On July 23, Ukraine’s Constitutional Court will hear arguments challenging the landmark 2017 legislation that overhauled the country’s healthcare system. It’s the latest salvo in an ongoing war pitting entrenched interests—empowered by the health minister—against the fundamental needs of patients and their families. Backsliding on Ukraine’s health reform has not attracted the same headlines as other reversals of reforms in banking, taxation, corporate governance, and the judiciary. But healthcare costs Ukraine about 7 percent of its budget, a huge slice of public spending that’s at risk of recapture by cronyism and corruption.
The key challenges have been around for more than thirty years. An unreformed inheritance from the Soviet era left the Ukrainian healthcare sector under-financed and held hostage to bureaucratic inertia and special interests. A network of shell companies, tightly connected to parliamentarians and government officials who profited from artificial price markups, controlled purchasing of drugs and medical equipment. The distribution of budget money to publicly-funded clinics and hospitals was governed more by the whims—and wallets—of politically powerful head doctors than by the needs of patients. Ordinary Ukrainians paid huge sums out-of-pocket for often atrocious medical care; over 600,000 Ukrainian families faced financial catastrophe each year because of demands for medical bribes or non-optional “charity donations” to clinics and hospitals.
The country’s 2014 revolution opened the same windows for change in healthcare as in other sectors. For a few years, the scope and pace of health reform were astonishing. The first step in 2015, driven by a long-standing fight against corrupt procurement in the Ministry of Health, turned pharmaceutical procurement over to UNICEF, the United Nations Development Program, and Crown Agents (UK). Buying medicines through international organizations brought transparency and eliminated corrupt intermediaries, reducing prices dramatically for vaccines and other drugs—and reversing earlier vaccine shortages that had led to outbreaks of measles, polio, and other vaccine-preventable diseases.
In 2016, under the first-ever truly reformist health ministry led by acting minister Dr. Ulana Suprun, work started in earnest on a new system of healthcare financing. Under the law passed in 2017, most Ukrainian adults have now signed a contract with a primary care physician of their choosing. A new single-payer agency, the National Health Service of Ukraine (NHSU), pays those doctors to deliver a clearly defined set of basic health services to each patient on their list, free of charge.
For the first time, private facilities are allowed to compete with state clinics for public funding, further expanding patient options. A new eHealth system and web-based NHSU dashboard provide continually updated, transparent data on delivery and financing of care and adherence to standards, dramatically narrowing the space for corruption. More than 70 percent of Ukrainians who have participated say they are happy with the quality of the care they now receive, and most doctors are pleased with salaries that have increased by a factor of two or three.
Hospital reform came next. The old model of financing hospitals per bed was scrapped. As of April 2020, hospitals are reimbursed based on the illnesses and conditions they actually treat, and again, freedom of choice is key: money follows the patient, and patients opt for the facilities offering the best care and producing the best outcomes. Most hospitals started to get ready for this new incentive structure back in 2017. With support from local governments, they renovated, bought new equipment, and did what was necessary to attract business.
It was intended from the start that most hospitals would thrive, but not all would survive this phase of the reform intact. Local governments were expected to prioritize. Where there is excess hospital capacity, the authorities may decide to invest in the best, re-profile some, merge others, and close a small number beyond repair.
There’s little disagreement on the numbers so far: under the hospital reform, 954 hospitals— that’s almost two-thirds of them—have signed contracts with the NHSU for more money this year than they got from the 2019 budget. The rest have seen their budgets reduced to varying degrees, from a few percentage points to as much as half. This is exactly how things were intended: stop throwing money away on facilities with few patients and substandard quality.
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Before the reform, there wasn’t reliable information on the number of medical institutions in the country. Different registries listed different facilities, with duplications and omissions. Nobody knew how many patients needed treatment for what conditions, or what medical services were being performed where. How was rational resource allocation possible in this environment? The NHSU dashboard now publishes the amount of each contract concluded with each facility, the specific medical services and procedures performed, and the resulting outcomes. Good hospitals will be able to make the case to local governments to invest in enhanced infrastructure and upkeep. With more equipment and staff, their service menus and volumes under NHSU contracts can grow. They’ll be successful.
This is all now at grave risk. Ukrainian President Volodymyr Zelenskyy has cycled through three different health ministers, and the latest—former Odesa governor Maksym Stepanov, appointed in March 2020—seems determined to unravel most of the progress that has been made. From the start, Stepanov has lambasted the reform, calling it “sabotage” that puts Ukraine’s doctors “under attack,” a “pseudo-reform” imposed by mysterious, hostile forces hell-bent on destroying Ukrainian medicine. It’s an increasingly common riff, not just in the health sector, a pushback against Western-sourced ideas, and it seems to be the main message Zelenskyy is hearing. Administrators and staff of the medical institutions suffering the largest cuts have bombarded Zelenskyy’s office with social media posts, in-person protests, and—noting his media consumption preferences—recorded videos. In early May, Zelenskyy said the reform can’t possibly move forward in its current form. Stepanov and the Rada’s health committee followed suit with statements supporting “improvements” to the reform, which means going back to spreading money around to every hospital regardless of the quantity or quality of services rendered. They have yet to propose a constructive alternative.
