Shortage of public resources in Ukrainian health sector magnified by inefficiencies

Jan 5, 2018

Photo credit: Artem Getman / UNDP in Ukraine

New study by World Bank UNDP and Kyiv School of Economics

Evidence has shown that the shortage of public resources in the Ukrainian health sector is magnified by their inefficient use. Health-sector spending is biased toward hospital services, rather than low-cost preventive care. A non-transparent parallel out-of-pocket fee system risks compromising access to treatment for Ukrainian patients.

These are among the results of a joint study conducted by the World Bank and the United Nations Development Programme in Ukraine in cooperation with the Kyiv School of Economics. The study analyzes primary health care facilities, hospitals and health administrative levels in four regions of Ukraine: Poltava, Lviv, Donetsk and Luhansk oblasts. It combines findings from surveys using two global methodologies: Public Expenditure Tracking Survey (PETS) and Quantitative Service Delivery Survey (QSDS). This survey analyzes the ways public resources are used, and the results obtained by using these resources.

UNDP contributed to the study by extending its original geographical scope from the Poltava and Lviv regions, in central and western Ukraine, to include the eastern regions of Donetsk and Luhansk, where the humanitarian and socio-economic consequences of the armed conflict create further challenges to healthcare provision.

Key findings:


-          Public health spending in Ukraine, at USD 77 per capita (2015) is the lowest among European countries.

-          The relatively small public health spending supports one of the most oversized health infrastructures in Central Europe, with 0.4 hospitals, 7.4 beds, 4.4 doctors and 8.6 nurses per 1,000.

-          Budget planning is characterized by excessive control and regulation and is not giving local authorities and hospitals enough financial management power.

-          Public financing contributes only to about half of total health expenditure. A non-transparent parallel out-of-pocket fee systems is in place.

-          Health sector spending is biased toward hospital services rather than primary healthcare providing low-cost preventive care. In the Donetsk region, 70% of the budget is allocated toward hospital care, while primary healthcare services represent only 13%.

-          Service providers’ budgets are mostly spent on wage and utility bills, with little left for medication. Overall, about 50% of the staff surveyed report periodic shortages of drugs. In most facilities, less than 25% of medication needs is reported covered; 63% of physicians ask patients to purchase the required medications when they are unavailable in the health care facility.

-          Salaries of health personnel are much below expected levels. More than 3 out of 10 physicians occupy other jobs (so-called moonlighting), affecting staff productivity and service provision.

Based on the findings, the study recommends measures to improve both quality of service and efficiency of health spending. Accelerating the implementation of the healthcare reform will help shift from input-based to results-based financing in healthcare. Explicit definition of health benefit packages, together with implementation of contracting mechanisms, will help better channel available public resources to provide guaranteed medical services to citizens.

This will also help clarify for patients the guaranteed level of coverage by the state budget and influence the uncertainty of expected contributions from the side of patients. Formalizing co-payment mechanisms will help cover financial gaps and make providers more accountable for the additional revenues. Providing more freedom in financial management will stimulate more rational spending at the decentralized level. Public disclosure of expenditures and selected performance indicators will ensure better transparency and accountability of health care providers. Access to data and benchmarking the performance of different facilities is one of most effective mechanisms to improve efficiency of service delivery. Additionally, a speeded implementation of electronic exchange of data will help improve accountability in outputs and better link costs to provided services.

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