Governance for strategic purchasing in Kyrgyzstan’s health financing system

GOVERNANCE FOR STRATEGIC PURCHASING IN KYRGYZSTAN’S HEALTH FINANCING SYSTEM HEALTH FINANCING CASE STUDY NO. 16 Jarno Habicht Loraine Hawkins Melitta Jakab Andres Rannamäe Aigul Sydakova © Copyright World Health OrganizaƟ on 2020 Some rights reserved. This work is available under the CreaƟ ve Commons AƩ ribuƟ on-NonCommercial- ShareAlike 3.0 IGO licence (CC BY-NC-SA 3.0 IGO; hƩ ps://creaƟ vecommons.org/licenses/by-nc-sa/3.0/ igo). Under the terms of this licence, you may copy, redistribute and adapt the work for non-commercial purposes, provided the work is appropriately cited, as indicated below. In any use of this work, there should be no suggesƟ on that WHO endorses any specifi c organizaƟ on, products or services. The use of the WHO logo is not permiƩ ed. If you adapt the work, then you must license your work under the same or equivalent CreaƟ ve Commons licence. If you create a translaƟ on of this work, you should add the following disclaimer along with the suggested citaƟ on: “This translaƟ on was not created by the World Health OrganizaƟ on (WHO). WHO is not responsible for the content or accuracy of this translaƟ on. The original English ediƟ on shall be the binding and authenƟ c ediƟ on”. Any mediaƟ on relaƟ ng to disputes arising under the licence shall be conducted in accordance with the mediaƟ on rules of the World Intellectual Property OrganizaƟ on. Suggested citaƟ on. Habicht J, Hawkins L, Jakab M, Rannamäe A, Sydakova A. Governance for strategic purchasing in Kyrgyzstan’s health fi nancing system. Geneva: World Health OrganizaƟ on; 2020. Licence: CC BY-NC-SA 3.0 IGO. Cataloguing-in-PublicaƟ on (CIP) data. CIP data are available at hƩ p://apps.who.int/iris. Sales, rights and licensing. TTo purchase WHO publicaƟ ons, see hƩ p://apps.who.int/bookorders. To submit requests for commercial use and queries on rights and licensing, see hƩ p://www.who.int/about/ licensing. Third-party materials. If you wish to reuse material from this work that is aƩ ributed to a third party, such as tables, fi gures or images, it is your responsibility to determine whether permission is needed for that reuse and to obtain permission from the copyright holder. The risk of claims resulƟ ng from infringement of any third-party-owned component in the work rests solely with the user. General disclaimers. The designaƟ ons employed and the presentaƟ on of the material in this publicaƟ on do not imply the expression of any opinion whatsoever on the part of WHO concerning the legal status of any country, territory, city or area or of its authoriƟ es, or concerning the delimitaƟ on of its fronƟ ers or boundaries. DoƩ ed and dashed lines on maps represent approximate border lines for which there may not yet be full agreement. The menƟ on of specifi c companies or of certain manufacturers’ products does not imply that they are endorsed or recommended by WHO in preference to others of a similar nature that are not menƟ oned. Errors and omissions excepted, the names of proprietary products are disƟ nguished by iniƟ al capital leƩ ers. All reasonable precauƟ ons have been taken by WHO to verify the informaƟ on contained in this publicaƟ on. However, the published material is being distributed without warranty of any kind, either expressed or implied. The responsibility for the interpretaƟ on and use of the material lies with the reader. In no event shall WHO be liable for damages arising from its use. The named authors alone are responsible for the views expressed in this publicaƟ on. Printed in Switzerland. Governance for strategic purchasing in Kyrgyzstan’s health fi nancing system/ Jarno Habicht, Loraine Hawkins, MeliƩ a Jakab, Andres Rannamäe, Aigul Sydakova ISBN 978-92-4-000345-3 (electronic version) ISBN 978-92-4-000346-0 (print version) Acknowledgements List of abbreviations Executive Summary 1. INTRODUCTION 2. GENERAL GOVERNANCE CONTEXT AND HEALTH FINANCING SYSTEM 3. GOVERNANCE OF THE KYRGYZ HEALTH CARE PURCHASING SYSTEM 3.1. Setting of strategic direction: national health sector reform strategies and implementation plans 3.2. Alignment of public fi nancial management with health purchasing reform 3.3. Coordination of development fi nance and the role of development partners 3.4. Challenges common in single-purchaser systems: credibility of the budget constraint, pressure to protect public providers 4. GOVERNANCE OF THE KYRGYZSTAN PURCHASING AGENCY: THE MANDATORY HEALTH INSURANCE FUND (MHIF) 4.1 Clear, coherent role and decision-making authority 4.2 Autonomy and authority of the MHIF to act strategically 4.3 Coherent lines of accountability supporting transparency: emerging accountability focused on results 4.4 Effective oversight 4.5 Inclusive and meaningful stakeholder participation: the Public Advisory Council 4.6 Relationship between provider governance and MHIF governance 4.7 Summary assessment of governance at the health purchasing agency level 5. ASSESSMENT OF FACTORS CONDUCIVE TO EFFECTIVE GOVERNANCE OF STRATEGIC PURCHASING 6. CONCLUSION: KEY CHALLENGES AND POSITIVE ACHIEVEMENTS AND LESSONS 6.1. Governance of the health purchasing system 6.2. Governance of the purchasing agency: the MHIF 6.3. Conducive factors relevant to good governance 7. RECOMMENDATIONS 7.1. Strengthening the authority and capacity of the MHIF Supervisory Board to bring multiple lines of accountability together 7.2. Developing more balanced and meaningful stakeholder participation 7.3. Supporting MHIF internal management and capacity – factors conducive for good governance 7.4. Considering alternatives to the “classic” model for governance of an independent health purchasing agency 8. REFERENCES 4 4 5 9 11 14 14 15 17 17 19 19 20 23 24 27 27 29 32 35 35 36 38 40 40 40 42 42 44 TABLE OF CONTENTS ACKNOWLEDGEMENTS LIST OF ABBREVIATIONS 4 This paper was commissioned by WHO Country Offi ce in the Kyrgyz Republic. The authors are grateful for the helpful inputs of the Kyrgyzstan Ministry of Finance (MOF), the Ministry of Health (MOH), the Mandatory Health Insurance Fund under the Government of the Kyrgyz Republic (MHIF) and development partners contribuƟ ng to the technical support and policy dialogue on health fi nancing, governance mechanisms and health sector strategy in Kyrgyzstan, and in parƟ cular for the advice and comments from key individual informants and experts, namely: Nurida Baizakova (MOF), Gulmira Borchubaeva (MHIF), Hannes Danilov (consultant to WHO), Triin Habicht (consultant to WHO), Ainura Ibraimova (Independent, former Deputy Minister of Health and MHIF CEO), Marat Kaliev (former MHIF Chair and CEO, former Deputy Minister of Health) and Altynai Omurbekova (Vice Prime Minister). The authors also appreciate various opportuniƟ es to discuss in length the health fi nancing arrangements and the developments over past decades with teams of key development partners supporƟ ng the health sector, such as the World Bank, KfW and the Swiss Agency for Development and CooperaƟ on. Any inaccuracies or misinterpretaƟ ons remain the responsibility of the authors. This document is a deliverable of the biennial collaboraƟ ve agreement for 2018–2019 between Ministry of Health of Kyrgyz Republic (KR) and the WHO Regional Offi ce for Europe, coordinated by the WHO Country Offi ce in Kyrgyzstan and fi nanced with the support of the European Union and the Grand Duchy of Luxemburg within the EU-Luxemburg-WHO Universal Health Coverage Partnership, the Japan Universal Health Coverage grant to WHO, and the Swiss Agency for Development and CooperaƟ on project on strengthening monitoring and evaluaƟ on and policy dialogue for Den Sooluk. CEO chief execuƟ ve offi cer CHE current health expenditure EHIF Estonian Health Insurance Fund GDP gross domesƟ c product JAR joint annual review MHI mandatory health insurance MHIF Mandatory Health Insurance Fund MOF Ministry of Finance MOH Ministry of Health PAC Public Advisory Council PFM public fi nancial management SB supervisory board SGBP state-guaranteed benefi t package SWAp sector-wide approach VHI voluntary health insurance WHO World Health OrganizaƟ on HEALTH FINANCING CASE STUDY NO. 16 EXECUTIVE SUMMARY 5EXECUTIVE SUMMARY This paper is part of a series of country case studies on governance for strategic purchasing. It describes and assesses governance in the single-payer system of the Kyrgyz Republic. The case study is structured around four assessment areas listed in the box below, in line with a recently published WHO methodology for assessing governance arrangements for strategic purchasing (WHO, 2019). One of the smaller and poorer countries of the former Soviet Union, Kyrgyzstan reached lower-middle-income country status in 2014. Comprehensive health fi nancing reforms over the period 1996– 2006 created a single-payer health fi nancing system. Most public funding is pooled in the Mandatory Health Insurance Fund (MHIF), which introduced provider payment reform alongside a beƩ er-defi ned benefi t package with explicit co-payments and exempƟ ons for priority services and for vulnerable groups. As a result of the reform, fi nancial protecƟ on improved but out-of-pocket payments sƟ ll account for around half of current health expenditure (CHE). The health fi nancing reforms have remained in place with reasonable policy stability over a period in which the country has weathered a series of poliƟ cal and economic crises. At the level of the health purchasing system, governance in Kyrgyzstan benefi ts from relaƟ vely comprehensive consolidaƟ on of public expenditure in a single pool, which potenƟ ally gives the MHIF strong leverage for strategic purchasing. However, this potenƟ al is not fully realized because of weaknesses in strategic coordinaƟ on with the Ministry of Health (MOH), and a history of misalignment between health fi nancing reform and public fi nancial management policy and processes. Recent progress has been made through stronger cooperaƟ on between the MHIF and the Ministry of Finance (MOF) to increase alignment of public fi nancial management (PFM) and give the MHIF greater fi nancial autonomy. The MHIF is an independent public administraƟ ve agency which, since 2009, has been subordinate to the Cabinet of Ministers. In the early stages of reform implementaƟ on, the MHIF was an agency subordinate to the MOH, which proved helpful for close coordinaƟ on. The current more independent status of the MHIF has been important for enabling it to consolidate its technical and administraƟ ve systems for purchasing, and to sustain these with a high degree of stability, in spite of many changes of government and ministers. Assessment areas: 1. The broader, poliƟ cal and general governance context and overview of the health fi nancing system 2. Governance of the health care purchasing system 3. Governance arrangements of an individual purchaser 4. Conducive factors for eff ecƟ ve governance for strategic purchasing At the level of governance of the MHIF, however, challenges remain. LegislaƟ on governing the MHIF does not set out a clear division of authority between the MOH and MHIF nor does it formalize coordinaƟ on and oversight arrangements. The MHIF has a supervisory board (SB) established by the Cabinet of Ministers but, because its role is not enshrined in legislaƟ on, it does not have real authority. It plays a largely passive role in approving operaƟ onal strategies, budgets and the annual report. As a result, the MHIF’s SB and management lack suffi cient autonomy to make decisions needed to enable strategic purchasing. The MHIF has mulƟ ple lines of accountability to the SB, the MOH, the MOF and a separate Public Advisory Council (PAC) of ciƟ zens, making it diffi cult to achieve sustained coherence between these lines of accountability. The governing agencies or bodies have not