Azerbaijan. Healthcare system financing

Despite significant increases in public health expenditure in recent years, Azerbaijan is still characterized by relatively low levels of public health expenditure both in absolute terms and as a share of GDP. The burden of financing health care is on the health care users, with OOP expenditure reaching almost 62% of total health spending in 2007 (World Health Organization, 2009).

Public health funding comes primarily from general government revenues, which includes money from the State Oil Fund. Formal user charges were allowed in public facilities until early 2008 when this practice was outlawed.

Much of the public funding for health is under the control of district authorities, which finance the network of primary and secondary health facilities in their jurisdictions. The central budget is implemented by the Ministry of Health, which funds republican tertiary health facilities, vertical state health programmes (mainly covering the centralized purchase of drugs and equipment for certain health conditions such as diabetes, hereditary blood diseases, cancer and others), as well as the Sanitary-Epidemiological Service. Since 2007, all Baku city health facilities are also funded through the Ministry of Health.

The vast majority of health providers are state owned, although the private sector has been flourishing in recent years, providing a growing share of health services especially in the capital. The payment mechanisms for the stateowned providers are based on inputs (beds, staffing), which does not foster the efficient use of resources. Moreover, the government, through the treasury system, controls how the money is spent within the health facilities by applying strict limitations for spending along budget line-items, which leaves health providers with little managerial and financial autonomy.

To overcome these difficulties, the Ministry of Health and the Ministry of Finance have agreed on new health financing reforms that will centralize funds and make room for greater provider autonomy and the introduction of contracting as the basis for new payment mechanisms, such as per capita payments in primary care and case-based payments for hospitals. These reforms will underpin the proposed introduction of mandatory health insurance.
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