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1 COMMENT THIS ARTICLE SEE COMMENTS ON THIS ARTICLE CONTACT AUTHOR March 1999 (Volume 40, Number 2) Development of State Health Insurance System in Georgia Temur Kalandadze, Ioseb Bregvadze, Revaz Takaishvili, Ann Archvadze, Nino Moroshkina State of Georgia Medical Insurance Company, Tbilisi, Georgia Since 1994, health resources in Georgia have became insufficient. The spending for the health care services per person in 1985 were US$95.5, US$12.2 in 1989, and US$0.9 in Currently there are 58.5 physicians per 10,000 inhabitants. The birth rate decreased from 16.7 in 1989 to 11 in The mortality rate of pregnant women due to extragenital pathologies, iron deficiency anemias (40% of the total pregnant women), iodine deficiency and complicated abortions are also on the increase. The State Parliament of Georgia decided to reorganize the health care system and, in August 1995, State Health Care Programs and the new system of reimbursement of providers were launched. The monthly contribution rate of medical insurance, which was 4% of the payroll (3% paid by the employer and 1% by the employee), is transferred from the Central Budget directly to the State Medical Insurance Company, which implements nine State Curative Programs. State medical insurance system co-exists with municipal and private health care. Municipal health coverage is closest to the universal coverage (over 80% of the population), and municipal health care services are the closest to a basic package of services satisfying most health care needs of the population. The exceptions are pregnant women and mothers and children under 1 year of age, who are covered by the Federal Programs under State Medical Insurance. Key words: assessment of health care needs; availability of health services; budgets; financial support; financing, Georgia; financing, governement; financing, public; health insurance; health services administration; health transition Georgia is a country with an ancient history and culture (1); it has its own alphabet and language. It is situated between Europe and Asia, sharing a border with Russia, Turkey, Armenia, and Azerbaijan. Georgia's west coast is on the Black Sea. The area of Georgia totals 69,500 sq. km with a population of 5.2 million. Georgia occupies the center and the west of the area known as Trancaucasus. From 1917 until 1991, Georgia was one of the Republics in the USSR. On April 9, 1991, Georgia regained its independence and became an active member of the United Nations in In 1994, by parliamentary decision, Georgia joined the Commonwealth of Independent States (former Soviet Union states). Changes after the Fall of Communism Since 1994, the economic and political climate has been changing rapidly, moving from a centrally planned to a market-based economy (2). This period in Georgian history is characterized by a political, economic, and social crisis. At the same time, the social bureaucratic style of management is such that it can neither meet the needs of the population nor cover all medical expenses for each citizen. Public resources have become insufficient for the improvement of the quality of health care services (3,4). A complicated reorientation process in the health system organization has been going on for almost four years. Following the Decree of The Head of State (December 23, 1994), the State Parliament of Georgia made a decision on the reorganization of the health care system (February, 1995), and in August 1995 State Health Care Programs and a new system of reimbursement of providers were launched (5). This crisis in health care has its source in insufficient funding and surplus number of physicians. Health care services per person were US$95.5 in 1985, US$12.2 in 1989, and only US$0.9 in 1994 (5). There are 58.5 physicians per 10,000 inhabitants in Georgia, compared to 27.7 physicians in the USA, 22.2 in Italy, 20.7 in Japan, and 25.6 physicians in France (6). The old model of public health care management did not have economic motivation for reaching effective outcomes. Technological and material basis of the health care was almost destroyed, a lot of obstacles and difficulties adversely affected the supply of pharmaceuticals, leading to the dissolution of the health care system and subsequent deterioration of the population health morbidity rate increased, birth rate decreased, and socially dangerous illnesses spread (3,5,7,8). Low salaries and

2 unstable economic situation made many outstanding specialists quit their jobs and leave the country. The Georgian medicine was actually on the way to a collapse. New Model of Health Care A new model of health care would have to provide: (a) coverage of medical care expenses according to the provider's expenditure; (b) free choice of health care providers by the patient; and (c) equal access to the basic package of health care services for each citizen (4,5,9). The State Health Insurance System (10,11), created under the Law on Medical Insurance (12), is based on the State Medical Insurance Company (SMIC, ref. 13) and the State Compulsory Medical Insurance Programs (5). SMIC (Fig. 1) is a special type of state organization with the mandate to administer the financing of the State Compulsory Medical Insurance Programs (14,15). These programs are financed by SMIC, which receives a defined amount from State Budget (under Annual Budget Law) and Medical Insurance Compulsory Premiums (collected by the State Taxation Agency). The monthly contribution rate in medical insurance was 4% of the payroll (3% to be paid by the employer and 1% by the employee) and was transferred from the Central Budget (Fig. 2). The State Medical Insurance Company implements nine State Curative Programs, draws payment contracts with health care providers, and