established results-oriented governance. There are no rules for prevenƟ ng or managing confl ict of interest in the SB or the PAC. The MOH itself has some confl ict of interest because the public provider network is subordinate to the MOH, meaning that it is not well- placed to be a neutral steward over both the purchaser and providers of the health system. However, perhaps the greatest challenge to eff ecƟ ve governance for strategic purchasing in the Kyrgyz Republic is the lack of a credible budget constraint due to a very large fi nancing gap between MHIF revenue and the cost of the benefi t package it is expected to cover. This makes it diffi cult to hold the MHIF accountable for the core fi nancing objecƟ ves of improving fi nancial protecƟ on, service quality and access. Addressing these challenges in the Kyrgyz context is diffi cult. Strengthening governance through the SB will take Ɵ me because there is liƩ le experience in the country of the “western” model of performance-oriented corporate governance, and consequently limited capacity available in any sector for governance boards. The new model of governance was overlaid on top of an only partly reformed Soviet-legacy system of centralized norms and regulaƟ on of inputs in the health system, accompanied by mulƟ ple inspecƟ ons and sancƟ ons. In addiƟ on, building the conducive factors for eff ecƟ ve governance, such as data and analyƟ cal capacity to support results- oriented governance, has been constrained by the scarcity of human resources and the limited administraƟ ve budget in the MHIF. In spite of these constraints, the chief execuƟ ve offi cer (CEO) of the MHIF has taken steps in recent years, supported by WHO, to put in place basic good governance pracƟ ces in strategy formulaƟ on, agenda- seƫ ng and reporƟ ng to the SB, and inducƟ on training has been off ered to SB members. Providing pracƟ cal technical support for these iniƟ aƟ ves, together with support for improvements in data analysis and presentaƟ on used in reporƟ ng, has proved to be a useful entry point for strengthening governance. Another lesson from the Kyrgyz experience is that it is important to dovetail the new governance mechanisms of an SB with the exisƟ ng lines of accountability and authority and to clarify how these should interact. Focusing the membership of the governance body on representaƟ on of agencies with key roles in MHIF statutory accountability (notably the MOH, MOF, Prime Minister or presidenƟ al administraƟ on, and the parliamentary health commiƩ ee) allows use of the SB as a mechanism for bringing mulƟ ple lines of governance together and coordinaƟ ng them. Devising mechanisms to ensure there is some conƟ nuity of board membership during government transiƟ ons would also be helpful. The Kyrgyz 6 HEALTH FINANCING CASE STUDY NO. 16 7EXECUTIVE SUMMARY experience also brings out the importance of support for developing both ends of the accountability relaƟ onship – i.e. clarifying the MOH stewardship roles and building relevant capacity to play a major role in MHIF governance. Tackling the mismatch between the state- guaranteed benefi t package (SGBP) and the MHIF budget constraint – an important enabler for stronger accountability for fi nancial performance and fi nancial protecƟ on – will conƟ nue to be very diffi cult in the context of low- and lower- middle-income countries like Kyrgyzstan. This challenge will require greater discipline over un-funded decisions to reduce co- payments and expand benefi ts as well as sustained commitment over the long term by the Kyrgyz Government to mobilizing resources for health. Nonetheless, the Kyrgyz case demonstrates there is scope for the MHIF to use its purchasing levers to achieve effi ciency improvements and re-invest these gains into improvements in quality of care. These improvements could be more substanƟ al if there is close coordinaƟ on with the MOH and its faciliƟ es in planning, regulaƟ on and health human resources policies. This paper is a case study that aims to document and review the experiences with governance of the health purchasing system and the MHIF of the Republic of Kyrgyzstan. It also discusses the iniƟ aƟ ves taken to strengthen governance arrangements, including their impact, remaining barriers and challenges. The case study is structured along WHO’s recently published AnalyƟ cal framework to guide a country assessment of governance for strategic purchasing (WHO, 2019), as outlined in the box below, and contributes to a series of country case studies of governance for strategic purchasing. 1. INTRODUCTION PURPOSE The paper synthesises analyses and fi ndings from published and grey literature on the governance of the MHIF, the health fi nancing system and related PFM issues in the health sector in Kyrgyzstan. These include the reviews and evaluaƟ ons of three generaƟ ons of health sector strategies, and studies commissioned by the Kyrgyz health authoriƟ es and development partners. The assessment is largely based on fi ndings of an unpublished 2016 assessment of MHIF governance commissioned by WHO, updated with informaƟ on included in reports on governance and PFM support acƟ viƟ es of WHO and other development partners. It also draws on discussions with key informants currently or formerly working in the MHIF. This paper draws substanƟ ally on the defi niƟ ons of governance and framework for assessing governance of mandatory health insurance set out in Savedoff & GoƩ ret (2008), which has also informed the WHO framework. Their framework speaks about a narrow defi niƟ on of governance that looks specifi cally at the mechanisms that are used to set strategic direcƟ ons and objecƟ ves for the MHIF and ensure they are achieved. This defi niƟ on is concerned with issues such as the design of the governance mechanisms which defi ne and regulate the balance between the managerial autonomy of the MHIF and the direcƟ on and control by the government, the MHIF’s accountability mechanisms and transparency requirements and the roles given to stakeholders in these METHODOLOGY AND DEFINITIONS 9INTRODUCTION Assessment areas: 1. The broader, poliƟ cal and general governance context and overview of the health fi nancing system 2. Governance of the health-care purchasing system 3. Governance arrangements of an individual purchaser 4. Conducive factors for eff ecƟ ve governance for strategic purchasing The paper synthesises analyses and fi ndings from published and grey literature on the governance of the MHIF, the health fi nancing system and related PFM issues in the health sector in Kyrgyzstan. These include the reviews and evaluaƟ ons of three generaƟ ons of health sector strategies, and studies commissioned by the Kyrgyz health authoriƟ es and development partners. The assessment is largely based on fi ndings of an unpublished 2016 assessment of MHIF governance commissioned by WHO, updated with informaƟ on included in reports on governance and PFM support acƟ viƟ es of WHO and other development partners. It also draws on discussions with key informants currently or formerly working in the MHIF. This paper draws substanƟ ally on the defi niƟ ons of governance and framework for assessing governance of mandatory health insurance set out in Savedoff & GoƩ ret (2008), which has also informed the WHO framework. . Their framework speaks about a narrow defi niƟ on of governance that looks specifi cally at the mechanisms that are used to set strategic direcƟ ons and objecƟ ves for the MHIF and ensure they are achieved. This defi niƟ on is concerned with issues such as the design of the governance mechanisms which defi ne and regulate the balance between the managerial autonomy of the MHIF and the direcƟ on and control by the government, the MHIF’s accountability mechanisms and transparency requirements and the roles given to stakeholders in these processes. This defi niƟ on has informed the WHO framework’s concepƟ on of governance arrangements at the level of the health purchasing agency. The Savedoff & GoƩ ret framework also refers to a broad defi niƟ on of governance which encompasses all the relevant factors that infl uence the behaviour of an organizaƟ on. For MHI enƟ Ɵ es, these factors include its relaƟ onship to the Government and legislature, its benefi ciaries, and other stakeholders, health-care providers, other insurers (though this is not a signifi cant consideraƟ on in Kyrgyzstan where private health insurance accounts for less than 1% of current health expenditure), the news media and civil society. This defi niƟ on has informed the WHO framework’s concepƟ on of governance of the health-care purchasing system. The laƩ er also draws on conceptualizaƟ on of governance for health fi nancing in Phua (2017). The WHO framework proposes to integrate those narrow and broad defi niƟ ons of governance into an analysis of governance arrangements applying to purchasing from the system to the agency level (WHO, 2019). This paper also draws upon another complementary framework for characterizing, analysing and structuring the assessment of governance insƟ tuƟ ons and governance pracƟ ce of the MHIF in Kyrgyzstan. This is the Good governance standard for public services of the United Kingdom, developed in 2004 and in use from 2006. It is applicable to all organizaƟ ons that work for public good goals using public money. The standard is useful for understanding and applying common principles of good governance in the narrow defi niƟ on – i.e. principles for the structures and processes of oversight and accountability for the MHIF. It is used to assess the strengths and weaknesses of current governance pracƟ ce and to formulate recommendaƟ ons to improve it. The United Kingdom standard refl ects principles and pracƟ ces widely accepted in high-income countries in Europe (Independent Commission on Good Governance in Public Services, 2004). The paper discusses whether the classic western European model of corporate governance, which is the context for development of this standard, is transferrable to the context of a lower-middle-income country with a diff erent history and culture. 10 HEALTH FINANCING CASE STUDY NO. 16 11GENERAL GOVERNANCE CONTEXT AND HEALTH FINANCING SYSTEM Kyrgyzstan became independent in 1991 and numerous changes have been introduced since then in all the sectors, including health care. The Kyrgyz Republic’s fi rst health reform strategy (the Manas NaƟ onal Program of Health Care Reforms) was applied in 1996–2005. Over the years the country’s economy has undergone a gradual transiƟ on from low-income to lower-middle-income status. The gross domesƟ c product (GDP) per capita increased from US$ 280 in 2000 to US$ 1160 in 2017 (World Bank data current US$). The populaƟ on grew over this period from 4.9 million to 6.2 million. The poverty headcount rate reduced to 19% in 2016 from over 30%. This progress has been achieved in spite of a series of poliƟ cal and economic crises that Kyrgyzstan weathered over the past 20 years. A World Bank review of progress in economic development, poverty reducƟ on and health sector performance aŌ er Manas implementaƟ on was posiƟ ve. However, the review noted that “a weak governance environment remains the major impediment undermining a more speedy reducƟ on in poverty and acceleraƟ on of growth” (World Bank, 2008). The country inherited from the Soviet Union a public delivery system of health faciliƟ es under the MOH and regional (oblast) administraƟ ons fi nanced from the government budget. Like other post- Soviet countries, Kyrgyzstan also inherited a system of very detailed input planning and control for health-care providers. In 1997, Kyrgyzstan established the MHIF to administer a naƟ onal health insurance system fi nanced by a 2% payroll tax, in order to improve revenue mobilizaƟ on and fi nancial protecƟ on for health. This funding fl owed to faciliƟ es in addiƟ on to general budget allocaƟ ons which were known to be insuffi cient to cover the costs of care. FaciliƟ es were given increased fi nancial fl exibility in the use of this incremental funding. 