Healthcare Sector of Uzbekistan: Analysis of Policy Issues

INTRODUCTION

“Health – a prerequisite for development”

(SDC, 2020)

After independence in 1991, Uzbekistan initiated reforms and programs to improve its healthcare system. Since 2016 government expenditure on the healthcare sector has almost doubled. Healthcare spending is increasing faster than economic growth. In addition, the healthcare sector is growing and becoming one of the largest sectors of Uzbekistan. Moreover, the government is continuously investing in medical facilities and improving infrastructure. Ministry of Health Statistics for 2023 July recorded the total number of the hospital as 1,328 (MOH, 2023).

On the other hand, there remain challenges related to quality and access to healthcare utilization. Firstly, financial protection is the main area of concern. Out-of-pocket payments are leading to decreased healthcare utilization of low-income people (World Bank, 2022). Secondly, insufficient and old medical machinery is resulting in low-quality health care services. Thirdly, the lack of quality assurance and underutilization of modern Information Technologies (IT) are causing systemic inefficiencies (Ahmedov, 2016). Lastly, poor working conditions and lower salaries in government hospitals are motivating well-trained health professionals to work in the private sector (ILO, World Bank, and UNICEF, 2020).

To solve these policy issues, this paper recommends Uzbek government move forward to Universal Health Coverage (UHC). For this, they need to adopt three health programs. They are E-health, Pay-for-Performance (P4P), and Mandatory Health Insurance (MHI). E-Health provides transparency and accuracy to the health sector. In contrast, the P4P program increases the productivity of the workforce, the quality of health services, and the supply of labor in government hospitals (Maskara, 2020). Finally, MHI provides financial protection towards strengthening access and quality of the healthcare system.

To fund E-health, P4P, and MHI programs in the short-run I recommend to the government to increase taxes. According to 2016 Life-in-Transition data results, the majority (75%) of citizens are willing to financially support the healthcare system, if that additional revenue directly goes to the implementation of reforms. In addition, institutional trust is the main determinant in deciding to pay more taxes. Therefore, I recommend the Uzbek government open a new institution for healthcare funding and send all additional revenue from tax to that new institution. In this way, people’s trust will increase as they will be sure that the additional money that they are paying will be fully used for healthcare improvement. Further, using this policy strategy the government can apply the programs recommended above without funding problems.

Further organization of the paper is in the following way. The next section provides a literature review discussing policy issues. The third section describes policy options and the empirical model of the analysis. The last section includes key findings from the analysis and makes final remarks by providing policy recommendations.

LITERATURE REVIEW

The Situation in the Healthcare Sector

Healthcare services in Uzbekistan were free under Soviet authority. However, because the government concentrated on access rather than outcomes, there were flaws in the healthcare sector. After independence, Uzbekistan developed its healthcare system which is similar to the Soviet Semashko model. Today improving health of the nation is one of the development policy priorities of Uzbekistan. The Ministry of Health (MOH) with the collaboration of the World Bank, the World Health Organization, and other international organizations established several health programs (WHO, 2022). Although many system improvements have been adopted, the health system of Uzbekistan is still lacking. The latest World Bank figures show that life expectancy at birth is 72 years relatively lower compared to the European Union (EU) which is 81. The infant mortality rate is 15.6 deaths per 1000 live births. Moreover, in 2022 Uzbekistan received a Global Health Security Index of 39 out of 100 (Ghsindex, 2022). So, the question is Why does Uzbekistan have low health indices? What are the main issues in the healthcare sector? To answer these questions, I provide the main healthcare system-related problems in the paragraphs below.

Health Financing

Sufficient and efficient health financing plays a critical role in determining the quality of the healthcare system. In Uzbekistan under the Soviet Union healthcare services were free and accessible to everyone. After independence, public and private sources have become the main forms of health financing (Ahmedov, 2016). Public financing is based on tax revenues, while private funding is out-of-pocket payments. In addition to them, international organizations also donate funds to finance health projects (Roberts et al., 2014).

