Azerbaijan. Healthcare system financial flowchart
As shown in the figure below, the health system in Azerbaijan is financed through a combination of tax revenues and OOP payments. Funding for services provided at the local level are channelled through the district authorities, while the Ministry of Health is responsible for the financing of national-level providers and the Sanitary-Epidemiological Service. Parallel services provided through other line ministries cover approximately 5% of the population (see below), and private providers are an increasingly significant part of the system.
Current reform projects are designed to develop a national health financing reform framework and to pilot new financing and management mechanisms. The health financing reform concept has been approved and covers pooling, new provider payment mechanisms, expanding provider autonomy, benefits for outpatient pharmaceuticals, and the defining of a basic benefits package. To support this, the process of integrating and improving health information systems is under way. However, this chapter outlines the current health financing system before these proposed reforms have been implemented.
Health expenditure
The economic collapse during the early to middle 1990s, aggravated by the military conflict with Armenia, resulted in a sharp decline in public expenditure on health. The situation started to improve in the early 2000s when the country started receiving significant revenues from oil production. In absolute terms, public health expenditure has grown rapidly from approximately US$ 6 per capita in 2000 to over US$ 50 projected in 2008 (authors’ own calculations based on unpublished data from the Ministry of Finance and data from the State Statistical Committee of Azerbaijan, 2009). However, the country’s GDP showed the same pattern of growth during this period, so budgetary allocations for health as a share of GDP have changed little, remaining at approximately 1%. Moreover, government health spending as a percentage of total government spending has decreased from 5.4% in 2000 to 3% projected for 2008 (Ministry of Finance 2008a; State Statistical Committee of the Republic of Azerbaijan, 2009). The state budget for health is also never executed fully. For instance, only 92.3% of allocated resources were used in 2007 (Ministry of Finance, 2008b).
This was understandable in the 1990s when the state budget ran huge deficits every year. In recent years, however, the reverse picture has been observed, and the reason for the continued underspending is not clear. One possible explanation could be the vacant positions in rural areas, which are budgeted for but not filled throughout the year.
In addition to health funding channelled through the Ministry of Health and local administrations, there are public health expenditures for parallel state health systems. The health care expenses of the Ministry of Defence, Ministry of Interior, Ministry of National Security, the State Railway Company and SOCAR are hard to estimate because of the scarcity of available data, but they certainly represent a significant share of all public expenses. Moreover, this share seems to have increased as a result of the expansion of the network by SOCAR, which has been spending tens of millions of dollars from its revenues on the construction of facilities, such as seven new treatment-diagnostic centres across the country. Another seven centres are planned for construction by SOCAR and these too will become part of the state health system on completion.
This expenditure is difficult to track because it is not reflected in the state budget. Consequently, the State Statistical Committee figures for government spending as a percentage of health spending are considerably lower than WHO estimates, which try to capture government funding to parallel systems and extraordinary government incentives (see Table 1).
According to expenditure figures reported by the State Statistical Committee, public health expenditure represented 44% of total health expenditure in 2007, which is a significant increase from 23.8% in 2002 (State Statistical Committee of the Republic of Azerbaijan, 2009). Estimates by WHO show less positive trends, with the share of public expenditure in total health expenditure as 29.3% in 2007, in comparison with 17.1% in 2002 (see Table 1) (World Health Organization, 2009). The true level of private health expenditure is hard to estimate for several reasons. First, there is a significant share of informal payments in OOP expenses, which are inherently hard to measure and would require a more detailed household survey. Second, even the formal charges may not be captured fully because of inadequate reporting from the private sector
Table 1. Trends in health expenditures in Azerbaijan, 2000-2007
(private health providers and pharmacies). Third, the country has not introduced a system of national health accounts to capture health expenditures in all subsystems and from all sources. Nevertheless, both WHO estimates and national statistics concur that the majority of health expenditure comes from the population as OOP payments.
Table 2. Structure of the state budget of Azerbaijan for health care, 2006-2008
The exact structure of health care expenditure in Azerbaijan is difficult to define. The classification of budget expenditure across five line-items (see Table 2) does not reflect the true division of spending between different types of health care, such as outpatient or inpatient. There is no clear definition of what constitutes primary, secondary and tertiary levels of care. For example, all village hospitals (SUBs) and many central district hospitals have ambulatory departments and their budgets are included in overall hospital budgets. Also, all hospital-based specialists provide outpatient services that are hard to trace because of the disrupted referral system. Moreover, from 2006, a significant share of the health care budget has been allocated for targeted state health programmes. The list of state health programmes and their corresponding budgets for 2008 are provided in Table 3.3. The majority target certain health conditions, aiming to cover the cost of providing equipment and pharmaceuticals through centralized procurement. The vertical nature of these programmes makes it difficult to determine the expenditures at different levels of care.