2. GENERAL GOVERNANCE CONTEXT AND HEALTH FINANCING SYSTEM Table 1. Key (socio-)economic, health and health expenditure indicators 2000 2005 2010 2015 Total current health expenditure (CHE) as % GDP 4.4% 7.5% 7.1% 8.2% Per capita CHE current US$ $12.29 $36.11 $62.59 $92.08 Per capita CHE PPP US$ $72 $160 $194 $287 DomesƟ c general government health expenditure as % CHE 48% 51% 48% 45% Out-of-pocket payment as % CHE 51.6% 42.6% 42.3% 48.2% DomesƟ c general government health expenditure as % general government expenditure 7.1% 12.8% 9.2% 9.9% External health expenditure as % CHE Not available 6.4% 9.5% 6.9% % external health expenditure channelled through government 0.0% 0.0% 55.9% 20.2% During 2001–2004, Kyrgyzstan implemented a health fi nancing reform model that was widely recommended at that Ɵ me in post-Soviet countries with public delivery systems; consequently a purchaser-provider split was phased in over fi ve years and a single-payer system was developed. The previous general government budget allocaƟ ons to faciliƟ es (fi nanced from general taxaƟ on) and MHI payroll contribuƟ ons were pooled and managed by the MHIF. IniƟ ally, pooling was at regional (oblast) level, and was managed by MHIF regional offi ces. In 2006 pooling of funds shiŌ ed to the naƟ onal level, which allowed the MHIF to distribute funds more equitably across oblasts. (Kutzin, Jakab and Shishkin 2009; Kutzin, Ibraimova et al. 2009). In the latest phase of reform, starƟ ng in 2016, the Government pooled into the MHIF most of the remaining parallel funding from the MOH budget (largely for specialized services) and the Bishkek City health budget. The MHIF now manages around 80% of government health spending (O’Dougherty et al. 2016). In line with internaƟ onal advice, the MHIF sought to move away from line-item budgets for providers and to introduce new payment mechanisms to improve incenƟ ves for effi ciency, increased cost-eff ecƟ veness and equity. The intenƟ on was, over Ɵ me, for the MHIF to contract private providers too, but unƟ l now the private health sector remains small except for private providers off ering diagnosƟ c services, and specialized services for cardiovascular disease in the capital Bishkek. The MHIF introduced capitaƟ on payments for primary care and a simple case-based payment system for hospital care. Other key components of the health fi nancing reform were a more explicitly defi ned SGBP with offi cial paƟ ent co-payments alongside exempƟ ons for poor and vulnerable groups. In conjuncƟ on with these fi nancing reforms, the MOH implemented a major downsizing of excess capacity in the hospital sector, closing smaller rural district (rayon) hospitals, releasing substanƟ al savings that were reinvested in health. The combined impact of these reforms improved health-care provider effi ciency and fi nancial protecƟ on for the poor (Jakab, 2007; Purvis et al. 2005, Jakab et al. 2005; Kutzin et al. 2010; World Bank, 2013). However, much less aƩ enƟ on was paid to the reform of provider governance and management in the fi rst phase of reform. The MHIF contracts with some private providers, mainly retail pharmacies, but also some specialist faciliƟ es, including haemodialysis services. It is remarkable that the MHIF has survived the poliƟ cal and economic crises the country has experienced since it was established and has maintained a substanƟ al degree of conƟ nuity and stability in the health fi nancing system. Important contributors to this have been the coordinaƟ on of local reform leaders and supporters and the development partners who have supported the single-payer system. The willingness to adapt governance of health- care purchasing over Ɵ me has also played a part. Several revisions to the governance arrangements for the MHIF have aff ected its legal status and its relaƟ onship with the MOH, wider Government and civil society, as well as its oversight and accountability arrangements.1 Since 1996 there have been several phases of technical support for the development of the MHIF’s governance and management capacity. The main strategic challenge facing the health fi nancing system in Kyrgyzstan is that although it now pools most public fi nancing for health care in the MHIF (almost 80% in 2017), the MHIF pools only around 40% of total recurrent health spending because the largest share (48% in 2015) is out-of-pocket expenditure – principally on pharmaceuƟ cals – followed by inpaƟ ent care. Informal payments 1 This secƟ on of the report draws on a presentaƟ on by the MHIF’s CEO, Dr Murat Kaliev, to the Joint Annual Review of the health sector strategy in 2016, enƟ tled: 20 years of MHIF in Kyrgyzstan: achievements and challenges. 12 HEALTH FINANCING CASE STUDY NO. 16 contribute to out-of-pocket spending. The share of out-of-pocket payments and the rates of catastrophic expenditure have risen since 2009, parƟ ally eroding gains made during the fi rst phase of the fi nancing reform, though the fi nancial protecƟ on policies of the SGBP are sƟ ll protecƟ ng the poorest quinƟ le (Akkazieva et al., 2016; Jakab et al., 2018). This situaƟ on refl ects the fact that the budget allocated to the MHI system is insuffi cient to fi nance the relaƟ vely comprehensive benefi t package at current levels of effi ciency, to pay prices that enable faciliƟ es to ensure a conƟ nuous supply of medically necessary inputs and to remunerate staff adequately. Table 2. Mapping of main purchasers and providers Ministry of Health Other central ministries (President’s administraƟ on, Interior, Defence) Mandatory health insurance fund Voluntary health insurance (VHI) Sources of fi nance (e.g. general taxaƟ on, earmarked taxes, local taxes, compulsory contribuƟ ons, rest of world) General taxaƟ on General taxaƟ on General taxaƟ on (naƟ onal government budget), 2% payroll contribuƟ ons, fi xed premiums for farmers, informal sector… Voluntary or employer contribuƟ ons. (minimal share of CHE) PopulaƟ on covered and as share of the total populaƟ on 100% Small numbers. Data lacking. Employees of these ministries are also covered by the single-payer system 100% for primary care, emergency care & referred hospital care, 74% for most prescripƟ on drug coverage Very few. Services covered (e.g. inpaƟ ent care, outpaƟ ent care, medicines, prevenƟ ve, promoƟ ve) PopulaƟ on-based public health services, a few clinics & faciliƟ es not transferred to MHIF single-payer system Comprehensive package of primary care, hospital care, palliaƟ ve care, rehabilitaƟ on Data lacking. Private VHI accounts for under 1% of health expenditure. In each column: Are these single or mulƟ ple purchasers? NA NA Single MulƟ ple If mulƟ ple purchasers, are they compeƟ ng? NA NA NA Not compeƟ ng with MHIF. Compete within private VHI market only. Types of providers from whom services are purchased Public providers, directly managed by MOH Public providers directly managed by the respecƟ ve ministry Mostly public providers. Contracts with private pharmacies & private haemodialysis providers Private providers NA, not applicable 13GENERAL GOVERNANCE CONTEXT AND HEALTH FINANCING SYSTEM At the level of the health care purchasing system, governance in Kyrgyzstan benefi ts from comprehensive consolidaƟ on of public expenditure in a single pool. The MHIF pools around 80% of government spending on health, with most of the other 20% being allocated to populaƟ on-based public health services, health educaƟ on and MOH administraƟ on. This was not always the case. UnƟ l 2016, Bishkek City government budget funded primary and secondary health care within the capital city, and specialized health services conƟ nued to be provided by insƟ tuƟ ons aƩ ached to the MOH. Bishkek City and the MOH funded their faciliƟ es from their budgets based on historic line-items, with no possibility for strategic purchasing. From 2017, however, this funding was transferred to the MHIF and these faciliƟ es were brought into the single-payer system. The high level of pooling in the MHIF has the potenƟ al over Ɵ me to give the MHIF relaƟ vely strong leverage for strategic purchasing. However, the high fi nancing gap for the benefi t package and heavy reliance of public faciliƟ es on informal and out-of-pocket payment weakens this leverage. From a governance point of view, in a single- purchaser system such as Kyrgyzstan’s, the governance of the MHIF as a purchasing agency (discussed in SecƟ on 3) is the main entry point for improving governance for strategic purchasing. However, there are several challenges at the health-system level that reduce the potenƟ al for the MHIF to act as a strategic purchaser and drive improvement in health- care effi ciency and quality that need to be addressed above the level of the MHIF’s own governance. An acknowledged strength of the Kyrgyz health system governance has been the adopƟ on by the Government of a series of comprehensive naƟ onal strategies for health sector reform and development which were also raƟ fi ed by Parliament. These strategies have brought together health fi nancing policies with other health system pillars – service delivery, human resources, informaƟ on, pharmaceuƟ cals. They have been used to defi ne the main objecƟ ves and responsibiliƟ es of the Government, MOH, MHIF and health- care providers in implemenƟ ng the health strategy in the medium term, and to coordinate public fi nance and development assistance. The fi rst such strategy – Manas covering 1996–2005 – did this coherently and successfully. It was evaluated as achieving a posiƟ ve impact on fi nancial protecƟ on, parƟ cularly for the poor, through coordinated acƟ on on revenue mobilizaƟ on, benefi t package defi niƟ on, formalizing co-payments with exempƟ ons for the poor, hospital restructuring and provider payment reform (Jakab, 2007). Strong coordinaƟ on of strategy formulaƟ on and implementaƟ on was facilitated in this 3. GOVERNANCE OF THE KYRGYZ HEALTH CARE PURCHASING SYSTEM 3.1. SETTING OF STRATEGIC DIRECTION: NATIONAL HEALTH SECTOR REFORM STRATEGIES AND IMPLEMENTATION PLANS 14 HEALTH FINANCING CASE STUDY NO. 16 3.2. ALIGNMENT OF PUBLIC FINANCIAL MANAGEMENT WITH HEALTH PURCHASING REFORM period by the posiƟ oning of the MHIF – its director was a Deputy Minister of Health. The laƩ er two naƟ onal health strategies (Manas Taalimi and Den Sooluk) have not achieved the same level of strategic direcƟ on and coordinaƟ on of fi nancing with service delivery and pharmaceuƟ cal reforms. There has also been weaker poliƟ cal buy-in to the strategy parƟ ally due to changes of government, leading to some major decisions which were not consistent with the strategy. In spite of this, there has also been a substanƟ al degree of stability and consistency in the major parameters of health fi nancing policy during this period. At Ɵ mes of poliƟ cal crises there have been proposals for changes in policy and structure, quesƟ oning the single-payer health insurance system, but so far these have been rejected. A weakness has been the failure of the MOH or wider governmental authoriƟ es to translate the medium-term naƟ onal strategies into concrete Ɵ me-bound, measurable insƟ tuƟ onal plans for the organizaƟ ons involved in implementaƟ on, including the MHIF. The independent status of the MHIF since 2006, in the absence of specifi c structures and regular processes of coordinaƟ on between the MOH, MOF and MHIF, has adversely aff ected alignment and coordinaƟ on of implementaƟ on plans for more recent health strategies. As a result, the strategic direcƟ on of the MHIF is set by its own CEO rather than by any external stewardship and governance structure or process. The MHIF single-purchaser system has been hampered by misalignment with the public fi nancial management system, though signifi cant progress has occurred in recent years in tackling this. The new output-based provider payment mechanisms introduced by the MHIF operated alongside rigidly controlled input-based line item budgets for health-care providers and unreformed Soviet legacy systems of planning and control of staff and other physical inputs based on norms (Cashin et al., 2017). The MHIF is responsible for allocaƟ ng pooled funds from four sources2 to health-care providers in a single process and uses capitaƟ on or case-based payments to do this. However, all state health-care providers are subject to the same PFM rules and processes as on-budget agencies such as the line ministries. The funds they receive from the MHI system have to be executed within these PFM rules. UnƟ l 2018, not all of the pooled expenditures of the MHIF appeared in the budget presented to Parliament, which presented only MHIF expenditure fi nanced from general tax sources. The MHIF revenue from MHI contribuƟ ons was “off budget”. IniƟ ally, the MOF required input-based budgets to be formulated and adopted by Parliament for all health-care providers. The MHIF budget submiƩ ed to Parliament was listed as input-based budgets for providers funded from the single-payer system. In 2006, a special single line item for MHIF’s payments to providers was added to the naƟ onal economic budget classifi caƟ on. Although this helped to simplify MHIF budget formulaƟ on, providers were sƟ ll subject to rigid line-item budget controls as part of budget execuƟ on under MOF and MHIF rules. 