Zelenskyy is being misled. Healthcare financing and service delivery are complex, politically sensitive subjects, and amid the cacophony of voices complaining about the recent changes, it may seem like the simplest solution is just to go back to the way things were. As an emotion-driven, intentionally deceptive rallying point, it’s easy to decry the closure or downsizing of even one hospital. But the reality is that the hospitals being re-profiled, combined, or eliminated are not well-equipped facilities with robust, qualified staff. Instead, these are awful places where nobody would reasonably want to get medical care. They are mostly small, dilapidated, moldy buildings from which the more capable doctors and nurses fled long ago.
The facilities whose budgets are being cut haven’t been chosen randomly, or on the basis of some political agenda or the lobbying talents of their head doctors. Instead, the NHSU is now paying hospitals the money they need to deliver specific types and volumes of medical care, based on their capacity and track records of patient demand. Is Stepanov really going to take money away from the hospitals that have modernized and are thriving by returning to the old budget model and propping up low-quality care?
Some of the loudest complaints insist that the specific amounts the NHSU pays doctors, clinics, and hospitals for individual services are too low. But the NHSU has meticulously calculated these tariffs and adjusted them where appropriate for heroic work in a sector that is still overall catastrophically underfunded. At this point, it’s more likely that some doctors are upset that the new, transparent processes net them less than the old system of bribes and kickbacks. Head doctors, many of whom have been in place for 20-30 years, or have essentially inherited their positions from their fathers, used to control all the cash, doling out crumbs to the other doctors and support staff. No wonder most regular doctors routinely asked for extra payments to make ends meet.
Many facilities also traditionally profited from monopolies on specific types of health services. This is now threatened because the NHSU will contract for those services with any clinic or hospital that has the necessary mix of equipment and qualified staff to perform those procedures. And the new system topples complex arrangements where head doctors and their political patrons profit from renting space in state hospitals to private clinics; now the NHSU enters into the same transparent contracting arrangements with public and private providers alike.
Stepanov is also attempting a direct takeover of the NHSU. Its inaugural head, Dr. Oleh Petrenko, resigned in late 2019 over a “difference of values” with the health ministry leadership. The ongoing process of selecting its new director is shrouded in controversy. An initial round of competition in May produced three finalists with uniformly sterling credentials, including NHSU management experience. But Stepanov—without explanation—declared them unacceptable. He re-opened the search and conducted online thirty-minute interviews with nine other candidates in early June, one-on-one, without the pretense of oversight. On June 2, Olga Stefanyshyna, a member of parliament and former deputy health minister, was rebuffed as she attempted to enter the ministry and livestream the meetings on Facebook. Stepanov claimed that pandemic-related restrictions had forced him to hold the sessions in private, but it’s a disingenuous excuse when the country had already re-opened gyms and malls. He course-corrected following intense criticism from anti-corruption watchdogs and now says that he’ll appoint someone soon, but on an interim basis for the duration of the quarantine period. It’s widely assumed that he intends to name a pre-chosen ally who will help him dismantle the reforms from inside its cornerstone institution.
Meanwhile, under the din of this threatening chatter, business has been proceeding as planned. Under the skilled leadership of interim head Oksana Movchan, the NHSU has been paying for delivery of medical services, including four new packages of services for patients with Covid-19. It’s cycled almost half of all medical professionals through the new NHS Academy, providing a clear, consistent vision of the new principles of healthcare financing. It’s also doing a full-court press in defense of the previous reforms, posting informational updates across social media platforms in both Ukrainian and English, and hosting virtual meetings with donors and representatives of patients’ organizations to rally support.
There’s scant middle ground here. Sure, there’s always room for important tweaks around the margins. The level of NHSU payments for specific services can be adjusted, if the money is there. New accommodations can be made for emergency and infectious disease services, especially during a pandemic. More deliberate planning and investment is needed to re-profile excess hospital capacity into diagnostic or outpatient surgical centers, long-term care facilities, and hospices. There still aren’t enough doctors in rural areas—a problem that predates the reforms. There’s specific hang-wringing about closure of tuberculosis and psychiatric hospitals, but the NHSU has carefully analyzed that infrastructure and is currently preparing top-off payments to support more humane, home- or community-based arrangements.
But any adjustments must respect the fundamental principles of transparency, access, equity, and efficiency. Sustaining the momentum of health reform was part of the recent IMF deal, and it’s integral to the portfolios of USAID, the World Bank, the EU, and other donors. It ought to be a bigger part of the public conversation about Zelenskyy’s performance. Activation of the independent steering committee to oversee the NHSU and other key health sector institutions—named almost a year ago but still not confirmed by the Cabinet of Ministers—might provide continuity and legitimacy, insulating the reforms from periodic waves of political heat. International partners could usefully work with key Ukrainian leaders to review and update the basic health sector strategy document, confirming their continued support and providing a framework for new investment.
Ukrainians deserve better than to be misled and swindled by entrenched interests desperately trying to reclaim the ground they deservedly lost in 2017. Failure to save Ukraine’s health system will drain money away from necessary medical care in the middle of an acute health crisis. After a few years in remission, Ukraine’s health sector is in critical condition again.
Judy Twigg is a professor of political science at Virginia Commonwealth University and a leading expert on healthcare systems in the former Soviet Union. She tweets @jtwigg9.
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