The overall trend is that the share of inpatient and specialty care is increasing as a result of state-funded capital investment programmes.
Table 3. State health programmes in Azerbaijan, 2007-2009
The majority of government health expenditure is taken up by staff salaries (see Table 4). The share of salaries increased significantly in comparison with late 1990s and early 2000s, when it was well below 50%. However, salaries in the public health care sector remain very low. According to the State Statistical Committee, the average salary was only 89.9 Azerbaijani new manat (AZN) in 2007, which is less than half the average salary in the country (State Statistical Committee of the Republic of Azerbaijan, 2009). On this basis, even if the entire health budget was spent on salaries, these would still fall below the national average. Also, allocations for drugs and medical supplies have grown from less than 10% of the total health care budget in the late 1990s to 18% in 2008. The share of capital investment has been rising rapidly too in recent years, from approximately 3% in 1999 to more than 9% in 2007 (Holley et al., 2004; unpublished data from the Ministry of Finance, 2008). More than 100 health facilities have been constructed or fully rehabilitated since 2006 (unpublished data from the Ministry of Health, 2009).
Table 4. Government health expenditures by service input in Azerbaijan, 2006-2009
Current reform projects are designed to develop a national health financing reform framework and to pilot new financing and management mechanisms. The health financing reform concept has been approved and covers pooling, new provider payment mechanisms, expanding provider autonomy, benefits for outpatient pharmaceuticals, and the defining of a basic benefits package. To support this, the process of integrating and improving health information systems is under way. However, this chapter outlines the current health financing system before these proposed reforms have been implemented.
The economic collapse during the early to middle 1990s, aggravated by the military conflict with Armenia, resulted in a sharp decline in public expenditure on health. The situation started to improve in the early 2000s when the country started receiving significant revenues from oil production. In absolute terms, public health expenditure has grown rapidly from approximately US$ 6 per capita in 2000 to over US$ 50 projected in 2008 (authors’ own calculations based on unpublished data from the Ministry of Finance and data from the State Statistical Committee of Azerbaijan, 2009). However, the country’s GDP showed the same pattern of growth during this period, so budgetary allocations for health as a share of GDP have changed little, remaining at approximately 1%. Moreover, government health spending as a percentage of total government spending has decreased from 5.4% in 2000 to 3% projected for 2008 (Ministry of Finance 2008a; State Statistical Committee of the Republic of Azerbaijan, 2009). The state budget for health is also never executed fully. For instance, only 92.3% of allocated resources were used in 2007 (Ministry of Finance, 2008b).
This was understandable in the 1990s when the state budget ran huge deficits every year. In recent years, however, the reverse picture has been observed, and the reason for the continued underspending is not clear. One possible explanation could be the vacant positions in rural areas, which are budgeted for but not filled throughout the year.
In addition to health funding channelled through the Ministry of Health and local administrations, there are public health expenditures for parallel state health systems. The health care expenses of the Ministry of Defence, Ministry of Interior, Ministry of National Security, the State Railway Company and SOCAR are hard to estimate because of the scarcity of available data, but they certainly represent a significant share of all public expenses. Moreover, this share seems to have increased as a result of the expansion of the network by SOCAR, which has been spending tens of millions of dollars from its revenues on the construction of facilities, such as seven new treatment-diagnostic centres across the country. Another seven centres are planned for construction by SOCAR and these too will become part of the state health system on completion.
This expenditure is difficult to track because it is not reflected in the state budget. Consequently, the State Statistical Committee figures for government spending as a percentage of health spending are considerably lower than WHO estimates, which try to capture government funding to parallel systems and extraordinary government incentives (see Table 1).
According to expenditure figures reported by the State Statistical Committee, public health expenditure represented 44% of total health expenditure in 2007, which is a significant increase from 23.8% in 2002 (State Statistical Committee of the Republic of Azerbaijan, 2009). Estimates by WHO show less positive trends, with the share of public expenditure in total health expenditure as 29.3% in 2007, in comparison with 17.1% in 2002 (see Table 1) (World Health Organization, 2009). The true level of private health expenditure is hard to estimate for several reasons. First, there is a significant share of informal payments in OOP expenses, which are inherently hard to measure and would require a more detailed household survey. Second, even the formal charges may not be captured fully because of inadequate reporting from the private sector
Table 1. Trends in health expenditures in Azerbaijan, 2000-2007
Table 2. Structure of the state budget of Azerbaijan for health care, 2006-2008
The overall trend is that the share of inpatient and specialty care is increasing as a result of state-funded capital investment programmes.
Table 3. State health programmes in Azerbaijan, 2007-2009
Table 4. Government health expenditures by service input in Azerbaijan, 2006-2009
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