2 General budget funds, MHI contribuƟ ons from 2% payroll tax, projected offi cial co-payment revenue of providers, and projected “special revenues” of providers from provision of private health services and non-health services. 15GOVERNANCE OF THE KYRGYZ HEALTH CARE PURCHASING SYSTEM The rigidiƟ es inherent in this system were made much worse by the budget execuƟ on system, which required providers to prepare separate input budgets for the four sources of MHIF revenue. Providers planned, executed, accounted and reported on each source separately. Virement (rules giving fl exibility to move funds) across the four sources was impossible while virement across line items within each source’s budget were diffi cult and slow. Control was exercised on month-by-month cash plans, with virement across months with boƩ lenecks impeding re-profi ling of cash across months within the year. All stages of formulaƟ on and execuƟ on of these provider budgets were approved by both MHIF and MOF. Unspent funds from the government budget (the majority of funds) to providers reverted to the Treasury at year end. Above-norm stocks of drugs and supplies at year end resulted in deducƟ ons from the budget for the following year. These budget-execuƟ on rigidiƟ es and disincenƟ ves conƟ nued unƟ l 2017. The rigid rules and cumbersome procedures applied to offi cial co-payments making informal payments more aƩ racƟ ve. While the single-payer fi nancing reforms enabled more equitable and raƟ onal allocaƟ on of budget resources across health faciliƟ es, the rigidiƟ es in the public fi nancial management system largely prevented the MHIF from using provider payment innovaƟ ons to create incenƟ ves for effi ciency and performance improvement.3 AddiƟ onally, the old system of Soviet input-based planning norms has not been repealed and replaced, though there have been incremental reviews and the relevance of the norms and rigour of enforcement has diminished over Ɵ me. This has locked in place an ineffi cient input mix biased towards the hospital sector and towards oblast (region) centres and naƟ onal capital ciƟ es. UnƟ l recently, the MOF reduced the health budget if faciliƟ es closed or reduced bed or staff numbers. Although this has changed since 2017, many of the norms conƟ nue to operate as “ceilings” on staff inputs (not as minimum standards for safety /quality). But because insƟ tuƟ ons can redistribute salary budgets from unfi lled vacancies to supplement salaries of other staff , they have therefore no incenƟ ve to reduce the number of staff posts. A new MHIF Budget Law implemented from 2018 removes the role of the MOF in approving provider budget plans and budget execuƟ on decisions and gives the MHIF power to change the old system of input planning, execuƟ on controls and reporƟ ng by four sources. However, the MHIF is understandably cauƟ ous about moving away from line-item controls for providers because it lacks data and systems to monitor hospital use of resources in more output- and results-oriented ways (such as data on cost per case). In addiƟ on, public health-care providers have well- documented weaknesses in fi nancial management and control and there are no plans to establish an alternaƟ ve system for ensuring internal control and external accountability for providers. The MOH conƟ nues to exercise control over provider resource use through a range of input-based norms and is responsible for addressing the idenƟ fi ed shorƞ alls in management capacity and systems in providers. This too is an area where split accountabiliƟ es, and lack of aligned and coordinated plans impedes governance of the providers in the single-payer system. 3 This secƟ on of the paper draws on an unpublished note produced for development partners by S. O’Dougherty and dated October 2016 (on SGBP Payment systems funds fl ow and corresponding faciliƟ es autonomy) and an unpublished mission report produced by E. Dale for WHO dated July 2018 (on alignment of PFM and health fi nancing reforms). 16 HEALTH FINANCING CASE STUDY NO. 16 4 This fi nding is reported in two unpublished papers: (1) by Oxford Policy Management (OPM), enƟ tled Independent review of Den Sooluk and project in support of mid-term review, produced for the MOH and development partners and disseminated in 2016, and (2) Health sector coordinaƟ on in Kyrgyzstan: further strengthening the sector wide approach, produced for the WHO Kyrgyzstan Country Offi ce in 2017 by Maria Skarphedinsdoƫ r, René Dubbuldam and Aigul Sydakova. 3.3. COORDINATION OF DEVELOPMENT FINANCE AND THE ROLE OF DEVELOPMENT PARTNERS 3.4. CHALLENGES COMMON IN SINGLE-PURCHASER SYSTEMS: FISCAL REALISM OF THE BENEFIT PACKAGE, PRESSURE TO PROTECT PUBLIC PROVIDERS Kyrgyz health fi nancing and system reform and development has been supported by development assistance since independence. Since 2006, a varying share of this support has been channelled through government systems under a sector-wide approach (SWAp) based on the naƟ onal strategies and monitored through a joint annual review (JAR). Over the years an increasing number of development partners have supported the reforms, while not all the development assistance is pooled. SWAp funds have supported budget allocaƟ ons to health and the SGBP, based on an agreed target of 13% of general government expenditure to be allocated to health. The SWAp and JAR processes have encouraged a focus on performance indicators and accountability for results, including some acƟ viƟ es and indicators reported by the MHIF (Government of Kyrgyzstan and development partners, 2013–2017). However, the SWAp and JAR processes have not reached across into the Government’s own accountability processes in any formal or systemaƟ c way. With weaker government ownership of the most recent naƟ onal strategy (Den Sooluk) and reducƟ on in SWAp resources, the infl uence of the JAR recommendaƟ ons on actual implementaƟ on acƟ ons in the MOH and MHIF has weakened, resulƟ ng in a lack of progress on key recommendaƟ ons made year aŌ er year.4 As in many low- and lower-middle-income countries, Kygyzstan’s MHIF has to live within the budget allocated by Parliament each year, and there have been periods when part of the approved budget is sequestered due to government revenue shorƞ alls. Likewise, public providers are unable to run cash defi cits. The budget constraint is thus very fi rm. But it is not credible to expect the MHIF to meet its SGBP commitments within the budget, nor to expect providers to limit paƟ ent charges to the offi cial co-payments specifi ed in the SGBP because of a large and long-standing gap between the costs of the SGBP and available resources, esƟ mated to be over one third of the cost of hospital care (Kaliev et al. 2012) and as much as two thirds of the needs for the outpaƟ ent drug benefi t. Weaknesses in budget formulaƟ on and policy processes have contributed to this gap. Budgets ceilings are set based on historic spending levels, without systemaƟ c projecƟ on of changes in the future cost of the SGHP. SGBP policy changes have been adopted (such as decisions to reduce co- payments or extend exempƟ ons) without adjusƟ ng budget provision and prices for services to refl ect the resource implicaƟ ons. It is therefore not straighƞ orward to hold 17GOVERNANCE OF THE KYRGYZ HEALTH CARE PURCHASING SYSTEM the MHIF accountable for implementaƟ on of the SGBP. While the MHIF has demonstrated that it has some potenƟ al to reduce the gap through increased effi ciency by beƩ er contract negoƟ aƟ on and use of other elements of strategic purchasing, cooperaƟ on of the MOH is needed too in order to close such a wide gap (e.g. by opƟ mizing the hospital network and reducing excessive staff numbers in hospitals with defi cits). As in many countries (including high- income countries) with a single-payer system and predominantly public health- care providers, the MHIF has not been given freedom to undertake selecƟ ve contracƟ ng of public providers. Only when there has been an MOH-approved strategy for closing or opƟ mizing public health faciliƟ es, has the MHIF been able to raƟ onalize the network of faciliƟ es it contracts with. AddiƟ onally, where a public provider has a fi nancial defi cit because it cannot cover its costs under the prices MHIF pays, the Government has intervened with regulaƟ ons requiring the MHIF to cover all salary, medicine and food costs of these providers – in eff ect, paying higher prices to these providers. In spite of this, the MHIF has adopted a policy of phasing out these higher payments over a planned Ɵ me frame and has sought to negoƟ ate with overstaff ed providers to reduce costs where feasible. 18 HEALTH FINANCING CASE STUDY NO. 16 IniƟ ally in 1997 the MHIF was an independent public-sector organizaƟ on but it was soon incorporated into the structure of the MOH as a semi-autonomous operaƟ onal arm, under the management of a Deputy Minister of Health and so directly accountable to the Minister of Health. It had no supervisory board (SB) or any other form of external input to governance. This organizaƟ onal posiƟ on facilitated very close coordinaƟ on between the MOH and MHIF in the implementaƟ on of health fi nancing reforms that needed to be coordinated with health-care provider reforms. The MHIF was again turned into an independent public agency in 2006 aŌ er the “revoluƟ on” of 2005, then briefl y brought back again under the MOH. Since 2009, the MHIF has again been operaƟ ng as a legally independent public administraƟ ve agency subordinate to the Government (Ibraimova et al., 2011; Kaliev & Meimanaliev, 2016). The MHIF’s CEO (called the “Chair”), appointed by the Prime Minister, is thus at a similar level in the government hierarchy to the Minister of Health but does not aƩ end Cabinet meeƟ ngs. In pracƟ ce, the Vice Prime Minister responsible for social aff airs became the responsible Cabinet member for the MHIF but the legislaƟ on governing the MHIF does not clearly specify MHIF accountability and oversight arrangements. To address this gap, the Government in 2012 put in place an SB for the MHIF, with government-approved membership and terms of reference. According to the law, the MHIF’s role is purely operaƟ onal: to implement the SGBP and the provider payment system. In European Union countries typically any policy decision authority given to an independent MHI agency would be reserved for the SB and not delegated to management, but the MHIF SB has no policy or regulaƟ on- making powers and cannot even submit proposals to the Government (InsƟ tute of Directors, 2018a). The Government (and Parliament for key issues), MOF and MOH have decision authority over most health fi nancing policies (SGBP, co-payments and exempƟ ons, annual budget ceiling and high-level budget allocaƟ on, payroll tax rate, permiƩ ed types of provider payment, various input norms for health faciliƟ es, 4. GOVERNANCE OF THE KYRGYZSTAN PURCHASING AGENCY: THE MANDATORY HEALTH INSURANCE FUND (MHIF) 4.1. CLEAR, COHERENT ROLE AND DECISION-MAKING AUTHORITY The following sections explore various elements of the governance of MHIF in more detail, by looking at core governance requirements that should be in place for a purchaser to operate strategically (cf. WHO 2019). 