financially administers payment orders to reimburse providers. Eligibility to access the State Medical Programs is in principle universal. Figure 1. Georgia's State Medical Insurance Company structure. Figure 2. Financing system of the State Medical Insurance Company (SMIC), Georgia. State Curative Programs The state curative programs (15) are: 1) on psychiatry; 2) on prevention and treatment of tuberculosis; 3) of obstetrics' care; 4) for the treatment of children under 2 years of age; 5) on additional medical aid for risk groups; 6) on treatment and prophylaxis of oncological diseases; 7) on hemodialysis; 8) on pediatric cardiosurgery aid; and 9) on treatment of infectious diseases. State Medical Insurance Company State medical insurance system co-exists with municipal and private health care. Municipal health programs complement federal programs of medical insurance with emergency care, care for children from 1 to 14 years of age, and adult health care. The Annual Budget Law defines the minimum municipal yearly allocation for health care (for 1998, the minimum was 1.65 Lari per person, with 1 Lari=US$0.77). Municipal health coverage is closest to the universal coverage (over 80% of the population), and municipal health care services are the closest to a basic package of services satisfying most health care needs of the population, with the exception of maternity and children under 1 year of age, who are covered by the federal programs under the State Medical Insurance. State Medical Insurance Programs contain a technical component describing the type of clinical interventions for particular diseases and prescribed content of services included in the respective State Medical Insurance Program, as well as a financial component (or the Program Budget) with the prices and a procedure for provider reimbursement. SMIC has its own status, powers, and responsibilities derived from its special status as a State organization fulfilling a specific State policy mandate. As a special type of organization, SMIC has a Director, who is appointed by the President after a nomination made by the Minister of Health. The Law on Medical Insurance instituted the Supervisory Council as the supreme managerial body of SMIC. The organizational structure of SMIC is determined by the Supervisory Council. SMIC is supposed to have full financial, managerial, and contractual independence. Financial independence is limited due to nature of income. SMIC is dependent on government allocations and, in case of underfunding, cannot actually influence the State Treasury in an effective way. On the other hand, premiums are not collected by SMIC and for them it depends on the State Taxation Agency. Managerial independence is relative because SMIC must execute State Medical Programs but these programs are designed and prepared by the Ministry of Health. SMIC only gives its approval to the Program content. Contractual independence could be less limited if SMIC would be able to select providers and fully determine the terms and conditions of the contracts. SMIC should have full authority to select accredited providers, with whom it contracts or by tender processes for competition. From February, 1996, to March 1, 1997, the duties of State Medical Insurance Company were framed only by Welfare Aid State Medical Program with the budget of 1,400,000 Lari. From March 1, 1997, State Medical Insurance Company had to implement six state medical programs

3 with the budget of 29 million Lari. From January 1998, the State central financial guarantee for medical care equals 38.8 mil Lari, including 9 state health insurance programs. Health insurance provides medical services based on the State Curative Standards/Protocols and includes both outpatient and inpatient care. In the technical component of the Protocols, the duration and volume of treatment is limited. The categories of the services, according to the Standards/Protocols, are defined for the out-patient care, such as clinical examinations, consultations, treatment and minor surgery, or for in-patient care, such as full medical supplies, clinical examinations, consultations, treatment, and major surgery. Health Status of the Georgian Population The social and economic crisis, stressful life, and civil war have influenced the health of Georgian population (7). During the last five years the demographic situation worsened considerably. For example, in 1989 there were 91,138 births, and only 53,000 in The birth rate decreased from 16.7 in 1989 to 11.0 in The mortality rate of pregnant women due to extragenital pathologies, iron deficiency anemias (40% of the total pregnant women), iodine deficiency, and complicated abortions also increased. There were 8 reported deaths due to complicated abortions in 1997, and 2 cases in The first necessary step to provide qualitative medical care for pregnant women is to improve their social and economical status. The mortality rate of pregnant women is much higher than in other countries, approximately per 100,000 live born children. The most common etiological factors are hemorrhage (46%), thromboembolism (21.6%), cesarean section complicated by sepsis and peritonitis (10.0%), gestoses (2.7%), complications during anesthesia (2.7%), extragenital complications (13%), and extrauterine pregnancies and complicated abortions (16.2%). During the last three years ( ), the mortality rate of pregnant women did not change significantly (58 per 100,000 live-born children in 1996 and 67 in 1997). The estimated risk is 1 death per 1,486 live-born children. The aims of the Program of Obstetric Care are to decrease the mortality rate of pregnant women and improve the outcomes of the care provided. A total of 42,272 pregnants gave birth in 1998; 32,309 of them (76%) normally whereas pathological incidents amounted