Unhealthy health insurance system

The health insurance law is currently being discussed by the parliament and is going to be amended for the tenth time since the democratic revolution. The age that we are living in requires this law to be seen with respect to not only current health financing but also the expected sweeping reforms of the Mongolian health care system that have already failed.
Mongolians today are frustrated by limited access to healthcare and the low quality of health insurance and services. Sick people who are in the depths of despair face death if they do not have money. The richer patients travel abroad to receive expensive medical treatments. This situation has been observed for a long time now.
People are now more prone to developing various kinds of diseases including cancer and tend to spend all their money on receiving medical treatment. Many people are facing poverty because of sickness or disease. Mongolians have been losing their faith in the low quality medical services that are provided at high costs by hospitals. The more able people have been travelling to affordable hospitals for prevention and early diagnosis.
In 2013, Mongolia spent three percent of its GDP on the health care industry. For a country with a per capita income lower than the international average, the three percent of GDP that we currently spend on health care is regarded as low when compared to the five percent recommended by the World Health Organization. However, this estimate does not take into account the money expended on buying medicine and dozens of millions of USD paid to foreign hospitals by Mongolian citizens.
The health industry has three major components: health care providers (hospitals), their financing, and health policy and management. As the health insurance law is currently being discussed, let us analyze the financing of Mongolia’s health care industry and have a closer look at some ideas proposed to improve it.


On an international level, health care financing consists of five sources: taxes, social health insurance, private healthcare insurance, out-of-pocket expenditures and external aid. In 2011, two-thirds of public health financing was comprised of public funds, 20 percent by the Health Insurance Fund and the rest by out-of-pocket expenditure. In order to estimate a total for  annual health care costs, private health care financing (by the private sector) and the amount of money paid to foreign hospitals by Mongolian citizens should be taken into account. If calculated in this method, we will see that Mongolia’s annual health care expenditure is actually higher than five percent of the GDP.
The public budget provides financing for the inputs necessary for the functioning of health service providers. In other words, operational cost of hospitals, including the wages of workers, heat and power are covered by the public budget. This mechanism is called “input-based financing,” which comprises 80 percent of Mongolia’s health care financing. The input-based financing has no effect on efficiency or quality of service. Regardless of the quality of service provided, hospitals will still get the financing. Since the input-based financing has no effect on efficiency or service quality, hospitals are financed regardless of the quality of the service they deliver. Therefore, there has not been a single case where a hospital went bankrupt since the shift to a free-market economy.
The other mechanism of financing is the money paid by the Health Insurance Fund for health services provided to people who are insured. The fund makes the payment on behalf of the insured and it is regarded as “results-based financing” or “output-based financing.” Every working person is required by the law to pay four percent of his/her monthly salary (two percent paid by the employee and the other two percent paid by the employer) to this fund. Although these people from the formal sector comprise only 28 percent of the total people who have health insurance, they make up 86 percent of total revenue received by the Health Insurance Fund. On the other hand, people from the informal sector, which could also be identified as players from the grey economy, make voluntary payments (6,500 MNT a month) as a mere formality and it comprises only five percent of the fund’s total revenue. The rest, which is less than ten percent, is provided by the public budget.
A monthly 680 MNT, which means only 8,000 MNT (approximately 5 USD) a year, is transferred to the Health Insurance Fund for elders, children, soldiers, people with disabilities and pregnant women. Yet our politicians claim that 80 percent of our population is covered by health insurance. In reality, it means that people who receive a salary are paying for the insurance of two people other than themselves. It shows that Mongolia’s health care market is not selective. The third way of financing is the out-of-pocket expenditures of patients. A survey carried out by the World Health Organization states that out-of-pocket expenditures comprised 41.4 percent of total health care expenditure in 2010. When compared to other countries, the percentage was too high. The reason for the high out-of-pocket expenditures increasing every year is associated with the fact that expensive medical drugs and payments for diagnostic tests are no longer covered by health insurance. Furthermore, lower levels have been set for the amount of compensation one can receive from the Health Insurance Fund.
People who work for the formal sector make up most of the total social insurance revenue, but they cannot recieve health services when they need to. Also, having been misdiagnosed, they spend days going to different hospitals and end up frustrated with the pills and medications that were supplied and sold by the prescribing doctors. Therefore, we demand that the government bring about a substantial improvement to its health insurance services.
The main issue regarding health insurance today is the inadequate results despite the enormous financing, low quality of health services and counterfeit medications being widely sold while the price of medications keep going up.


The Health Insurance Fund has to be an independent institution that is not governed by any ministry. Ministers must not decide who manages the fund. The most senior management of the fund should be a National Social Health Insurance Council that purchases health services on behalf of people who have insurance and provides scrutiny over the prices and quality of those services.
Currently, the activities of the Health Insurance Fund are combined with other funds (pension, social care and benefits, occupational disease and unemployment insurances are all combined) and they are governed by the Ministry of Human Development and Social Welfare. That is why it has become impossible to focus the fund’s activities on a single issue, and maintain control over or improve the quality of health services.
Prices and standards of health services are currently set by the Ministry of Health, which is the health care provider itself. Therefore, there is no way to measure, assess and promote the results of the expenditure from the public budget or the health insurance, which is the reason for the health industry’s failure.
A National Center for Research and Development of Health and Social Care could be established and operated independently from the state. This center could have branches in every aimag (province) and town so that it could be a crucial instrument in assessing and monitoring the performance of Mongolia’s health industry. The local branches can collect necessary information, carry out various research projects, set the market prices for health services including medications, and produce statistics that could improve the system.
An institution that has a similar function as the proposed center currently exists and is called the Department of Health, which is an implementing agency of the Mayor of Ulaanbaatar. Nevertheless, the name of this institution and its status were changed 12 times with the amendments to the law on health insurance. As a result, the department doesn’t even know their core function.
The operational cost of the health insurance fund is currently set at three percent of the total fund. The new law is going to increase it to five percent. However, the most important thing is the transparency of expenditure reports and results. There should be independent auditing in order to make it transparent to the public, track where the funds are kept and at what interest rate, and determine how efficient the fund’s operations are.
If we establish the previously mentioned national center, there will no longer be a never-ending quarrel between ministries about who should manage the fund and its expenditure. Also, it will make the ever-growing structure of ministries more compact and allow professional workforce to be transferred to the proposed center. The center can publish monthly newsletters to be delivered to the government and the people. These newsletters could provide information about how to prevent common illnesses, services offered by hospitals and updates on renewed equipment in health institutions.
It is obviously not possible to cover every single issue faced by Mongolia’s health industry in a single article. The purpose of this article lies in proposing some ideas on how a smart government can and should protect the most valuable belonging of its citizens – their health.

Translated by B.AMAR

Short URL: http://ubpost.mongolnews.mn/?p=7689

Posted by on Jan 26 2014. Filed under Opinion. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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