19GOVERNANCE OF THE KYRGYZSTAN PURCHASING AGENCY: THE MHIF Tables 3 and 4 compare the Kyrgyz MHIF’s autonomy and decision rights on health policy and fi nancial maƩ ers with the Health Insurance Fund (EHIF) in Estonia – another former Soviet health system with a single purchaser. It is relevant to disƟ nguish the authority of the SB from the authority of management. By comparison with Estonia, the MHIF SB in Kyrgyzstan has liƩ le formal autonomy over health fi nancing policies.5 At the level of the management board, Kyrgyzstan and Estonia have quite similar limits on their autonomy. What is also important in Estonia is a clear shared understanding of the role of the EHIF management and staff in formulaƟ ng health fi nancing policy proposals which are submiƩ ed to its board, and the roles of the MOH, MOF and the Government for each step in reviewing, providing feedback, and agreeing on policy proposals prior to fi nal adopƟ on by whichever body has formal decision authority. This includes clear roles in the processes for design and approval of benefi t package, contracts, selecƟ ve contracƟ ng strategy and clinical guidelines. By contrast, the MHIF management and staff in Kyrgyzstan tend to play a less proacƟ ve role in formulaƟ ng and infl uencing policy, though this depends very much on the CEO. There is no clear delineaƟ on of the roles of MHIF staff and management versus the MHIF SB, MOH and MOF in health fi nancing policy formulaƟ on in Kyrgyzstan, nor are there clear processes for making shared decisions. 4.2. AUTONOMY AND AUTHORITY OF THE MHIF TO ACT STRATEGICALLY regulaƟ ons protecƟ ng or guaranteeing payment of salaries, drugs and some other inputs). The MOH and oblasts, as owners of public health faciliƟ es, have greater leverage over organizaƟ on and resource use of service providers than does the MHIF. The MHIF has very limited leverage over prices for pharmaceuƟ cals in private markets (which are largely unregulated and characterized by limited compeƟ Ɵ on), and its budget is too small to provide comprehensive coverage of medicines and lower-priority non-urgent health services. The Social Fund, rather than the MHIF, is responsible for collecƟ ng MHI payroll contribuƟ ons, while most revenue for the MHIF comes from the state budget. Consequently, it is not fully within the power of the MHIF’s management to achieve the health fi nancing goals of universal coverage and fi nancial protecƟ on, nor can the MHIF maximize the contribuƟ on of health fi nancing to other health goals (effi ciency, equity, care quality, health status) without enabling policies and joint acƟ on by the MOH and local authoriƟ es. In pracƟ ce, however, the MHIF’s CEO, managers and senior staff have much of the country’s experƟ se in health fi nance policy and strategy. The MHIF is oŌ en best placed to formulate policy proposals and draŌ regulaƟ ons to improve health fi nancing, and in pracƟ ce does so – submiƫ ng draŌ s to the MOH and/or MOF for approval. There has also been a major role played by external technical assistance and advice from development partners in infl uencing fi nancing policies and providing technical input to these policies. 5 Note that, in Estonia, the SB is chaired by the Minister of Health and includes an MOF representaƟ ve. 20 HEALTH FINANCING CASE STUDY NO. 16 21GOVERNANCE OF THE KYRGYZSTAN PURCHASING AGENCY: THE MHIF Issue Kyrgyzstan MHIF Estonia EHIF Benefi t package (individual services) Parliament adopts law (sets broad scope, protected groups); Government adopts regulaƟ ons (MOH proposes, MHIF management consulted) Parliament adopts law (broad scope ); Government adopts regulaƟ ons (EHIF management proposes, SB formulates opinion, MOH presents to Government) Provider payment method Government adopts (MHIF management usually proposes, SB may be consulted, MOH approves and presents to Government) Government adopts (EHIF management proposes, SB formulates opinion, MOH presents to Government) together with benefi t package Pricing/tariff s Government adopts (MHIF management proposes, SB may be consulted, MOH approves and presents to Government) Government adopts (EHIF management proposes, SB formulates opinion, MOH presents to Government) together with benefi t package; the methodology of pricing MOH adopts (EHIF management proposes, SB formulates opinion) Contract development & award Government approves template, MHIF management proposes, SB may be consulted (no selecƟ ve contracƟ ng and liƩ le private sector contracƟ ng) Parliament adopts law (criteria for contracts); EHIF SB approves the budget (higher level than contracts) and details of selecƟ on criteria; EHIF management prepares and negoƟ ates template and procedure (selecƟ ve and private contracƟ ng); EHIF must contract hospitals in government-approved masterplan but can vary mix and volume of services in line with minimum service availability standards set for hospital types adopted by MOH) Quality standards/ accreditaƟ on MOH adopts (licensing for private sector, accreditaƟ on for public faciliƟ es), MHIF management approves quality indicators for contracƟ ng including P4P scheme State agency under MOH - Health Board - licenses doctors and faciliƟ es; independent Quality Board under MOH handles paƟ ent complaints; EHIF manages quality standards within contracts and indicator system including primary health care quality bonus Reimbursement of prescripƟ on drugs Joint MOH-MHIF adopƟ on of Order (MHIF management proposes list of drugs and reimbursement percentage) Government adopts regulaƟ on on reimbursement price/share reimbursed by disease groups; MOH approves list of drugs (EHIF management proposes, SB formulates opinion); MOH adopts pricing methodology (EHIF management proposes, SB formulates opinion) Clinical guidelines MOH develops and approves EHIF supports the process; guidelines development methodology approved by Medical Faculty of University of Tartu. Guidelines development is coordinated by University of Tartu. Table 3. Division of authority and MHIF autonomy on health purchasing decisions: Kyrgyzstan MHIF compared to Estonian EHIF Issue Kyrgyzstan MHIF Estonia EHIF Payroll tax rate/ budget contribuƟ on Parliament adopts (MOF sets budget ceiling in budget formulaƟ on process based on actual historic spending; MHIF parƟ cipates in negoƟ aƟ on meeƟ ng) Parliament adopts payroll tax rate and annual ceiling for the budget (EHIF management prepares and EHIF SB approves annual budget) Reserves None EHIF has 3 types of reserves: Solvency reserve: 5.4% of total budget since 2018 (8% in 2001-2004, 6% 2005-2017) – government decision; Risk reserve: 2% of health insurance spending (introduced in 2002) – SB decision; Accumulated surplus: non-mandatory reserve as diff erence between revenues and expenditures; accumulated before last global fi nancial crisis AllocaƟ on of MHI budget to service programmes Parliament approves allocaƟ on to funcƟ onal (service categories), with single line of economic classifi caƟ on under each funcƟ on. (UnƟ l 2006, Parliament approved budget by economic classifi caƟ on) Parliament only approves single line (budget ceiling); EHIF SB approves service category allocaƟ on AllocaƟ on and execuƟ on of provider payments according to line-items (economic classifi caƟ on) Provider budgets by economic classifi caƟ on line items are approved and executed by MHIF through the single treasury system. MHIF is obliged to cover protected input costs – wages, drugs, food even if this amount exceeds payment for performed services. UnƟ l 2018, MOF local treasury offi ces also approved provider budget allocaƟ on and execuƟ on EHIF pays providers one-line (lump sum) payment covering all necessary costs for performed services according to payment method. Autonomous or private health-care providers allocate these resources to line items and pay own bills using commercial banks RetenƟ on or carry-forward of savings MHIF and providers since 2018 are able to carry forward unspent funds from all revenue sources EHIF savings could be added to reserves which was the usual pracƟ ce before last global fi nancial crisis. Providers fully retain savings Table 4. Division of authority and MHIF autonomy on fi nancial decisions: Kyrgyzstan MHIF compared to Estonian EHIF UnƟ l 2018, the MHIF in Kyrgyzstan had substanƟ ally less fi nancial autonomy than the Estonian EHIF, but from 2018 a new law has increased its fi nancial autonomy, although not to the extent of the Estonian EHIF. In parƟ cular, the MHIF does not hold reserves and its SB does not have primary authority to approve the MHIF budget and fi nancial policies – the MOH and MOF remain the primary authoriƟ es, even if the SB is consulted and invited to endorse proposals for ministerial decisions. 22 HEALTH FINANCING CASE STUDY NO. 16 23GOVERNANCE OF THE KYRGYZSTAN PURCHASING AGENCY: THE MHIF Even though the MHIF SB formally lacks authority over fi nancing policy, there is a case for holding the MHIF accountable to some extent for results – for progress towards health fi nancing objecƟ ves and not just for operaƟ onal implementaƟ on of SGBP and regulatory compliance – because of the MHIF’s de facto ability to iniƟ ate and formulate policy proposals, to build consensus among key ministries and stakeholders at SB level and to use the MHIF’s recently increased fi nancial autonomy. However, there is inevitably shared accountability with the MOH for results, because the MHIF cannot act without MOH approval and needs MOH cooperaƟ on over complementary acƟ ons in other health system pillars – notably service delivery, quality management and medicines policies. In a context where respecƟ ve responsibiliƟ es and accountabiliƟ es of the MOH and MHIF for formulaƟ ng and approving health fi nancing policies (such as benefi t package) and implementaƟ on plans are not clearly defi ned, this shared accountability dilutes both the MHIF’s and the MOH’s accountability. In the Kyrgyz context of accountability and management control centred on insƟ tuƟ onal hierarchies, joint decision-making and accountability across insƟ tuƟ onal boundaries is unfamiliar and diffi cult to operaƟ onalize. The MHIF CEO has mulƟ ple lines of control and reporƟ ng, operaƟ ng in silos, that fragment governance. Formally, one would expect the MHIF’s primary line of accountability to be to its SB, but the legal basis does not make this clear. LegislaƟ on puts in place controls and reporƟ ng obligaƟ ons directly to various ministries, with the MOH and MOF being the most important, to Cabinet processes and to the parliament health commiƩ ee. There are also mulƟ ple government commiƩ ees chaired by the Vice Prime Minister with the MOH, which have overlapping roles in coordinaƟ ng aspects of health