Recommendations

stimulate hospital rightsizing and more efficient use of resources within the facilities. Paying for inpatient health care services based on the case mix, in particular through a system of diagnosis-related groups, allows the purchaser to link reimbursement to the hospital workload. It also incentivizes hospitals to contain costs per case by fixing the amount paid for each clinically and economically similar case. Given the excessive size and low productivity of Ukraine’s hospital network, incorporating case-rate payment elements into an NHSU purchasing model is an opportunity to expand the budgetary space for the PMG via efficiency gains.

Cost-sharing

Introducing patient cost-sharing undermines access and financial protection and can erode the strategic purchasing function; if introduced, cost-sharing will need to be accompanied by measures to protect against these risks. The government is considering introducing cost-sharing—co-payments for services covered by the PMG and supplementary payments for noncovered services—to permit an expanded range of services and choice of amenities for those who can afford to pay more. Cost-sharing entails considerable risk of adverse consequences: it could worsen Ukraine’s already heavy reliance on OOPs through formal and informal payments, involve significant administrative costs, and weaken strategic purchasing if not strictly regulated. It is not realistic to expect that the introduction of cost-sharing will permit an expanded range of services to be covered by the PMG without undermining the PMG’s objective of ensuring equitable access to services. If cost-sharing is introduced, it should be in the form of small, flat co-payments that are subject to annual caps and limited to selected services (certainly excluding preventive care to promote its utilization). Poor households should be exempt from all co-payments, and percentage co-payments should be avoided. The design of any co-payment policy should be as simple as possible to ensure that people can easily navigate the health system and do not face administrative barriers to benefiting from protective measures. In addition to co-payments for covered services, the government is considering allowing supplementary payments as a means of encouraging private providers to supply PMG services. If implemented, supplementary payments should be limited to aspects of service delivery that are not directly associated with the clinical quality of care, like a single room in hospital (extra billing). Health care providers should not be allowed to ask patients to pay in addition to co-payments for covered services (balance billing). The implementation of co-payments for covered services and supplementary payments for noncovered services requires careful regulation and active monitoring to avoid creating inequities (including potential discrimination against people who are exempt from co-payments or do not make supplementary payments), reducing financial protection, and undermining strategic purchasing incentives.

RECOMMENDATIONS

Short term

• Clarify the political process for the design and expansion of the PMG benefit package (including its approval) to make it more transparent, explicit, and participatory.

• Implement a process and associated rules within the health sector to ensure a medium-term perspective in the definition of the PMG benefit package and its budgeting, even if the government-wide medium-term investment framework remains suspended. • Introduce rules for the CabMin to provide reliable budget ceilings in advance of the annual budget preparation process, not only for each sector, such as health, but ideally also for priority programs such as the PMG within each sectoral budget; this would need to be a government-wide measure. • Introduce policy instruments to address the risks of continued inefficiencies resulting from the SNGs using local revenue to retain inefficient, low-occupancy, and low-quality facilities in small hospitals in rural and small-town locations, and inefficient competition to invest in high-tech and tertiary facilities among city hospitals in larger population centers. These instruments could include regulatory powers for the center to help direct SNG investments in a way that is more efficient from a system-wide perspective.

Additionally, the center can use financing instruments such as grants to incentivize more appropriate investments at the local level. • Consider shifting financing responsibilities for utilities from the SNGs to the central budget, paid by the NHSU through the PMG budget directly to facilities. This would reduce inefficiencies, strengthen the principle of

“money-follows-the patient,” and help level the playing field for private providers. • Continue and extend the MoH’s practice of undertaking detailed, health sector–specific spending reviews, together with the MoF, to identify health sector savings and act on those findings.

Long term • Increase current health spending in line with economic growth and increases in general government spending while also ensuring that in times of economic contraction, current levels of health spending are at least maintained in real per capita terms in order to realize the coverage and financial protection goals to which the government committed when it passed the Law on Financial Guarantees for Health Care Services. • Ensure full commitment to current tax reform roadmaps, in particular, the tobacco tax roadmap, which envisions the gradual increase of tobacco rates in line with the EU-Ukraine Association Agreement as well as broader revenue administration reform. • Consider introducing additional health taxes, such as for sugar, or further augmenting existing health taxes, such as on tobacco and alcohol, to increase overall fiscal revenues. These proceeds could potentially be earmarked for health, but careful consideration would need to be given to the trade-off of reduced budget flexibility. • Regularly undertake whole-of-government spending reviews to reconsider functional priorities and accordingly adjust spending allocations across sectors. • Increase spending efficiency through accelerated hospital rightsizing, especially in long-term TB care, gradual introduction of case-rate payments for inpatient care, and a clear strategy to promote a stronger role of PHC and integrated service provision.