostic, an aesthetic sterilization, and replacements for old, non functioning and expired surgical equipment.

A way to clear the bottleneck needs to be found so that basic drugs and medical supplies can be obtained by importation or production, depending on the emerging comparative advantage of these potential industries in Ukraine.

19. Ukraine needs technical assistance to help identify its areas of comparative advantage in pharmaceutical and medical equipment production. Donors could help finance imports of essential drugs and supplies for pharmaceutical production and technical assistance for short-term planning for procurement and distribution.

20. There is no production of blood substitutes in Ukraine and the quality and quantity of blood products available needs improvement. The Institute of Hematology and Transfusion, MOH, monitors the quality and safety of services provided by a network of some 630 blood transfusion centers. Three plasma fractionation facilities operate in Ukraine. The present system and facilities need to improve the safety of products and services, to increase the volume of production, and on a basis that supports priority needs of the health system, to increase the number of blood products available. Plasma production will need to be increased and a new plasma fractionation plant may be required. To achieve these ends will require a new central testing laboratory using Western reagents, the introduction of modern equipment and technology into the 27 blood centers to increase their production of plasma, and a computer-based management information system for monitoring and coordinating services. The starting point for such a program is a strategic plan for blood services, avoiding an expensive high technology initiative that diverts attention from such seemingly prosaic, but critically important, health needs as programs for the elderly.

21. Institutes for Higher Health Care Education train physicians in general practice, pediatrics, preventive medicine, dentistry, and pharmacy, with specialization in the final year. The system is being changed this year to improve quality. The MOH needs technical assistance in the form of training materials, curricula examinations, quality assurance, and total quality improvement methods and programs. From 1993, there will be a reduction in the intake of first-year students by 500 per year for a period of three years to achieve a norm of 34 physicians per 10,000 population. Some medical schools have been considered for closure, particularly in the western oblasts where there is an oversupply of physicians. Reducing intakes to medical training institutes is a sound beginning to medical human resources planning. More needs to be done, including further review of the norm for physician supply, which is still higher than most OECD countries.

          Table 9.3: Sources of Funds for Health Care, 1992
                            Total                   Percent of
                          (million     Percent of   Government
Source                     rubles)       Total        Revenues
State and Local
   General Revenues       191,987         91.0           12.3
Payroll Taxes              12,079          5.8            0.8
Social Insurance Fund       7,211          3.4
Chernobyl Fund              4,868          2.3
Individuals                 6,967          3.3            NA
Total                     211,032        100.0           13.5
Note: 1.  Includes state and local general revenues and resources
          of the Pension, Social Insurance, Employment and
          Chernobyl Funds.
Source: June 1992 Drafts of the 1992 Budgets for the Ministry of
Health, Social Insurance Fund, Chernobyl Fund, Pension Fund and
Employment Fund.
22. Nurses are trained in 109 mid-level health education institutions reporting through oblast health administrations. These mid-level institutions train seven categories of health worker; about 30,000 nurses are trained per year. The roles of nurses and physicians are quite different from those in some OECD countries, with physicians providing much of the care nurses provide and nurses functioning like nursing auxiliaries. There are plans to decrease first year intakes and close some nursing schools. More consideration could be given to the future role of nursing in Ukraine in relation to international practice.

23. A program of consolidation and reform of health legislation has been initiated as a result of moving legal responsibilities from Moscow to Kiev. This reform has produced several levels of draft legislation for eventual consideration by Parliament. Compared to Western health legislation, the present draft versions tend to include widely different types of functions in the same bill, ranging from general principles to budgetary matters such as the requirement to spend no less than 10 percent of national income on health, to benefits relevant to an employment agreement. Advice from a team of health professionals with experience in developing health legislation that reflects contemporary health principles and system development directions would be valuable to Ukraine. The team would be likely to include a legal professional with significant experience in writing health legislation.

24. There is a need for all parties involved in developing legislation to become familiar with international directions before setting the basis for delivery of health services. These include the 1948 WHO Charter definition of health, the 1978 Alma Ata Declaration on Health for All and definition of primary care, the 1986 Ottawa Charter on Health Promotion, the 1988 Adelaide Consensus on Health Public Policy and the 1991 and 1992 Swedish and Brazilian agreements on a sustainable basis for health through reducing waste, avoiding over consumption, and limiting environmental risks.

