Towards an evidence-based scientific rationale neoliberal health reforms

• Andrey V. Ragozin
• Vladimir V. Grishin

Abstract

Neoliberal health care reforms have been underway in OECD countries and the Russian Federation since the 1980s, with the aim of limiting the availability of medical guarantees, containing public expenditures, increasing out-of-pocket payments, and replacing public administration with market mechanisms. The reason for these reforms in OECD countries is the low efficiency of their national systems of universal health care (UHC), whose cost growth outpaces economic growth. The authors explain the low efficiency of UHC systems in OECD countries by the unprecedented favourable conditions of their formation during the so-called “golden age of capitalism” (1945–1975), when the GDP of these countries grew much faster than health expenditures. This allowed the use of high-cost solutions of the past centuries: the view of medical guarantees as final consumption of households, “Bismarckian” labour taxation, market antagonism and information asymmetry of payer and provider, insurance mechanism of payment for medical services with high administrative costs and fragmentation of resources. In contrast, the first UHC system in the world, inherited by Russia from the USSR, was extremely efficient: it guaranteed universal accessibility and free medical care at many times lower costs than in OECD countries, and suffered from a lack of resources rather than a surplus. The authors explain the high efficiency of the Soviet UHC system by the conditions of its creation in a low-income country, which required breakthrough resource-saving innovations: a view of UHC as intermediate consumption, financing by general taxes, integration of payer and provider, refusal to pay for providers’ services by centralised financing of their current activities by a linear (itemised) budget. The successful experience of the USSR allowed a number of low-income countries – e.g., Mongolia, Algeria, and Cuba – to establish UHC systems. Given these circumstances, a conscientious scientific approach demanded that the original Soviet system be scientifically studied by Western UHC systems free of ideological stereotypes, that it be funded and further developed in Russia. However, the Soviet model was consigned to oblivion in the West as “communist”, despite the fact that many of its solutions are used by market economies and/or seen as promising – for example, general tax financing, its centralisation by a “single payer” and the payer-provider integration model successfully used in the US by Kaiser Permanente Corporation since the mid-20th century. In Russia, the ineffectiveness of the Soviet model was proved by its obvious advantage – its ability to guarantee universal accessibility and free medical care in conditions of low so-called “residual” financing, which was natural for the USSR as a middle-income country with high defence expenditures. During the neoliberal dismantling of the Soviet system, its proven effective innovations were replaced by high-cost solutions from high-income countries. At the same time, Russia remained a middle-income country with high defence spending, and the government’s financing of health care is as low and “residual” as in the USSR – less than 4% of GDP. As a logical result of the Soviet low financing and dismantling of the Soviet levers of efficiency, Russia ranks last in international ratings of the efficiency of national health care systems. Today there is a global failure of neoliberal reforms. OECD countries’ health care expenditures continue to grow faster than their economies, and Russia has de facto abandoned the Soviet principles of universal access and free health care: the growth of out-of-pocket payments has taken on alarming proportions. The authors consider the innovations of the Soviet UHC system to be non-alternative for low-income countries and conclude that the scientific rationale for neoliberal health reforms is of questionable validity.

Keywords: universal health coverage; UHC; neoliberalism, reforms; Nikolai Semashko system; USSR; low-income countries

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