Before 1999 Uzbekistan government authorities followed the Soviet model of health financing. More specifically, they used single-line budgeting based on the number of doctors and beds. Thus, this method accounted for only fixed costs and did not take into account the improvement of healthcare facilities and capital investment (Langenbrunner et al., 2016). After 1999 government started allocating the healthcare budget into four categories: the first two categories include health workers’ salary and medication-related financing, the third for capital investment, and the last one for maintenance and other expenses (RBASIA, 2020).

On the other hand, private healthcare expenditures can be formal and informal out-of-pocket payments. Formal payment is official and registered payments done for the healthcare service or pharmaceuticals. Informal payments are those unregistered so-called under-the-table payments that go to health workers (Yasar, 2011). The issue of informal payments distorts the healthcare system and decreases healthcare utilization of low-income people favoring expensive but unregistered services (Thompson and Witter, 2010). There are several reasons explaining why informal payments are common in Uzbekistan. Firstly, the low salaries of health workers make them expect informal payments (Ishhaqi.uz, 2023). Secondly, people are not aware of the rights and responsibilities of government health workers. As a result, they make under-the-table payments to ensure a polite attitude and better quality of healthcare.

Physical Resources

Issues related to the healthcare system may be due to many factors, one of which is a lack of physical resources. After 1991, Uzbekistan’s state-owned health infrastructure downsized dramatically. Lack of capital investment, insufficient and old medical machinery resulted in low-quality health care services. Moreover, the healthcare facilities were distributed unequally in different regions of the country and the situation was worse in rural areas. On the other hand, modern and specialized medical equipment is available in the private health sector. Private medical centers do not receive direct subsidies from the government. Their services are expensive and citizens from low-income households cannot afford them.

According to UZIPA (2020) data, number of hospital beds increased sharply after 2017. However, after the coronavirus outbreak, the situation revealed that there was shortage in number of medical facilities. Therefore, in 2020 the government built new hospitals, allocated new beds for coronavirus patients, and increased healthcare sector capacity. Ministry of Health Statistics for 2023 July recorded the total number of the hospital as 1,328 (MoH, 2023).

Information Technologies

The use of Information Technologies (IT) in the healthcare sector is crucial for the efficiency and quality of medical services. However, the usage of IT in government-owned healthcare centers is limited (Ahmedov, 2016). Uzbek healthcare process is not transparent and full of informal payments due to the lack of information and communication technologies.

Therefore, Uzbekistan in 2009 approved the National Integrated Health Information System (NIHIS). The NIHIS is a portal, used by healthcare workers and patients to get medical information. However, government-owned healthcare institutions are not yet likely to use this iHealth portal. On the other hand, no data is available about the usage of IT in the private sector (Maskara, 2020). Although evidence on the usage of IT in health services is limited, previous studies show that government-owned hospitals in Uzbekistan still work on paper-based systems. As a result of this healthcare system faces several challenges such as long data processing time, unreliability in data storage, and difficulty in information exchange.

Human Resources

Adequate and qualified human resources are critical to improving healthcare services. The main health workers in Uzbekistan are physicians, pharmacists, dentists, midwives, and nurses. Although there is no recent data available, from World Bank statistics it is clear that after 2000 number of health workers per population decreased substantially. The main reason behind this trend is the migration of professional health workers overseas. Most professional doctors emigrated to Russia and Kazakhstan, as they have better working conditions and there is no language barrier (Langenbrunner et al., 2016).

Uzbek government-owned hospitals cannot manage human resources according to the demand for their service. The Ministry of Health is a body that decides the number and working hours of health workers. Current income packages and incentives are not enough to retain professionals in their jobs. Moreover, the lack of medical equipment and bad working conditions in government hospitals motivate workers to work in the private sector. Therefore, policymakers should consider these issues and provide solutions for optimal and qualified staffing of government-owned medical institutions.

Overall, from the discussions above it is clear that Uzbekistan initiated reforms and programs to support its healthcare system. However, there remain challenges related to equity and access to healthcare utilization. Thus, the MoH needs to act on increasing qualified hospital staff, improving medical service quality, strengthening capital investment, implementing information technologies, and providing equal access to healthcare utilization. These areas should be funded with smart reforms subject to budget constraints.

RESEARCH ANALYSIS

After analyzing policy issues and previous literature, the contribution of this section to this report is twofold. First, this section discusses policy programs to improve the healthcare system. Second, after deciding on policy options it provides empirical evidence on funding options of these policy reforms.