policy, health-sector performance and public health strategy. These commiƩ ees’ roles also touch on the MHIF, but none has a mandate to hold the MHIF accountable for results. In theory, the SB could follow the Estonian example and convene and coordinate these decisions because the MOH and MOF are represented. However, in pracƟ ce there is no coordinaƟ on of the mulƟ ple governance mechanisms in use to ensure that decisions of governance actors are aligned, to set a coherent direcƟ on for the MHIF, or to take a coordinated approach to reviewing the decisions the MHIF takes and to monitor performance of the single- payer system towards achieving intended strategic outcomes. This is made diffi cult by the culture of hierarchical management and control within insƟ tuƟ onal silos. The mulƟ plicity of overlapping bodies and processes also exceeds the country’s very limited capacity for coordinaƟ on, leading to pracƟ cal problems of infrequent, poorly aƩ ended meeƟ ngs, poor preparaƟ on and lack of follow-up. It devalues governance. One example of the lack of coordinaƟ on noted above is the fi nancing gap for the SGBP. Reducing this requires coordinaƟ on of public sector policy levers and strategies towards shared goals, including revenue mobilizaƟ on (MOF lead role), public sector effi ciency improvement (MOF and MOH shared role), review of the SGBP (involving all three agencies), beƩ er targeƟ ng of co- payment exempƟ ons (MOH and Ministry of Labour and Social Aff airs) and improvement of the MHIF purchasing/contracƟ ng (MHIF 4.3. COHERENT LINES OF ACCOUNTABILITY SUPPORTING TRANSPARENCY: EMERGING ACCOUNTABILITY FOCUSED ON RESULTS The SB’s terms of reference give it the roles of coordinaƟ ng, monitoring and advising the MHIF’s CEO and approving maƩ ers already within the authority of the MHIF’s management. The creaƟ on of the SB was an aƩ empt to put in place the kind of governance structure seen in most social health insurance or health purchaser organizaƟ ons in EU countries. However, unlike in these countries, the legislaƟ on governing mandatory health insurance was not amended to give statutory authority and duƟ es to the new SB, nor is there any general legislaƟ ve framework governing such boards for public agencies in Kyrgyzstan – except for the separate Public Advisory Councils introduced for all public agencies and ministries, but which do not have a governance role. As a result, the SB does not have clear decision authority in its own right, it is largely up to the CEO to decide whether to seek SB endorsement for any proposal. Nor do SB members have clear accountability or any liability for carrying out their oversight of the MHIF appropriately. The MHIF SB is chaired by the Vice Prime Minister for Social Aff airs, with the Minister of Health and MHIF CEO as deputy chairs. A Deputy Minister of Finance is a board member. Others on the 13-member board include the chair of a separate Public Advisory Council of the MHIF represenƟ ng civil society (discussed below), representaƟ ves of the Social Fund, the employers’ organizaƟ on, the trade union of health-care workers, the Union of Social ProtecƟ on (represenƟ ng socially vulnerable groups including people with disabiliƟ es) and the pensioners’ associaƟ on. The terms of reference of the SB have weak status (an administraƟ ve act, without any basis in legislaƟ on) and content: they are very general and unclear about role and duƟ es, and do not give clear decision authority to the SB in relaƟ on to the MHIF management. The terms of reference encompass consideraƟ on and approval of MHIF strategies and (unspecifi ed) internal policies, coordinaƟ on, monitoring, advice, and approval of annual reports. The SB does not have any role in selecƟ on and appointment of the MHIF CEO or other MHIF managers nor in review of their performance. Board members are not paid for this role (though most members are salaried public offi cials). There are no clear criteria and descripƟ on for board member competencies, and the SB has no mandate to carry out self-assessment. 4.4. EFFECTIVE OVERSIGHT role).6 Another example has been lack of the necessary legislaƟ ve framework and limited insƟ tuƟ onal capacity to regulate the pharmaceuƟ cal and retail pharmacy sectors, combined with limited compeƟ Ɵ on in the market for many pharmaceuƟ cals, resulƟ ng in high prices and mark-ups and high private out-of-pocket payment for medicines (Jakab, Akkazieva & Habicht, 2018).7 The MOH began to take steps to tackle this issue in 2017 with the adopƟ on of new legislaƟ on to underpin development of price and margin regulaƟ on for essenƟ al medicines. This also requires cooperaƟ on with the AnƟ -Monopoly Commission. 6 This paragraph draws on the work of the MHIF/MOH Health Financing Expert Group, which presented its analysis at a 2017 ThemaƟ c MeeƟ ng in a PowerPoint presentaƟ on: Management of fi nancial resources and strengthening health fi nancing arrangements. 7 Also reported in an unpublished paper by Oxford Policy Management (OPM), enƟ tled Independent review of Den Sooluk and project in support of mid-term review, produced for the MOH and development partners and disseminated in 2016. Supervisory Board membership, functions and functionality 24 HEALTH FINANCING CASE STUDY NO. 16 25GOVERNANCE OF THE KYRGYZSTAN PURCHASING AGENCY: THE MHIF An assessment of the funcƟ onality of the SB was commissioned for the MHIF with WHO support in 2016 as a basis for planning acƟ ons to strengthen governance.8 This found that although the MHIF SB formally approves the annual plan, budget and annual report of the MHIF, the SB’s role is passive, in line with its limited formal mandate. Its agenda and discussion do not typically cover strategic issues. At that Ɵ me, the SB met infrequently. It did not exercise eff ecƟ ve accountability by acƟ ve monitoring of outputs produced and other performance indicators, quesƟ oning or challenging results or performance where necessary. For example, while there has been evident public concern and MOH policy concern about inadequate fi nancial protecƟ on and persistent informal payments, this issue was not discussed by the SB. The limited SB discussion of fi nancial reports focused on inputs and Ɵ mely payment but has not, for example, discussed the very high share of budget spent on salaries versus direct paƟ ent care costs such as medicines and supplies which lead to informal payment. Minutes of SB meeƟ ngs have been sketchy in content. There were no policies for declaring or dealing with confl icts of interest of SB members. The role of the MOH on the SB creates parƟ cular issues because it is the owner of almost all public health faciliƟ es in the single-payer system. Thus the MOH has some confl ict of interest when the MHIF seeks SB approval to use its contracƟ ng relaƟ onship to challenge ineffi cient providers. The MOH may have an interest in using its role on the SB to protect infl uenƟ al providers. In a well-funcƟ oning governance board, this interest would be balanced by other interests on the board, and the MOH would be constrained to act under the collecƟ ve obligaƟ on to ensure that MHIF resources are used effi ciently and eff ecƟ vely. But the SB lacks a clear set of governance duƟ es and lacks capacity to funcƟ on in this way. While the MOH has a stewardship role over the health fi nancing system and the MHIF, and the Minister is a Deputy Chair of the SB, the MOH does not have the mandate to hold the MHIF accountable nor the authority to intervene in management and operaƟ ons of the MHIF. The MOH has decision-making authority on all policies and regulaƟ ons (other than budget and treasury regulaƟ ons) that the MHIF needs enacted to carry out its health purchasing funcƟ ons, including many operaƟ onal regulaƟ ons such as MHIF regulaƟ ons for fi nancial oversight of health facility expenditure of MHIF funds. However, the MOH lacks capacity to lead and innovate in health fi nancing policy and tends to react to policy iniƟ aƟ ves taken by others – including the MHIF. Nevertheless, it has authority to review and approve all MHIF regulaƟ ons. Although the MOH could use its role on the SB acƟ vely to play a role in monitoring and accountability, and could devote some of its staff capacity to advising and briefi ng the Minister for SB meeƟ ngs, it does not monitor outputs and performance of the MHIF. The MOH has not addressed concerns about data reliability The Ministry of Health as steward, supervising ministry and owner of health facilities 8 This secƟ on of the report draws on a report commissioned by WHO Kyrgyzstan Country Offi ce: Rannamäe A & Danilov H. Strengthening Mandatory Health Insurance Fund of Kyrgyz Republic, May 2016, and on subsequent presentaƟ ons and mission reports by the consultants who conducted the assessment and provided follow-up advice to the MHIF. The MHIF has a strong line of accountability and governance relaƟ onship to the MOF and the PFM system. The MHIF plans its budget allocaƟ on according to output- based provider payments and has regular interacƟ ons with the MOF in the budget formulaƟ on process. It reports quarterly to the MOF according to aggregated input-based line-item expenditure of the providers it contracts with. The MOF thus monitors the MHIF’s fi nancial posiƟ on and that of the public health-care faciliƟ es in the single-payer system. The single Treasury account system is used to monitor, control and account for expenditure of MHIF funds and the expenditure of faciliƟ es in the single-payer system. This integraƟ on of the MHIF into the budget and treasury management system provided Parliament and ciƟ zens with assurance of fi nancial control and accountability for use of inputs, including external audit by the state audit authority – the Chamber of Accounts. The MOF does not, however, monitor outputs or effi ciency of the system. Financial control and accountability: the relationship with the MOF, the budget and the public fi nancial management system for monitoring; provider outputs reported by providers to the MOH and NaƟ onal StaƟ sƟ cs Bureau diff er markedly from those reported to the MHIF’s case payment database, for example.9 At Ɵ mes, the MOH has advocated policies opposing the MHIF’s autonomy and opposing aspects of the health fi nancing reforms, puƫ ng the MHIF in the posiƟ on of advocate and defender of health fi nancing reform. Weaknesses in strategic coordinaƟ on and communicaƟ on and confl ict in the relaƟ onship weaken the potenƟ al infl uence of the MOH on the MHIF’s performance via its membership of the SB. It is not uncommon to fi nd tension, communicaƟ on concerns and even confl ict in the relaƟ onship between an MOH and an independent health insurance agency. But it is of concern that in Kyrgyzstan, coordinaƟ on and communicaƟ on appear to have weakened compared to the fi rst phase of health reform under the Manas strategy. This has contributed to calls from some government actors to make the MHIF subordinate to the MOH, as it was in the Manas period. It is not clear whether changes in strategic coordinaƟ on are due to this structural change but it is clear that in the Kyrgyz context, in the absence of a tradiƟ on of using formal governance structures and the absence of well-defi ned procedures for coordinaƟ on, the system is unduly dependent on collaboraƟ ve personal relaƟ onships among key individuals. It may be that there is a trade- off between choosing structures that aid coordinaƟ on through MHIF subordinaƟ on to MOH and structures that strengthen checks-and-balances through greater MHIF independence. 9 Finding of interviews with health-care providers conducted by InformaƟ on Systems and data consultant commissioned by WHO in 2017–2018. 10 This secƟ on of the report draws on an unpublished paper by Oxford Policy Management (OPM), enƟ tled Independent review of Den Sooluk and project in support of mid-term review, produced for the MOH and development partners and disseminated in 2016. 