Improving Financial Risk Protection in Armenian Health Care System

Abstract

Financial risk protection, in spite of extensive efforts and observed progress, still remains a major problem for the Armenian healthcare system. Different studies agree on unacceptable level of out of pocket payments with large proportion of informal payments. This situation may get worse under conditions of global financial and economical crisis; hence, this paper calls to develop a different solution to the problem of financial protection in Armenia. The out-of-pocket payments are strongly regressive. The poorest (whose household incomes are generally below the poverty level) overall pay about five times the percent of household income than the richest, despite having the larger benefit package provided to the poorest under the Basic Benefit Package program. Financial reasons are major barriers to seeking medical care. Data showed that 16%-26% of all Armenian households had catastrophic medical expenditures depending on the poverty definition used. This paper identifies several key determinants for low financial protection, referring to low healthcare spending, poor governance, inappropriate pricing of services under BBP, low remuneration of health workers, taxation of health care facilities and products, and lack of awareness of patient rights. The preferred strategy to address this problem is introduction of mandatory social health insurance with a single purchaser organization. This strategy is feasible for Armenia since the State Health Agency has relevant experience as a purchaser organization and hence it would not take long time for it to develop effective policies and has the capacity to operate in all marzes. This strategy does not suggest substitution of the existing resource generation through general taxation but rather diversification of ways to generate additional financial resources for the health system.