Universal Health Coverage

Universal Health Coverage (UHC) has become a widely used development strategy to improve the health level of low- and -middle-income countries. UHC includes all essential good quality health services such as treatment, rehabilitation, and preventive care during the whole life of the entire population. The main goal of UHC is to provide everyone with universal access to healthcare without financial obstacles. So, UHC promotes equity and financial protection in healthcare utilization. Another advantage of the program is the full utilization of healthcare services according to the needs of individuals. In 2012 the United Nations (UN) urged all countries to consider UHC as an effective tool to make healthcare services affordable, available, and of good quality (Langenbrunner et al., 2016).

Although, the coronavirus outbreak deteriorated the universal availability of health facilities today more countries are moving towards UHC. This program is already in practice in many countries. Japan achieved UHC in 1961. The adoption of UHC played a crucial role in Japanese recovery after World War II, and it ensured social stability by providing equal healthcare services across the population. The policy evaluation reports of Japan show that UHC leads to improved levels of health. Moreover, for Japanese UHC has a key role in reducing main preventable diseases and progressing hospital efficiency (Katsuda et al, 2011). Turkey also achieved financial protection in the healthcare sector by moving towards UHC. Since 2003 Turkey achieved remarkable positive health outcomes in life expectancy, infant mortality, and antenatal care usage. Most importantly, UHC had a clear positive effect on the health levels of the most disadvantaged individuals (Yasar, 2011).

It should be noted that no one approach will lead to UHC. Some countries achieve UHC by implementing insurance systems, while others improve public health systems and introduce public health centers. The paragraphs below provide an analysis of essential programs to achieve UHC.

E-Health

World Health Organization (WHO) recognized E-Health technologies as a key factor in achieving UHC. E-health improves quality, and access to healthcare services by supporting quick identification and response to various diseases. Basic E-Health technologies required for UHS are electronic health records (eHRs) and mobile health applications (m-health).

There are several advantages to using E-Health technologies. Firstly, the public can access consultation and diagnosis through electronic services. Secondly, health workers can provide service according to the longitudinal data of each individual. Thirdly, E-Health provides transparency and accuracy to the health sector. Finally, waiting time will be reduced and individuals will not take unnecessary tests as all information will be recorded.

E-health is already in practice in all developed economies. For instance, after 2009 France by adopting eHealth policy reform computerized all medical processes, created open data sources for researchers, and allowed patients to have free online consultations (Health, 2020). Developing countries also started practicing IT in the health sector. From 2007 The Electronic Azerbaijan program provided children with health cards and monitored their health. This strategy helped to prevent the spread of infectious diseases among children (WHO, 2015).

Pay-For-Performance

UHC ensures that each member of the community utilizes healthcare services on demand without financial barriers. Implementation of it requires optimum levels of skilled healthcare staff and high-quality services. Several studies confirm that building new medical institutions and training healthcare workers do not have immediate effects. However, in the medium- and long- run they have a positive effect on the quantity and productivity of human capital in the healthcare sector. Regarding efficient and immediate policy strategy most countries started implementing Pay-for-Performance (P4P) program (Lindenauer, 2007).

P4P requires employers to give bonuses to workers who provide more care of higher quality. So, it is intended to achieve various objectives, from improving health service quality to improving data utilization and information technologies. Indeed, to understand whether bonus payments improve the quality of healthcare World Bank did an evaluation of P4P in Rwanda for two years. The study results reveal that P4P works in real life. It leads to better provider performance and improved health levels of women and their children (World Bank, 2011).

A similar study was done by the World Bank Group for Turkey about P4P outcomes. It indicates that the program encouraged job motivation, productivity, and also higher levels of healthcare utilization. Moreover, the number of full-time staff working in hospitals owned by the government increased dramatically (World Bank, 2008).

So, P4P has several positive effects on healthcare service provision. Firstly, the P4P program by providing a monetary incentive for healthcare staff, increases the labor supply in government hospitals. Secondly, an additional benefit for high-quality care it increases the productivity of workers and the quality of service they are providing. Finally, it should be noted that adopting P4P requires a complex system with some upper limit to bonus payments of workers. The Ministry of Health should evaluate performance and make adjustments to quality measurement parameters continuously.