25. From the perspective of the recent past, Ukraine is likely to be getting reasonable value for the money spent on health care. Its health status indicators compare well with those of the former Soviet Union and a number of its former republics (with the exception of indicators such as with alcoholism, drug abuse, abortions, and congenital defects). Health status needs considerable improvement if it is to approach OECD levels. Yet health sector expenditures will have to shrink to reduce the pressures on the government budget. Several countries are able to do more with less;?; so can Ukraine.

26. Introducing greater efficiency into the health system is one important way of doing more with less. A valuable strategy is for the Ministry voluntarily to review the present budget and seek ways to reduce it but still maintain its services. Budget reduction must be done in a way that continues services provision to vulnerable groups. In particular, care must be taken to maintain the de facto social service function carried out by clinics and feldsher stations in villages where there is a large elderly population, mainly female, that relies on local health facilities for support in daily living. The budget-cutting strategy should focus on measures that result in ongoing as well as one-time savings. Table 9.4 shows 1992 budget allocations for health, recommendations for 1993, and an estimated sustainable level of health spending beyond 1993. Ukraine historically used about 3 percent of GDP for health care, and government will have to cut back from the 7.7 percent of 1992. But reductions can offer a chance to improve efficiency and quality. By 1994, Ukraine could have a stronger and better system than it has today if the recommended changes are made.

27. The following steps are already under consideration in the MOH or, in selected cases, by early 1993, they had already been taken in whole or in part:

* Outpatient Care. Shift 30 percent of inpatient procedures and treatments to ambulatory care that can be done safely on an outpatient, ambulatory basis.

* Personnel Norms. Revise norms for bed and physician supply to make them closer to international comparator levels, and link staffing to the care needs of the patient not to the number of beds available.

* Excess Capacity. Withdraw unnecessary hospital beds from service, preferably by closing whole wards in order to gain full impact of staffing reductions; rationalize hospital service delivery by retaining only programs relevant to service area needs, especially in rural and oblast facilities, and closing nonviable, unnecessary hospitals.

* Medical Education. Decrease the intake of medical students (and possibly middle level health personnel; rationalize the number of medical school facilities and close those that are unnecessary.

These changes could reduce spending on hospitals considerably, with no loss in quality of service. The expenditure scenario in Table 9.4 provides for a 30 percent reduction from 1992 to 1993 in hospital spending. This cut may seem large, but the 1992 budgeted level was far above previous years' spending levels. The 1993 recommendations call for other categories of spending, except for Chernobyl-related health spending, which could be covered from other accounts, to remain the same.
           Table 9.4: Current, Suggested, and Sustainable
                     Policy for Health Spending
                  Percent of GDP under Alternative Approaches
                                      Suggested     Sustainable
Spending                 1992          Program        Program
Category                Budget         for 1993     Beyond 1993
Hospitals                 5.1             3.8            3.1
Other Facilities          1.6             1.6            1.3
Public Health(1)          0.2             1.0            1.2
Public Health
  Education               0.2             0.2            0.1
Subsidies for
  Pharmaceutical          0.2             0.1            0.1
Research                  0.1             0.1            0.1
Other(2)                  0.4             0.2            0.1
Total, Health(3)          7.7             7.0            6.0
Spending Category              Policy Actions Required
Hospitals                 Shift a third of all treatments to out-
                          patient care
Other Facilities          Strengthen basic care and community-
                          based care but with fewer physicians
Public Health(1)          Invest in health promotion, anti-smoking
                          campaign and a program to reduce injury,
                          other prevention programs
Subsidies for             Prepare plan for imports from West;
  Pharmaceutical          selected local production capacity
Notes:    (1)   Additional public health expenditures are included
                in the budgets for specific facilities. 
          (2)   Additional treatment for Chernobyl victims and
                private payments for health services not included
          (3)   Does not sum exactly due to rounding.
Sources:  June 1992 Drafts of the 1992 Budgets for the Ministry
          of Health, Social Insurance Fund, Chernobyl Fund,
          Pension Fund and Employment Fund.
28. In 1993, the Ministry of Health was already taking a number of these recommended steps, including the closure of beds in the past year, and reviewing the feasibility of other closures. The decision to cut medical school enrollment is sound, since unemployment among physicians is already appearing. The MOH may close some schools for training middle-level health personnel and has shifted some treatments and procedures to an ambulatory setting. However difficult it may be, medical school closures must be addressed.