to 6,345 (15%) with pathological complications and 3,618 (8%) with cesarean delivery. For each 1,000 livebirths there are 12.3 stillbirths. The highest birth rate prevailes in Samtskhe and Ajara (Table 1), where the religious population of muslims outnumber other groups. There are 320,000 citizens insured by the State Welfare Medical Program for Vulnerable Groups. The population defined as high risk population encompasses people with low income, refugees, physically disabled, etc. Outpatient services were provided 221,195 times and inpatient services 30,438 times for this population, with 2,752 of the services provided for the refugees. The analysis conducted by the State Medical Insurance Company has shown that certain groups of diseases are particularly common in this population (Table 2). According to the 1999 SMIC report, State program for children under 2 years of age had 133,659 insured children, with 1,136,639 individual services in outpatient care and 95,657 in inpatient care. In 1998, approximately every fourth insured has used outpatient care. Data in Table 3 show that in 1998 some outpatient services were used more than expected, and some were used much less than expected. Table 1. Birthrate (births per 10,000 inhabitants) in different parts of Georgia (1998) Table 2. Most common diseases among high-risk population groups (low income people, refugees, physically disabled, etc.) in Georgia (1998) Table 3. Frequency of the diseases in common fields of medicine in Georgia (1998), in comparison (%) to the expecteda number of these diseases Table 4. Incidence of hepatitis (% of all infectious diseases) in Georgia (1998) Table 5. Morbidity rate of tuberculosis (per 100,000 population) in different regions of Georgia (1998) Infectious diseases insurance program was established in 1998 and encompasses only 7 institutes in 4 regions. Over the years, 3,062 incidents of infectious diseases were recorded, 77 of those related to AIDS. The most common diagnoses were hepatitis (Table 4) and shigellosis (4.64%). Amebiasis (1,130 cases) was recorded in Tbilisi.

4 State program of tuberculosis care covers all regions of Georgia (Table 5). The main reason for high prevalence of tuberculosis in Ajara and Samegrelo is their geopolitical situation, with high humidity and a large number of refugees. Future Plans for the Health Care Reform Future plans aim to integrate financial sources, merging the financing flow into a single channel, i.e., merging health insurance contributions from the central and local budgets. In practice, this means that the Municipal Programs for Urgent Care and State Medical Insurance Programs will merge. As more employers register their workers and pay health care insurance for them, transfer from state budget will decrease. On the basis of computerized system for registration, analysis and eligibility to benefits, we will have more or less universal basic package of medical services and a universal health insurance card. Apart from the merge of health funds, the health care reform will include: (a) unifying registration and reimbursement mechanisms within Programs in terms of creating a universal guarantee; (b) stabilization of financial resources; (c) information management and the development of a communication network on human resources and development; and (d) structural development, shifting the functions of regional offices of SMIC from the supervisory to the managing of information and creating its own premium collecting facility. Realization of these goals may bring us to the State Health Insurance Universal Guarantee for the population. The main objectives of the health care reform are minimization of the Central Budget expenditures for curative needs of the population, shifting financial burden of curative expenditures to employer/employee, and parallel process of optimization of the Georgian health care system. They would allow the State health care system to become more manageable and more effective. References 1 Shengelia R. Study of the history of medicine in Georgia. Croatian Med J 1999;40: Georgian Economical Policy and Law Affairs Center. Georgian Economic Trends, Quarterly Report. IV Quarter Tbilisi: GEPLAC; Joint Experts Group. Aide Memoir on Health Sector in Georgia. Tbilisi: UNICEF/UNDHA/WHO; Ministry of Health. Statement of Development Objectives. Tbilisi: MH; Jinjolava T. The social-economic aspects of public health care reform. Medicine 1998 August 23:5. 6 Šarac I, Bagariæ I, Oreškoviæ S, Reamy J, Šimunoviæ V J. Physician requirements for the Croat population in Bosnia and Herzegovina. Croatian Med J 1997;38: United Nations Development Fund. Human Development Report: Georgia Tbilisi: UNDF; World Health Organization. Statistical forms concerning morbidity of tuberculosis and birthrate in Georgia. Tbilisi: WHO; Bregvadze J. Original way of development. Medicine 1998 October 22:4. 10 Fuenzalida-Puelma HL, Cordillo, NJ. Regulation of health insurance. Medicine 1997 August Kalandadze T. Medical insurance State guarantee. Medicine 1998 April 29:5. 12 Law of Georgia on Medical Insurance. Legal Acts of Georgia #3, Tbilisi: April 18, Ministry of Health of Georgia. Decree No Creation of State Medical Insurance Company as the state owned enterprise. Tbilisi: MH; Ministry of Health of Georgia. Decree No Concerning additional measures of social protection of employees by medical insurance within the recognition of the health care system. Tbilisi: Ministryof Health; February, Ministry of Health of Georgia. Decree No On additional measures for the improvement of health care system under market economy conditions. Tbilisi: MH; Recieved: March 18, 1999 Accepted: April 16, 1999 Correspondence to: Nino Moroshkina State of Georgia Medical Insurance Company K. Gamsakhurdia Avenue Tbilisi, Georgia nmoroshkina@usa.net