Mandatory Health Insurance

As discussed above out-of-pocket payments in Uzbekistan are a financial barrier to accessing health care and cause inequality in healthcare utilization. Therefore, to achieve UHC Uzbekistan has to move away from out-of-pocket payments toward Mandatory Health Insurance (MHI) funding. MHI is a benefit system that mandates the entire population to be enrolled and covers the financial cost of healthcare services for them. Specifically, MHI provides financial protection towards strengthening access and quality of the healthcare. Moreover, it also means huge discounts as insurers provide a larger number of patients and therefore can negotiate a price with medical care providers.

MHI is proposed in more than 65 countries. The effectiveness of this benefit system depends on the level of competition, and the relationship between public and insurance funds. Government officials should decide whether to have a single insurer or competing multiple insurance funds. The experience of single-insurer countries (China, Taiwan, and Korea) shows that they pay more attention to service quality and productivity. On the other hand, countries with multiple insurers (Germany, Netherlands, and Mexico) reveal that they have to develop strategies for consumer protection. In implementing MHI, it is also important to ensure that it covers all essential healthcare service costs and that individuals do not have additional out-of-pocket spending.

According to Precedential Decree No.5590, MHI was already introduced as a policy strategy of Uzbekistan in 2018. Its consequences and funding options are still being discussed and it is not yet implemented in practice.

FUNDING OPTIONS AND METHODOLOGY

After identifying support programs for UHC, how to fund these programs is the next issue that policymakers face. In Uzbekistan to support healthcare reforms, additional income can be collected through increasing government spending or tax rates.

Ø Option 1: Increase government spending. Over the last five years, Uzbekistan has been undergoing various reforms and has been increasing government spending. There is a huge demand for quality improvement in all sectors. However, the government budget is limited. Therefore, the government budget cannot be the sole source of the funding required to implement healthcare policy programs. Specifically, the government increasing its spending on the healthcare sector means it has to decrease its funding from other sectors or get a loan. Under both scenarios, the government is facing fiscal pressure. Thus, to fund the entire UHC reform in the short run to increase government spending on the healthcare sector would be an ambitious option.

Ø Option 2: Increase tax. The Uzbek government can increase general and payroll taxes to collect additional revenue and redistribute it for UHC purposes. A general tax is a tax from the capital, profits, consumption, and trade. On the other hand, payroll tax can be charged only to people who are working in the formal sector. Therefore, increasing payroll tax may impact formal employment negatively. More specifically, formal employment may decrease if workers do not comply with the new tax regime and prefer unregistered cash payments. Therefore, the increased payroll tax would be an optimal funding solution only when people are willing to support health policy financially. So, what determines an individual’s willingness to pay more taxes to support healthcare?

As UHC reform increases fiscal pressure, I want to provide empirical evidence for the following questions: Are people willing to pay more taxes to contribute towards UHC? If yes which factors determine their willingness? Several studies confirm that understanding citizens’ readiness to financially support the entire nation’s health is a key technique in applied policy analysis. The rational choice theory reveals that an individual’s willingness to support welfare systems depends on self-interest, social beliefs, and trust in institutions (Habibov et al., 2019). There is growing empirical literature showing a positive effect of institutional trust on support for welfare reforms (Nikilova and Sanfey, 2016; Balabanova et al., 2012). It is believed that if government institutions are trustworthy, citizens are more likely to support healthcare programs and less likely to be dissatisfied with the tax burden. According to Footman et al. (2013), it makes sense for individuals to give some part of their money if they believe that money can save human life.

In this study, I use 2016 Life-in-Transition data for Uzbekistan to analyze citizens’ willingness to pay taxes to support the healthcare system. LITS asked whether an individual was willing to pay more taxes if he/she was sure that the money would be used to improve the healthcare system. The response was in binary form Yes or No. According to summary statistics, 75 percent of survey respondents indicate a willingness to support the health system (LITS, 2016).