26 HEALTH FINANCING CASE STUDY NO. 16 27GOVERNANCE OF THE KYRGYZSTAN PURCHASING AGENCY: THE MHIF AŌ er the 2010 overthrow of a government criƟ cized for centralizing power and non- transparency, Kyrgyzstan adopted legal requirements under a new ConsƟ tuƟ onal RegulaƟ on on Government, puƫ ng in place a Public Advisory Council (PAC) for all government ministries and agencies, including the MHIF, with the aim of increasing ciƟ zen parƟ cipaƟ on and transparency. The 2016 WHO assessment found that the MHIF PAC does not have a clear governance role and its role overlaps with that of the SB. It lacks any decision- making authority. Its role is to monitor the organizaƟ on. It is able to raise issues to the Government and in the media. Any interested ciƟ zen can apply to publicly adverƟ sed posts as members of the PACs who are appointed by the PresidenƟ al AdministraƟ on. There are no requirements for sector-specifi c or parƟ cular governance skills or experience for being a PAC member, nor is there any regulaƟ on of confl ict of interest for PACs. The MHIF’s PAC includes members from the private health insurance industry, health-care providers and health nongovernmental organizaƟ ons. PAC members have two-year terms, with no overlap of terms, limiƟ ng the scope to build capacity, insƟ tuƟ onal memory and construcƟ ve ongoing engagement with the MHIF. The role of the MHIF PAC is not well- defi ned, there is no systemaƟ c basis for seƫ ng agendas, some issues raised overlap with the SB role, and some seem to be selected randomly. While this Council meets frequently (every two weeks), it has neither the mandate nor capacity to hold the MHIF accountable, nor does the MHIF report regularly to it on performance. The confl ict of interest issues noted above would need to be addressed before it could play a stronger role in governance. In theory, the PAC chair, as a member of the SB, could play a role in aligning and coordinaƟ ng the work and recommendaƟ ons of the two bodies; however, in pracƟ ce this does not happen in the absence of a clear and focused role for the PAC. Since 2006, subnaƟ onal as well as naƟ onal public health-care faciliƟ es have been subordinated to the Minister of Health, who now appoints all public-sector facility directors. In Kyrgyzstan, health faciliƟ es do not have autonomous legal status – they are budget agencies. By contrast, high-income countries like Estonia and the United Kingdom gave autonomy to, or corporaƟ zed, state-owned providers as part of their purchaser-provider split reforms, enabling the Ministry of Health to step back into an arms-length governance and stewardship relaƟ onship with providers. In Kyrgyzstan, the MOH’s role is dominated by its responsibiliƟ es as a health-care provider. This is reinforced by a Consilium of the MOH – a body that has existed since the Soviet era and is composed of public health facility directors – which advises the minister. Thus, the MOH is not well- posiƟ oned to funcƟ on as a neutral health system “steward” across both the fi nancing/ 4.5. INCLUSIVE AND MEANINGFUL STAKEHOLDER PARTICIPATION: THE PUBLIC ADVISORY COUNCIL 4.6. RELATIONSHIP BETWEEN PROVIDER GOVERNANCE AND MHIF GOVERNANCE purchasing and provision funcƟ ons in the health system. Furthermore, the MOH does not have capacity or standard operaƟ ng procedures or an internal culture for arms- length governance of autonomous health providers. It does not regularly monitor the performance of its subordinated health faciliƟ es, although its aƩ ached agencies collect data that is used to produce staƟ sƟ cs and populate reports to the JAR. It has no subnaƟ onal staff , apart from part- Ɵ me oblast health coordinators – posiƟ ons which are reliant on uncertain donor support. A related disƟ ncƟ ve feature of the Kyrgyz purchaser-provider split is that, as noted in the previous secƟ on, the MHIF was given the role of controlling and monitoring the expenditure of public health faciliƟ es fi nanced through the single-payer system. The MHIF did this jointly with the MOF unƟ l 2018 but has carried out this task alone since the reform. The MHIF took over the oblast-level role and staff of the MOH – the oblast health departments – in monitoring and controlling health-care provider acƟ vity and expenditure. This was a pragmaƟ c way of coordinaƟ ng the MHIF provider payment system and unreformed, misaligned public fi nancial management systems in the Kyrgyz context. It also made best use of the very limited available staff capacity for provider monitoring. Kyrgyzstan was simply unable to aff ord or staff both MHIF monitoring of contracts with providers on the one hand and, on the other, a separate provider performance monitoring by the MOH as “owner” of faciliƟ es. As a result, the MHIF is now the repository of data on hospital acƟ vity (in its case payment database) and on public health facility expenditure and revenue (its provider-based budget planning and execuƟ on data). The MOH can access this hospital data only by coordinaƟ ng with the MHIF. The MOH captures other hospital data (such as bed and staff numbers, occupancy rate, mortality) and holds data on primary care registraƟ on, outpaƟ ent acƟ vity and disease registries. InformaƟ on exchange between MOH and MHIF is in pracƟ ce delayed and diffi cult. The MOH usually considers fi nancial data on providers for reacƟ ve invesƟ gaƟ on of problems in specifi c providers, rather than rouƟ nely for all providers. Conversely, the MHIF does not yet have rouƟ ne on-line access to data on health-care providers held by MOH and its agencies. Thus, no single agency has data as well as capacity to play an eff ecƟ ve governance role over providers. No ministry or naƟ onal agency takes an acƟ ve interest in clinical quality or the effi ciency of health-care providers although there are plans for the MOH to establish a quality unit and begin collecƟ ng and reporƟ ng quality data under the next naƟ onal health strategy. The MOH also lacks any fi nancial incenƟ ve to address the governance challenges of providers. Currently, some 39 hospitals have fi nancial defi cits. A number of these faciliƟ es are in urban areas and could be downsized or raƟ onalized without jeopardizing access to care. This is a task for the MOH which has the necessary regulatory and governance levers over faciliƟ es. Yet the MOH has no fi nancial incenƟ ve to do so because the MHIF is obliged to subsidize these providers under a regulaƟ on requiring it to guarantee to cover planned salary, drugs and food costs for hospitals even if this exceeds case payment revenue of the hospital (although this is no longer a formal legal requirement under the new MHIF Budget Law). Normally in health systems with a “purchaser-provider split” the owner or founder of a hospital bears both fi nancial and governance responsibility for addressing hospital defi cits. Unclear and overlapping roles between the MOH and MHIF in oversight or providers are thus exacerbated by fragmented health data systems and reinforced by mismatch of fi nancial and governance responsibiliƟ es for public health faciliƟ es. 28 HEALTH FINANCING CASE STUDY NO. 16 29GOVERNANCE OF THE KYRGYZSTAN PURCHASING AGENCY: THE MHIF Several themes emerge in recent reviews of MHIF governance: a. The model of corporate governance recommended for the MHIF – with an SB that should be the primary oversight body – was very recently introduced in Kyrgyzstan for both the private and the public sectors. Results- oriented governance with a focus on ex-post reporƟ ng and monitoring runs counter to the legacy of Soviet prior administraƟ ve control and puniƟ ve responses to performance shorƞ alls. It is therefore diffi cult for the Kyrgyz authoriƟ es to fi nd SB members or staff for the corporate secretary role with knowledge or experience of this model of governance and of the appropriate governance culture to operate this model. b. A combinaƟ on of pervasive unfamiliarity with the role of governance boards and limited internal capacity in the MHIF led to a situaƟ on where basic governance processes of convening the board, seƫ ng agendas and reporƟ ng were not implemented for many years. c. The new governance mechanism of the SB was overlaid on top of exisƟ ng lines of control and accountability to the MOH and MOF and did not replace them. It tended to add a layer of reporƟ ng and decision-making that may have seemed redundant to SB members because all the necessary decisions could be taken even if the SB met very rarely. d. The legislaƟ ve framework for the work of the SB is weak. The status, authority and duƟ es of the SB are weaker and accountability of board members is less stringent than those of corporate governance bodies in the private sector and in corporaƟ zed or autonomous public bodies in many western European countries. e. Although there is a clear need for coordinaƟ on across the mulƟ ple lines of accountability of the MHIF, and although this is one of the stated funcƟ ons of the SB, the legislaƟ ve environment and the administraƟ ve pracƟ ces and public-sector “organizaƟ onal culture” in the Kyrgyz public sector reinforces parallel verƟ cal lines of accountability in silos. Without a clearer legislaƟ ve and regulatory basis, and standard operaƟ ng procedures spelling out how joint or shared decision-making should operate, this is diffi cult to change. f. The MOH does not have a formal mandate to monitor the MHIF’s performance because the MHIF is not subordinated to it. The MOH’s capacity for sector stewardship is weak, even if it were to be given this role. It lacks data and analyƟ cal capacity to monitor MHIF performance and to provide robust feedback on MHIF insƟ tuƟ onal strategy and plans. g. The limited competencies, knowledge and moƟ vaƟ on of SB members to oversee the MHIF are an overwhelming constraint. Board members do not appear to understand why the SB was established or what is involved in the governance role, and most have liƩ le familiarity with the business they are monitoring. Board members are unpaid and do not have any other incenƟ ve to take responsibility for making decisions on strategy or for seeking to infl uence policy and performance. Board members face no pressure to meet or to parƟ cipate acƟ vely when they do meet. Some stakeholder members see the SB primarily as a forum for pursuing narrow interests. 