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Political Science Department Central European University Political Science Department Central European University Payments for Services Free by Law in the Russian Public Healthcare: Analysis of a Hidden Institution Ph.D. Dissertation submitted to Political Science Department, the Central European University by Maxim Ryabkov supervisors: Balázs Varadi and Iván Csaba defense board members: Paul Anand, Loránd Ambrus-Lakatos, Tamás Meszerics Budapest May 2004 1 Acknowledgements This work would not have been possible without advice and support of quite a number of people and institutions. Iván Csaba (formerly of Political Science Department at the CEU) has helped me through the research stage of the project, teaching me consistency and precision. Balázs Varadi has greatly helped with completion of the project, patiently listening to my arguments and bettering them with many new ideas, only few of which I explicitly acknowledge in the text. Loránd Ambrus-Lakatos has taught me formal modeling and commented on several drafts of this text. Tamás Meszerics helped hone my story of private payments in public healthcare at several key junctions. Tamás Rudas has been my teacher of statistics. Paul Anand has kindly agreed to be an external referee for this dissertation. Him together with many others I thank for fruitful discussions. Alexander Maxwell edited the text and made a lot of useful suggestions. During my field research in Russia, I greatly benefited from discussions with Sergey Shishkin of Independent Institute for Social Policy, Igor Sheiman, Elena Potapchik, Larisa Popovich, Tatyana Makarova, and many others, whose research jump started mine and who showed me the way through the intricacies of Russian healthcare. My special thanks go to the Central European University for financial and logistical support and to the University of Boston and Institute for Social Research, Moscow for permission to use primary data from their surveys. My heartfelt thanks go to my wife, Maria Khovanskaia, whose support and encouragement cannot be overestimated. The remaining factual errors, misinterpretations, and conceptual blunders are all mine. 2 Abstract This dissertation presents the empirical and theoretical findings of multi-pronged research into the nature and causes of payments for services which are free by law in Russian public healthcare. This research rejects the received wisdom of explaining the phenomenon by insufficient public funding. Instead, such payments are viewed as informational rent to medical professionals. I further hypothesize that private money plays the double role of the purchase of services and of establishing a special relationship with the medical professional. A mechanism of quality assurance exists which is based on the professional and reputation concerns of the doctor, who is willing to favor paying patients over non-paying ones. A regulatory gap creating a conflict of interest for the providers creates a favorable environment for such a mechanism. Limited public financing can hypothetically be viewed as a form of rent extraction. 3 Contents CHAPTER ONE. INTRODUCTION ...................................................................................................5 1.1 RESEARCH PURPOSE AND METHODS ..............................................................................................5 1.2 RUSSIAN PUBLIC HEALTHCARE: THE GENERAL SETTING.............................................................10 1.3 LITERATURE REVIEW ...................................................................................................................21 CHAPTER TWO. RULES AND PROCEDURES REGARDING COMBINATION OF FREE AND PAID CARE ................................................................................................................................42 2.1 PURPOSES AND METHODS ............................................................................................................42 2.2 ENTITLEMENT FOR FREE MEDICAL CARE: VOLUMES AND RATIONING OF FREE SERVICES ..........44 2.3 REGULATION OF PAID HEALTHCARE AND FREE CARE RIGHTS.....................................................52 2.4 COMBINED PAID AND FREE SERVICES AS A PUBLIC POLICY .........................................................69 2.5 CONCLUSIONS ..............................................................................................................................72 CHAPTER THREE. EMPIRICAL DATA ON PAYMENTS FOR SERVICES FREE BY LAW: IN-DEPTH INTERVIEWS AND STATISTICS................................................................................78 3.1 INTRODUCTION.............................................................................................................................78 3.2 STATISTICAL EVIDENCE ...............................................................................................................80 3.3 INTERVIEW-BASED EVIDENCE ......................................................................................................91 3.4 ANALYSIS...................................................................................................................................122 3.5 CONCLUSIONS ............................................................................................................................138 CHAPTER FOUR. A CONCEPTUAL FRAMEWORK OF PRIVATE PAYMENTS IN PUBLIC HEALTHCARE..................................................................................................................................140 4.1.INTRODUCTION...........................................................................................................................140 4.1 AGGREGATE LEVEL....................................................................................................................141 4.2 INDIVIDUAL LEVEL.....................................................................................................................146 4.3 RENT EXTRACTION AND HEALTH POLICIES................................................................................154 4.4. CONCLUSIONS ..........................................................................................................................162 CHAPTER FIVE. A MODEL OF STATE-PROVIDER-PATIENT RELATIONS.....................165 5.1 AN INTUITIVE EXPOSITION OF THE MODEL ................................................................................167 5.2 NOTATION AND DEFINITIONS .....................................................................................................171 5.3 SOLUTION...................................................................................................................................179 5.4 REGIME CHOICE: EFFECTS OF BENEVOLENCE AND INEQUALITY ................................................184 5.5 INTERPRETATIONS FOR REGIME CHOICE ....................................................................................199 5.6 OBJECTIONS AND FURTHER DEVELOPMENTS..............................................................................204 CHAPTER 6. CONCLUSIONS ........................................................................................................207 APPENDIX A. STATISTICAL DATA AND SEMI-STRUCTURED INTERVIEWS ................214 A1. BOSTON UNIVERSITY SURVEYS.................................................................................................214 A2. RUSSIAN LONGITUDINAL MONITORING STUDY (RLMS)...........................................................217 A 3. INTERVIEWS WITH PROFESSIONALS AND DECISION-MAKERS.....................................................222 APPENDIX B. ADDENDA TO THE MODEL OF CHAPTER FIVE ..........................................242 B1. EFFORT-RENT TRADE-OFF: CONTINUOUS CASE.........................................................................242 B.2. JOINT CONSUMPTION OF HEALTHCARE.....................................................................................247 SOURCES AND BIBLIOGRAPHY .................................................................................................249 4 Chapter One. Introduction This introductory chapter pursues three objectives. The first is to present the aims and methods of the research undertaken. The second is to describe the statutory institutions of the Russian public healthcare, so as to set the scene for the main story of this research. The third objective is to place this research within the existing literature, both on the same and related subjects. Hence, section 1.1 is a statement of purpose with a description and justification of methodology. Section 1.2 describes the current system of public healthcare of Russia and places the research topic in the context of recent developments in health policies. Section 1.3 discusses the relevant literature and embeds this research into a number of broader theoretical topics. 1.1 Research Purpose and Methods 1.1.1 Statement of purpose. Consider the following two stylized human interest stories about the Russian public healthcare. Someone visits a doctor with a complaint and receives a suggestion of hospitalization. Hospitalization and treatment are free of charge by law. The truth of the matter, however, is that hospitalization is unlikely to happen very soon because of queues. It is desirable for the patient to be hospitalized as soon as possible, and, moreover, it is desirable to end up in a good hospital. The current rules limit the choice of hospital. Queue jumping is possible if the patient goes home, waits for the next crisis, and then calls the emergency services. A good hospital however is not guaranteed. Money can solve both problems,
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