The main explanatory variable is institutional trust. The LITS provides information on people’s trust in government, parliament, police, the court, political parties, and other institutions. Respondents show their trust on a scale from 1- no trust to 5- complete trust. I generated an institutional trust variable by adding all complete trust answers. As a result, the new variable ranges from 0- do not trust any institution to 12- complete trust for all institutions. Following the previous literature, I also include other explanatory variables that may determine citizens’ willingness to support healthcare. Specifically, I include:

• Individual-level characteristics: age, wealth status, university education, marital status, and health status;

• Country-level characteristic: whether the economy of the country improved during the last four years;

• Healthcare characteristic: quality of health services;

• Individual belief: belief in redistribution from the rich to the poor.

EMPIRICAL EVIDENCE

In estimation, I use logit, as our outcome variable is in binary form with S-shaped probability distribution. Table 1 reports results for the model of interest with all relevant variables discussed above. It provides marginal effects, coefficients, standard errors, and the significance level of variables.

		Logit
Variable	Marginal Effect	Coef.	Std. Err.
Institutional trust	0.035	0.22***	0.0029
Better economic conditions	0.081	0.51**	0.0323
Believes in redistribution	0.041	0.26*	0.0244
Female	0 .027	0.18*	0.0212
Higher education	0.06	0.38	0.0587
Married	0.016	0.105	0.0284
Middle wealth households	0.004	0.028	0.0306
Wealthiest households	0.011	0.07	0.0486
Medium healthcare quality	-0.0233	-0.143	0.0690
Poor healthcare quality	-0.075	-0.438	0.0879
Medium health level	-0.056	-0.33	0.0465
Good health level	0.028	0.185	0.0459
Age 18-24	0.025	0.167	0.0400
Age 25-34	-0.149	-0.817*	0.0852
Age 35-44	-0.162	-0.87*	0.0861
Age 45-54	0.008	0.051	0.0650
Age 55-64	0.11	0.929**	0.0446
Age 64+	-0.026	-0.162	0.0378
Number of observations		1506

legend: * p<.1; ** p<.05; *** p<.01

Table 1. Regression results

Observing Table 1, it is evident that the results are consistent with the previous literature. One unit increase in institutional trust on average increases willingness to pay more taxes to support healthcare by 3.5 percent, holding all other variables constant. According to regression results, other predictors of an individual’s willingness to pay more taxes are improved economy, being a female, and belief in redistribution of income from rich to poor. Variables such as an individual’s health, wealth, and marital status are the weakest covariates that appear to be statistically insignificant.

To sum up, the conclusion from the results is institutional trust has a strong positive effect in determining people’s financial support to the healthcare system. Thus, policymakers have to take action to build the trust of citizens. Increasing transparency, good governance, and universal welfare policies are key factors in building trust and thus boosting welfare support.

POLICY RECOMMENDATIONS AND CONCLUSIONS

Overall, from the discussions above it is clear that Uzbekistan initiated policy reforms to support the healthcare system and achieved remarkable results. However, there remain challenges related to equity and access to healthcare utilization.

Based on policy programs and funding options discussed, UHC is a promising reform to improve the healthcare system, while E-health, P4P, and MHI are required programs to move towards UHC. The government has already introduced the National Integrated Health Information System and Mandatory Health Insurance as policy strategies in Uzbekistan. However, they are not implemented and results are not seen in practice yet. Thus, the government needs to adopt those programs in the short run to improve the healthcare system and the health level of citizens.

According to the funding options analysis, I recommend that the government fund the abovementioned programs through the following scenario:

· Collect revenues from general taxation: (1) increase payroll tax by 1%; (2) one-time monthly minimum salary from each entrepreneur;

· Collect revenues from sin taxation: increase tax for alcohol and tobacco products by 5%.

When introducing a new tax, policymakers should consider its feasibility and consider individuals’ ability to pay additional money. According to LITS data, majority (75%) of citizens are willing to support the healthcare system if that additional revenue directly goes to healthcare reforms. In addition, institutional trust is the main determinant in deciding whether to pay more taxes. Therefore, I recommend that government officials open a new institution for healthcare funding and send all additional revenue from the tax there, not to the government budget. In this way, people’s trust will increase as they will be sure that the additional money that they are paying will be fully used for healthcare improvement. Further, now the government can apply the policy programs mentioned above without any loan or budget deficit. It is win to win policy solution for all stakeholders of the economy.