Medical Reform: The Way Towards Insurance Medicine

Mihail Radutsky
8 min readMay 18, 2020

Ukraine is a European country. Its residents want the same living standards as in Europe in all spheres, including the health sector. I will tell you how the Ukrainian government is gradually changing the outdated Soviet system into a modern model, which includes insurance medicine.

Semashko Soviet System

In the Soviet Union, medicine was operating according to the system of Nikolai Semashko, a famous doctor who introduced it in the 1950s.

The Semashko system had its pros and cons. The main advantage is considered the wide-scale provision of medical services with relatively little funding. In the early 80s, converting the costs to dollars, the government allocated $200 per year for the treatment of one Soviet citizen. In the USA and Europe during the same period, this sum was $1800–2200. Thus, Soviet doctors provided rather high-quality medical services at significantly lower costs. At that time, this system was really effective and, perhaps, the only possible one: the country destroyed and weakened by wars needed centralized state medicine.

However, this system also had serious disadvantages. The first is huge queues in medical institutions. The patient spent much more time in the waiting room than in the physician’s office. For example, in the 80s, the waiting time of a Soviet citizen was 2–2.5 times longer than that of a German resident, while waiting for a doctor to visit a patient at home took 5 times longer in the USSR. The situation was aggravated by the fact that Soviet patients came to the doctor not only for treatment, but also to receive sick leave note for their workplace. This additional function took the lion’s share of doctors’ and patients’ time.

The second disadvantage is unmotivated doctors. The health professionals received their salary not for the services provided, but for the time spent at the workplace. The doctor didn’t care how many patients he or she would treat in a day as they were de facto paid for being in the office during their working time.

The third downside is excessive staff and infrastructure. The Soviet government believed that the more beds in hospitals, the better. As a result, in terms of the number of hospital beds and doctors, the USSR was ahead of the rest of the world. For example, in 1985, there were 4 times more beds beds in the Soviet Union than in the United States. Thus, the presence of a huge number of doctors who are not interested in providing quality services has led to a crisis in the healthcare system.

After the collapse of the Soviet Union, the state of the health sector only worsened with every year. There was no investment in modern equipment or major repairs. Doctors demanded money from patients for surgeries that were officially free of charge. Financing of the sphere reduced so much that a security guard in a store was paid better than a highly qualified doctor. It is not surprising that the prestige of the medical profession has decreased to a minimum.

Beginning of the Reform

After the collapse of the Soviet Union, its medicine system continued to exist for several years. However, it could not last for a long time: it was necessary to either make serious changes to the existing system or create something new. The market economy has emerged, but real competition has not appeared on the medical market. As a result, while Ukrainians were able to buy goods and services from different suppliers, they were deprived of this opportunity in medicine. Hospitals needed new equipment, the whole sector had to be restructured to fit the new conditions, and the excessive number of beds had to be reduced. However, none of this ever happened. The only change was reduced funding, which was not enough to support the Soviet system under the new conditions.

At the same time, many experts knew that changes were needed. For many years, Ukrainian doctors have expressed the need to introduce insurance medicine. Nevertheless, the healthcare sector, that still worked based on an outdated Semashko Soviet system, was in critical state.

The beginning of a radical reform of medicine is associated with the name of the Minister of Healthcare Ulyana Suprun; however, in fact, it had been started by one of her predecessors, Alexander Kvitashvili. Nevertheless, it was Suprun who accelerated the medical reform. It immediately caused a lot of controversy. It was assumed that the reform will have several stages, which will gradually, step by step, lead medicine to a modern model.

The first stage of the reform started in April 2017. The stage revolves around the doctors who people turn to when it is not clear what problem they have: therapists, pediatricians, family doctors. Competition appeared among first-level doctors because their salary is calculated depending on the number of patients. If earlier, medical services were provided according to the patient’s registration (place where the person lives), now, Ukrainians can choose a doctor themselves.

At the same time, the eHealth system and the Affordable Medicines program began to work. The eHealth system collected all information about patients, doctors, medicines in electronic form. As a bonus, it allowed making an appointment with a doctor online or to order medicines via the Internet.

Under the Affordable Medicines program, patients can receive medications for cardiovascular diseases, type II diabetes mellitus, and bronchial asthma for free or by paying only part of the price.

