A different direction: Market reforms will completely realign the sector

Over the two decades since democracy and the free market were instituted in Mongolia, a steady process of health care reform has taken place. The introduction of national health insurance, administrative changes that include decentralisation and rationalisation of facilities, as well as international financial and technical support, have helped the system recover from the ructions of transition. Reform has stepped up a gear in the past three years and Mongolia is currently in the process of implementing a wide-ranging restructuring of the health system, with more changes set to affect delivery, regulation and financing.

PRIMARY CONCERN: One of the key changes is the health law that was passed in the spring 2011 session of parliament. The main provision of the legislation is a shift from the Soviet-era, hospital-based system to a more modern public-health-based model. The implementation of the new system is expected to take around five years. According to S. Enkhbold, the director of the Ministry of Health (MoH) Strategic Policy and Planning Department, “The focus is now on prevention, which is preferable to corrective care. We are moving toward an international model of health care.”

The changes laid out by the law include changing soum, or district, group practice hospitals to primary health care centres (PHCs). This will change them from being corrective care institutions focused on inpatients to being community health centres with a public health remit, where basic treatment and consultation is given, and where referral to hospitals can be made for any necessary further treatment.

Through these reforms, Mongolia aims to create a vertically integrated system with a clearer referral progression from primary to secondary and tertiary care for those who need it. Currently, as in many health systems around the world, hospitals are burdened with visits from patients who would be better treated in a PHC, while small community health centres in turn are using resources to treat inpatients, which a large hospital would be better equipped to handle. “Previously, soum hospitals’ financing was determined by their bed occupancy, so they had an incentive to keep beds occupied,” M. Adiya, the director of the health project run by the Millennium Challenge Account - Mongolia (MCA), told OBG. “Their change to PHCs puts the emphasis on early prevention and referral.”

INTEGRATION: The next five years will see many Mongolian hospitals changed from “mono-profile” operations, as previously administered during the Soviet era, to “multi-profile”, or general institutions. Under the mono-profile system, many hospitals focus on treating single conditions, such as cancers, trauma or neurology. Multi-profile units operate several specialist departments, as is common in many developed countries. The changes will transform district hospitals into general hospitals, offering a range of services, including surgery, maternity, dermatology and gynaecology, bringing sophisticated care for a variety of conditions to the population and enhancing economies of scale.

Better integration should tackle the disconnect between different stages of care. According to Claude Bodart, a health specialist at the Asian Development Bank (ADB), the separation between health structures and a lack of proper referral processes mean that postoperative care can often be burdensome to patients.

DONOR BACKING: The reform process is being supported by the ADB. The bank has allocated an $14m grant for the wide-ranging Third Health Sector Development Project (THSDP). The major focus of the THSDP is strengthening primary care, including clarifying the legal framework, which is unclear regarding the status of family group practices in urban areas.

The programme aims to help the implementation of the health law by strengthening standards at PHCs in return for the centres receiving a greater share of public funding. Capacity at soum PHCs is being increased, for example. Home-care services are also under development, partly for the purpose of taking pressure off PHCs, which often face an influx of elderly people in winter seeking beds and food, as well as treatment.

A separate ADB project, running from 2008 to 2013, supports Mongolia’s efforts to increase hospital autonomy, moves which dovetail with vertical integration and financing reforms. At present, hospitals are bound to rigid budgetary rules and must return unspent funds to the government at the end of the year. When the reforms are fully rolled out, each hospital will have a management board with more responsibility over cash flow and the ability to raise their own revenue through charges. In return, they will be expected to adhere to quality standards and deliver clear information on results; the competition for patient revenue is expected to lead to improvements on both counts.

The project is part of a comprehensive long-term strategy that will create greater competitiveness in the health sector, with the private sector taking a greater role in provision. “We need to create a more competitive environment, further increasing the ability of public hospitals to generate their own revenues, mainly from health insurance,” Bodart said. “We need to create an environment in which the private sector will invest, and there needs to be better quality of care.”

PUBLIC INSURANCE: Mongolia is in the process of expanding health insurance penetration with the aim of achieving universal coverage as soon as possible. Public social health insurance (SHI) is funded through payroll contributions of those in formal work and their employers. The government covers those in vulnerable groups including the young, elderly, unemployed and parents of young children.

SHI was introduced in 1993 and population coverage is now around 80%, according to the ADB and WHO. This proportion has actually fallen from 95% in the late 1990s, due to factors including internal migration, dissatisfaction with health services, low administrative capacity, the removal of premium subsidies for some groups, and avoidance by the very rich and poor, according to a 2010 report prepared for the MoH. Private insurance penetration is scant, due to low income and a lack of awareness of insurance options.

FINANCING: The ADB is assisting the insurance expansion drive, which also includes increasing the range of pharmaceuticals that are covered by the public scheme – currently too many patients have to buy drugs for procedures as an out-of-pocket expense, another factor deterring people from purchasing insurance.

PHCs are funded directly from the state budget, while hospitals obtain around half their funds from the MoH and half from insurance. Overall, only 25.4% of health care costs are paid through insurance, while the remaining 71.2% comes from the state budget. This indicates the weakness of SHI, which is partly linked to low premiums and partly to the structure of the system.

The MoH has drawn up a strategic plan for health care financing, with the long-term aim of creating a single-payer system. This involves pooling the state health budget and revenues from insurance, which currently overlap wastefully at times. While the recommendation of the ADB and UNESCAP, a UN development organisation, is the creation of an independent body to both administer the SHI fund and to monitor service quality, initially the single-payer plan is likely to operate under the supervision of the MoH.

The THSDP includes an agenda to shift Mongolia toward performance-based financing, which in turn requires considerably better evaluation and assessment. The aim is to ensure that investments are matched by enforced quality standards. This process also involves setting and enforcing standard treatment procedures, ensuring that substandard and irregular treatment is not carried out at public expense.

Over the longer term, the ADB advocates public hospitals being funded through health insurance alone, without block grants from the MoH. While this will take some years to implement, it will bring Mongolia’s payment system in line with models such as those in France and Germany, in which resources move with the customer, creating greater choice and competition.

Bodart expects a stronger health insurance system to stimulate the growth of the private sector, with patients able to pay for services at private facilities from their health insurance, public or private. “Reinforcing the health insurance system is the best way of providing incentives for the private sector to get involved,” he said. “The private sector is already coming in, but to take off it has to ensure that reimbursements are commensurate to cost. If companies see that there is financing and they will get returns, they will invest.”

THE ROAD AHEAD: After some years of steady change, reform has accelerated, and few sectors are likely to change as dramatically as health care over the next decade. The reform programme is ambitious and presents challenges for Mongolia, which still retains many elements of its Soviet past.

With the support of international organisations, it aims to retain the many positive elements of its current health system, while also raising standards on par with its increasing wealth. These structural changes will take time, but they will also present opportunities for both the public and private sectors, and, most importantly, should deliver higher quality care to patients.