Russia Takes 'Anti-Socialist' Approach to Health Care

While Washington plans to pump unprecedented sums into what critics call a government takeover of health care, Moscow is moving in the opposite direction by backing legislation that could force hospitals and other public institutions to go commercial or close.

A bill scheduled to be approved by the State Duma in a third and final reading Friday aims to overhaul the financing for medical, educational, cultural and scientific institutions by giving them for the first time a free hand in how they spend state subsidies.

But opponents warn that the "anti-socialist" reform also could lead to a drop in state subsidies, forcing hospitals, schools and even libraries to increase their numbers of paid services or reduce work hours so as to make ends meet. They say this free-market approach could ultimately hurt the population, especially in poor rural areas.

The current system of funding public institutions is based on cost sheets — detailed lists of planned expenses that the institutions submit to the authorities each year. The funding rules, which are rigid and have been unchanged for years, earmark similar funding for similar institutions regardless of the quality of their work. Leftover funds are confiscated at the end of the year — a practice that leads to wasteful spending.

"The bill is aimed at making public institutions spend state money efficiently, instead of exaggerating expenses," said Vitaly Shuba, first deputy head of the Duma's Budget and Taxes Committee and a United Russia member.

United Russia, the pro-Kremlin party that dominates the Duma, is the only parliamentary faction backing the bill; the other three factions have denounced it.

The bill, a copy of which was obtained by The Moscow Times, adopts a laissez-faire approach instead of a micromanagement one. Subsidies for each public institution would be defined by a single line in the state budget. Leftover funds would no longer be confiscated.

Better services will lead to bigger subsidies, said Alexei Lavrov, a department head at the Finance Ministry, which drafted the bill.

Lavrov brushed off concerns that public institutions might be caught in a catch-22 of needing to boost the quality of their services to get more money, while at the same time needing more money to boost the quality of their services.

"The quality can be boosted through organizational efforts," he said.

But critics pointed out that the bill also frees the authorities fr om bearing any responsibility if a public institution goes bankrupt.

Opponents said they found it ironic that Russia was adopting the bill at a time when the United States, its capitalist foe during the Cold War, was increasing the government's presence in health care.

In March, U.S. lawmakers approved a seminal health care reform that will see the government spend almost $1 trillion over the next 10 years to broaden health care coverage. The reform, a hallmark of Barack Obama's presidency, has been widely panned by its critics as "socialist."

“France, Germany and the United States have more socialism than Russia, while even our Constitution implies that the country has to be socialist,” Duma Deputy Sergei Obukhov, a Communist, told The Moscow Times.

The Russian Constitution defines Russia as a “social state.”

The Duma bill, which was passed in a first reading in mid-February and a second reading on Wednesday, does not cover institutions prohibited from doing commercial business, such as defense agencies and psychiatric hospitals, nor so-called autonomous institutions that use little state money and enjoy broad freedoms.

The bill also does not specify how much money will be distributed to public institutions.

The size of the subsidies — not the new funding mechanism — is the key issue, said Lev Yakobson, a senior official with the Higher School of Economics. What the government needs to do is figure out a method for calculating the size of the subsidies, he said, adding that the method would determine whether public institutions stand to benefit from the proposed reform.

"The bill is a framework," Yakobson said.

The ambiguity, however, is stoking worries. The new rules are to be implemented nationwide by mid-2012.

A senior Just Russia deputy, Oksana Dmitriyeva, said the bill was unacceptable because public institutions should not have to face free-market pressures.

"A subsidy means partial financing, which implies a possible reduction of financing from the state budget and partial commercialization," Dmitriyeva said in a telephone interview.

Commercialization might have dire consequences in rural areas if hospitals and schools are forced to close for lack of funds, said Sergei Shtogrin, deputy head of the Duma's Budget and Taxes Committee and a member of the Communist Party.

"The country's population will die out and the quality of national education will go down," Shtogrin said in an interview in his Duma office.

He suggested guaranteeing a list of free public services for citizens.

The legislation allows the state to shrink its responsibilities and obtain a new way to pressure public institutions, said Irina Gorkova, a Duma deputy with the Liberal Democratic Party.

She explained that the bill makes legal a situation in which an institution does not receive enough money to fulfill assignments given by the state. In that case, the head of an institution would be held responsible and therefore be subject to pressure from authorities.

Insufficient funding also could result in a lack of medical equipment and cause doctors to shun jobs in public institutions, leaving hospitals understaffed, Gorkova said.

Workers in the cultural sector are equally pessimistic. With the bill's enactment, authorities would be able to get rid of their obligation to finance many museums and theaters, Russian State Library head librarian Alexander Visly said by phone.

Russian libraries are not allowed to perform commercial operations, which makes self-financing, even to lim ited degree, all but impossible, he said.

Cutting salaries is not an option because pay is already very low, so the only alternative would be to reduce working hours to save some money on electricity bills, he said.