Polyclinics and outpatient clinics of the first level also received financial and managerial autonomy. Before, all the money was distributed centrally, and now, the head physician can decide what to spend it on.

More competition

From April 1, 2020, the second stage of medical reform began. It revolves around the second level specialists: specialized doctors (surgeons, gynecologists, rehabilitologists). The main principle is that the money comes with patients. Ukrainians choose a hospital, and doctors receive more money if they have more patients. Such a system is supposed to stimulate the hospital to meet all the necessary requirements in order to fit into the reform: to purchase modern equipment, hire the best specialists, and send doctors to improve their knowledge at postgraduate courses.

National health service of Ukraine (a subdivision of the Ministry of Health of Ukraine) pays for medical services at special rates. 27 packages of medical services were developed that are free of charge for patients and that will be paid for by the National health service of Ukraine. Part of the services will come for a fee.

The medical reform does not include closing hospitals or job cuts. However, if a hospital turns out to be uncompetitive, and its doctors get no patients, then such institution will not have money. As of April 1, 2020, the National health service of Ukraine signed an agreement with 90% of all medical institutions in the country.

Keep what is good and solve the problems

A month after the start of the second stage, the future of the medical reform in Ukraine was in jeopardy. The National health service of Ukraine was given the task of calculating the cost of those 27 packages, but they have to do it within the current financial capabilities. Thus, the calculations were not objective as they were not based on market prices; instead, they tried to ensure all medical institutions in the country receive at least something. The budget initially contained less money than necessary for the second phase of the medical reform. Moreover, a serious force majeure factor, the coronavirus pandemic, intervened, so it was necessary to hastily redistribute finances to fight COVID-19.

As a result, according to the calculations of the National health service of Ukraine, the emergency team arrival is estimated at only 75 UAH ($ 2.7), while the cost of an outpatient package is 49 UAH ($ 1.8). To date, only four packages are working: COVID-19, emergency care, and stroke packages. They are funded under the new system. In stages, other packages will join them, when they are ready and correctly calculated. The next packages planned are heart attack ones that are already being recalculated. The whole process of calculating should be completed by 2021, and until then, financing of medical institutions will be conducted the same as previous year.

In early May, President of Ukraine Volodymyr Zelensky made a statement: he cannot let 50 thousand doctors lose their jobs, and it is necessary to keep what is good in the reform and solve all problems. However, despite the radical calls to stop the reform, the President instructed to continue its implementation, but at a more relaxed pace, without radical steps, gradually solving problems that arose at the start of the second stage. It will reduce social tension in the medical environment, which (quite rightfully) arose after the doctors saw the cost of packages of medical services.

The authorities now have a serious task: without stopping the reform, to continue implementing it to the extent possible, at the same time increasing salaries for doctors who are now at the forefront of the fight against coronavirus, as well as to develop state standards for medical care and introduce a system of professional responsibility.

On the way towards insurance medicine

The third stage of the reform will affect the third level: high-technology medical care and special services such as outpatient and inpatient treatment, which requires complex procedures. During the third stage, patients will not be hospitalized at a certain institution based on their place of registration, but in institutions their family doctor will choose.

It is important to note that medical reform will not be successful if the state does not provide sufficient funding. In the legislation, 5% of GDP are allocated for medicine. However, this year, the budget is only 2.9%. For comparison, in Poland, this number is 5%, in leading European countries — about 10%, in the USA — 17%.

No reform has even been implemented without money. The Verkhovna Rada Committee on Public Health, which I am the head of, appealed to the Cabinet of Ministers of Ukraine with a proposal of budget calculations for next year offering to allocate 6% of GDP for medicine. Only then will the medical care be of high quality, without the need to cheat patients or doctors. Only then will the doctors understand that each package contains their percentage for their quality work, and they will start chasing after the patients.

In the election program of the President of Ukraine, “the introduction of the insurance model of medicine” was included, and this quality Western insurance medicine is our goal. However, it is not possible to attain this goal without going through all stages of the reform. Even if the Verkhovna Rada adopts a law on health insurance tomorrow, in reality, health insurance will not be introduced. We have to go through all the stages of the medical reform. Only then will we be able to provide Ukrainians with quality services, introducing compulsory insurance. We will reach this point sooner or later.



Mihail Radutsky

Head of the Committee on Public Health, Medical Assistance and Medical Insurance, People’s Deputy of Verkhovna Rada of Ukraine of the 9th convocation