|Project Rationale and Linkage to Country/Regional Strategy
Since its establishment in 1994, the social health insurance system in Mongolia has demonstrated good achievements, including high coverage of over 90.0% of the population. Health care delivery has also been sustained despite severe budget constraints in the early 1990s at the onset of the socioeconomic transition in Mongolia. However, those insured are increasingly dissatisfied with social health insurance because of poor service quality provided by hospitals and increasing out-of-pocket expenditures.
High out-of-pocket expenses have resulted from social health insurance reimbursement ceilings, exclusion of costly procedures and diagnostic services from reimbursement, limited reimbursement for medicines, enforcement of various forms of co-payments, existence of informal payments, and the need to seek better quality care abroad. As a result, out-of-pocket payments for health services stood at 41.0% of total health expenditures in 2010, while utilization of hospital services was lowest among the poor, raising concerns about the inclusiveness of growth. In 2009, 3.8% of total households (or 27,442 households) experienced catastrophic health expenditures, and 1.8% of total households became impoverished due to health payments.
The government subsidizes social health insurance for 58.0% of the population, but targeting is ineffective and does not take into account the ability to pay. Ineffective targeting results in 10.0% of the population remaining uninsured (mostly poor unemployed and herders). Although, the government subsidizes 58.0% of the population this accounts for only 9.0% of social health insurance revenues, as subsidies are set too low (currently about $5 per year per insured person) and are not indexed to the rising cost of care. Employees and employers in the formal sector, representing 28.0% of the insured population, generate 86.0% of health insurance revenues. The disparity between the proportion of formal sector workers who are insured (28.0%) and the contribution to social health insurance revenues (86.0%) has frustrated employers and made social health insurance unattractive to them. The remaining 5.0% of social health insurance revenues are contributions paid by self-employed and informal workers.
The present social health insurance system governance structure has led to tensions within government organizations (mainly the ministries of finance, health, and population development and social protection) and between the Health Insurance Organization and the Health Insurance Sub-Council. There are no clear lines of accountability for social health insurance performance. Moreover, the current legal framework further fragments responsibilities by making the Ministry of Health instead of the Health Insurance Organization responsible for functions such as designing the benefit package, setting payment tariffs, and selecting service providers. There is also potential for serious conflicts of interest where the main service provider (i.e., the Ministry of Health) also sets payment tariffs and selects providers to be reimbursed by social health insurance. The social health insurance system also lacks mechanisms and an effective information system through which insured people can report complaints and provide feedback on social health insurance deficiencies; these are essential for informed decision making and accountability.
The Health Insurance Organization has limited capacity, particularly in terms of service costing, actuarial projections, contract negotiations, and monitoring of quality of services. It is merely one of the departments of the Social Insurance General Office and is subject to legal restrictions when it comes to staff and operational resource allotment. These circumstances have prevented the Health Insurance Organization from developing into a strong purchaser of health services on behalf of the insured population. Furthermore, for the Health Insurance Organization to act as a purchaser of care on behalf of the insured requires an effective health information system to monitor quality of services and financial autonomy of public hospitals to enter into negotiations with the Health Insurance Organization. In addition, all public hospitals are allocated social health insurance funds systematically regardless of performance, preventing the Health Insurance Organization from effectively selecting hospitals to contract with.
To address the deficiencies above, Parliament is revising the Citizens' Health Insurance Law. The revision of the law is undergoing a broad consultation process, including with civil society organizations. It is envisaged that the revised law will introduce broad reforms to improve governance and financial sustainability; improve targeting of government subsidies, including for the poor; increase access to an essential benefit package; and strengthen the autonomy and operational capacity of the Health Insurance Organization. The revised Citizens' Health Insurance Law will give more weight to reforms that the Health Insurance Organization and the Health Insurance Sub-Council have started to implement with TA provided by German development cooperation through GIZ and ADB.