29. By acting now, the Ministry can lay the basis for long-term health system efficiency and effectiveness with the following four components in its strategic vision:

* Financing imports of essential drugs and supplies for pharmaceutical production, to include (i) short term planning for acquiring the required drugs and supplies and determining how, when, and where they will be distributed to ensure that priority needs are met, and (ii) developing a strategy for the pharmaceutical industry in Ukraine to secure supplies for the population, encouraging a major private sector role within an effective regulatory framework.

* Introducing reforms in health-system management to improve effectiveness, to include (i) planning a strategic health policy that focuses on primary care, health promotion, and healthy social and physical environments; (ii) rationalizing the structure and functions of the health system from the Ministry level down, reinforcing local participation, accountability, and responsibility; (iii) developing contemporary methods for financial planning and control based on program budgeting; (iv) rationalizing relationships between the MOH and the Ministries of Finance, Environment, Education, and Social Welfare to strengthen MOH control and accountability for its stewardship of the health system; (v) introducing modern health information system methods that bring together health status, clinical, financial and utilization data streams in an integrated way for managing the system at each level; and (vi) developing and enabling coordinated regulatory legislation; and (vii) improving the quality of services and their delivery by introducing quality assurance, and accreditation methods.

* Strengthening and modernizing primary care (basic) health services, including those targeted to women and children, family planning services, and the elderly, to include (i) introducing health promotion, and strengthening prevention programs; (ii) introducing family planning programs to enable women to have more control over their reproductive role; (iii) increasing access to contraceptives to lower the present high rate of abortions, including the possibility of developing a productive capacity for self-sufficiency in contraceptives; (iv) strengthening child health programs for women and children to lower present levels of morbidity and mortality; (v) assisting other vulnerable groups, particularly persons with long term psychiatric illness; and (vi) developing a range of health and support programs, both institutional and home based, to meet the needs of the elderly.

* Developing health personnel, including assistance with restructuring the present approach to training medical and other health professionals, and initiating health management training, to include (i) restructuring the process of training health professionals, introducing new curricula, teaching, and examination methods; (ii) introducing the concept of "approved acts" as a basis for defining the role and scope of practice of a health profession to permit laborKŪ??stitution effects, strengthening the role and profession of nursing.

* Planning the financing of health service delivery through a national health insurance scheme, including (i) the principles for its delivery and their economic implications, (ii) the relationship of the scheme to other social safety net programs; (iii) alternative arrangements for organizational responsibility and accountability for its implementation and operations; (iv) associated reforms necessary for the viability and success of the scheme in the health sector financial administration and other areas, and their relative timing; (v) enabling legislation; and (vi) a strategy for implementation and a plan and timetable for organizing and proceeding with the scheme.

These steps, if introduced in 1993, can help lessen the demands on hospital care because they help prevent illness, as with abortion-related hospital costs that would be avoided with family planning services. Management improvements can both reduce costs and improve quality.

30. The introduction of health insurance has been characterized by some as a way to solve many of the financial problems of the health system. However, a health insurance scheme does not create new money in the economy for health care. Financing will have to come from existing resources. Health insurance introduces a new set of complex dynamics into the health system that can adversely affect service delivery. Premature introduction of health insurance can lead to financial problems, distortions in priority for service delivery, and distraction away from the need to deal with more fundamental problems in the health system. Several East European countries, especially the Czech and Slovak Republics and Hungary, are experiencing serious difficulties because of the ill-timed introduction of a health insurance scheme. Once such distortions set in they are very difficult to overcome, a particularly dangerous situation since the distortions would add to the problems of the present ineffective system.

31. Proceeding at this time with the introduction of health insurance is premature for a number of reasons: (i) the instabilities in the economy; (ii) the absence of management and financial administration tools; (iii) the lack of consensus among key stake holders on values and principles of a new scheme; and (iv) the need to study the financial implications and implementation requirements. Nonetheless, planning assisted by experienced health-finance specialists from OECD countries should continue as a part of strategic management for the health sector.

Copyright 1993, The World Bank All Rights Reserved