4.7. SUMMARY ASSESSMENT OF GOVERNANCE AT THE HEALTH PURCHASING AGENCY LEVEL Table 5 summarizes the assessment of governance of the MHIF – the purchaser agency level of governance, using the dimensions of analysis set out in the WHO Framework for assessment of governance for strategic purchasing (WHO, 2019). Table 5. Summary assessment of governance aspects at purchaser level Governance arrangement and desirable features Assess whether the respecƟ ve relevant governance arrangements are in place Legal provisions determine a clear and coherent division of labour and defi ne the decision-making authority for key aspects of purchasing between the purchaser, MOH and other relevant parts of government. Legal provisions for the MHIF SB would ideally be in primary legislaƟ on. Clarifi caƟ ons of the SB terms of reference have been proposed, lisƟ ng specifi c tasks, but as of the Ɵ me of wriƟ ng have not been adopted. Both a public interest mandate and clear objecƟ ves for strategic direcƟ on are formalized in legal or regulatory provisions. Not formalized in law or regulaƟ ons, although the series of naƟ onal health strategic plans/ programmes have played a posiƟ ve role in the earlier periods of reform. The purchaser has suffi cient autonomy and authority, commensurate with its capacity to achieve its objecƟ ves. The MHIF SB and CEO lack authority to develop strategic purchasing unless the MOH approves and the MOF aligns fi nancial management processes. An eff ecƟ ve (expert) oversight body and mechanisms are in place to increase accountability for results and balance increased autonomy. The MHIF SB is unable to hold MHIF accountable for results. There is inclusive, meaningful stakeholder parƟ cipaƟ on, with checks on confl icts of interest. Stakeholder parƟ cipaƟ on in SB and PAC is ineff ecƟ ve and suff ers from confl icts of interest. The mulƟ ple lines of accountability are coherent, allowing clear direcƟ on for the purchaser and clear aƩ ribuƟ on of responsibility. MulƟ ple lines of accountability are not always coherent. They are based more on prior control and inspecƟ on than on seƫ ng direcƟ on and aƩ ribuƟ ng responsibility. There is a fi rm, credible budget (constraint) in place, so that it has clear responsibility for balancing expenditure and revenue, with credible sancƟ ons in case of breaches of the budget constraint. Budget constraint is not credible. There is no possibility to breach the budget constraint – instead the fi nancing gap is transferred to providers and paƟ ents. The head of the purchasing agency is selected on the basis of appropriate skills. There are performance incenƟ ves for the head and other relevant staff to guide operaƟ ons. The MHIF has had some strong, well-qualifi ed leaders, but also some periods of weaker leadership. The values and intrinsic moƟ vaƟ on of appointees is the main incenƟ ve for performance. There are specifi c regulaƟ ons in place on the management and control of public funds, fi nancial management and control of public or semi-public agencies or rules that apply to insurance agencies, and these regulaƟ ons are implemented. MHIF funds are managed in the single Treasury system and unƟ l 2018 execuƟ on was subject to prior MOF control. It is audited by the Chamber of Accounts. 30 HEALTH FINANCING CASE STUDY NO. 16 What are the reasons for the defi cits in governance arrangements (e.g. gaps in insƟ tuƟ onal or technical capacity)? How do these governance arrangements foster or hinder strategic purchasing? It may be diffi cult to achieve stable poliƟ cal consensus to amend MHIF legislaƟ on due to periodic opposiƟ on to the MHIF’s independent status. Strategic coordinaƟ on is weak. However, strategic purchasing could be strengthened under exisƟ ng legislaƟ on through capacity-building for contracƟ ng and data analysis. TradiƟ onal model of legislaƟ on and regulaƟ on, based on central controls of inputs and processes rather than objecƟ ves and results. The system is reliant on the MHIF’s CEO to iniƟ ate strategic purchasing and to advocate for it. NaƟ onal health sector strategic programmes also play a role. MHIF governance mechanisms do not drive strategic objecƟ ves or monitor them. Diffi cult to maintain a stable poliƟ cal consensus supporƟ ng MHIF autonomy. Strong MHIF CEOs have been able to make some progress, with support of local reform advocates and development partners. Lack of legal basis for SB, vague terms of reference, too many passive non-expert SB members, lack of country experience with this model of corporate governance. The MOH, MOF and Chamber of Accounts play stronger roles than the MHIF SB, but none of these governance actors provides eff ecƟ ve results-oriented oversight. Weak legal basis for SB and PAC. Governance bodies do not add value and cannot be relied on to give the MHIF direcƟ on or hold it accountable for results. The MHIF faces high compliance and reporƟ ng costs and to a large extent has to set its own direcƟ on – though naƟ onal health sector strategic plans/programmes play a role in seƫ ng direcƟ on. Strategic plans/programmes have recently been translated into concrete MHIF insƟ tuƟ onal strategies at the MHIF CEO’s iniƟ aƟ ve, but the SB is not yet acƟ ve in using these to hold MHIF to account. Budget formulaƟ on does not refl ect cost of benefi ts package. PoliƟ cal will is not there to introduce more explicit raƟ oning or to target co-payments beƩ er to the poor. Providers reduce quality and paƟ ents fi nance the gap through informal payments. Appointment of health-sector leaders with appropriate skills is achieved through informal advocacy for strong leadership by reform supporters. Inappropriate appointments are challenged by a free press. The MHIF has progressed in strategic purchasing when leadership has been strong and when the relaƟ onship with the MOH is construcƟ ve. The single-payer system has suff ered from excessively rigid input-based controls and boƩ lenecks in the PFM system. Since 2018, these have been addressed through legislaƟ on to increase MHIF fi nancial management autonomy. Input-based budget execuƟ on controls and protecƟ on of loss-making providers have blunted the fi nancial incenƟ ves for effi ciency created by MHIF’s output based payment methods. 31GOVERNANCE OF THE KYRGYZSTAN PURCHASING AGENCY: THE MHIF For governance to be eff ecƟ ve, some conducive factors in the realm of internal management and capacity need to be in place. At the level of the MOH as health system steward, there is a need for 1) health fi nancing and system performance data, 2) an organizaƟ onal unit or units with assigned responsibility and work processes for seƫ ng health fi nancing strategy and for oversight of performance of health fi nancing, 3) staff with health system knowledge and analyƟ cal skills, and 4) a leadership focus on health fi nancing strategy and performance. As noted above, the Kyrgyz MOH, with the wider Government and development partners’ parƟ cipaƟ on, has been able to mobilize resources for seƫ ng long-term strategies for the health sector, and with external support has been able to review these annually. This is a creditable achievement given that the MOH itself is very constrained in data quality and in staffi ng (with a complement of around 70 staff and permanent unfi lled vacancies), parƟ cularly in analyƟ cal skills. As noted above, it does not have dedicated staff responsible for monitoring MHIF performance and has no established rouƟ ne work processes for doing so apart from the externally supported annual health strategy review. Leadership challenges include frequent changes of government and minister, and a high reacƟ ve workload – notably for responding to individual complaints and requests from ciƟ zens, and parliamentary queries. At the level of the health purchasing agency, the MHIF’s governance body needs to receive competent proposals for strategic orientaƟ ons and policies and reliable reports based on accurate data from the MHIF’s management and staff . At this level too, eff ecƟ ve governance requires adequate data and informaƟ on systems, analyƟ cal capacity and organizaƟ onal processes within the MHIF – supported by a management commitment to openness and transparency to the SB. For the governance body to drive improvement in MHIF performance and correcƟ ve acƟ on on any problems, the management must take responsibility and must be able to respond to governance direcƟ ons, which in turn requires appropriate organizaƟ onal structure, staff technical capacity and standard operaƟ ng procedures for ensuring follow-up to governance decisions. In addiƟ on, the quality relaƟ onships between the mulƟ ple governance actors, the MOH, the MHIF, the MOF and other SB members and key stakeholders need to be conducive to results-oriented governance. A culture of construcƟ ve, open relaƟ onships can facilitate the formal processes of government. The MHIF’s management, with WHO support, has begun to strengthen aspects of governance processes that are within its control, in response to the recommendaƟ ons of WHO’s 2016 assessment. The MHIF has developed a mulƟ -year rolling insƟ tuƟ onal strategy, approved by its SB, which serves as 5. ASSESSMENT OF FACTORS CONDUCIVE TO EFFECTIVE GOVERNANCE OF STRATEGIC PURCHASING 32 HEALTH FINANCING CASE STUDY NO. 16 a basis for standardized reporƟ ng to the SB on progress and results (MHIF, 2017). The MHIF management has insƟ tuted standard operaƟ ng procedures for supporƟ ng the SB – i.e. Ɵ mely producƟ on of agendas, papers and minutes and regular standardized fi nancial and performance reports. The MHIF has taken steps to increase the transparency of its purchasing acƟ viƟ es through SB reporƟ ng and publicaƟ on on its website. It also has plans to strengthen monitoring and feedback to the health faciliƟ es it contracts with in order to strengthen the accountability of providers. These commendable steps have faced some limitaƟ ons. Although the data available to the MHIF on hospital care and some performance informaƟ on through its administraƟ ve systems is much beƩ er than in many lower-middle-income countries, data quality sƟ ll needs further improvement in order to provide a robust basis for using contracƟ ng as a lever for strategic purchasing. The MHIF does not yet have online or Ɵ mely access to data held by the MOH and its agencies on populaƟ on health, primary health care and outpaƟ ent services because the data systems of the two agencies are not integrated. Data and analysis on fi nancial protecƟ on performance has to date depended on external technical assistance. At the same Ɵ me, the experience in the past decade shows the ability of the authoriƟ es to use various data sources in the country and to prepare valuable policy briefs and analyƟ cal tools for decision support. Secondly, changes to structure and staff mix of the MHIF have proved diffi cult to make in pracƟ ce because of fi scal and pay constraints, and scarcity of key skills. Yet without changes to structures and funcƟ ons, it is not possible to build capacity sustainably in areas that are vital for the development of strategic purchasing and other prioriƟ es in the MHIF strategy. Specifi cally, the MHIF is lacking structures and appropriate staff with primary responsibility for some criƟ cal areas – including health economics, data collecƟ on, data management, cosƟ ng services, developing case mix, seƫ ng prices, analysis of uƟ lizaƟ on as well as provider performance and capacity, analysis of paƟ ent demand and access, and the pharmaceuƟ cal and pharmacoeconomic capacity to develop and oversee the drug benefi t package, drug reimbursement and pharmacy contracts. The MHIF does not have structures and staffi ng for these funcƟ ons, although some data analysis is conducted by a strategic planning and analysis team. External analyƟ cal capacity supported by development assistance has proved unable to meet the need for Ɵ mely, responsive operaƟ onal analysis. Further, not all the knowledge is insƟ tuƟ onalized within the organizaƟ on, which is a risk for sustainability. This needs in-house capacity, with close links to management and operaƟ onal divisions of the MHIF. External technical assistance has focused on improving data and in-house data analysis capacity in exisƟ ng teams, but simply adding new responsibiliƟ es to the already very stretched staff will allow only incremental improvement. A process of organizaƟ onal development and change management across the whole MHIF would be needed to bring about sustainable, insƟ tuƟ onalized change in pracƟ ces. SubnaƟ onal capacity and skills-mix is also variable, leading to a variety of pracƟ ces in contracƟ ng in diff erent oblasts, infl uenced for example by whether the local leadership has a chiefl y medical, economics or fi nance background. A combinaƟ on of naƟ onal analysis of data, training of subnaƟ onal staff and development of standard operaƟ ng procedures is being used to help address regional variaƟ ons and to improve the use of data for iniƟ al steps towards strategic purchasing. There is a need to build corresponding capacity in providers to build a shared understanding of data, acƟ vity and performance. 33ASSESSMENT OF FACTORS CONDUCIVE TO EFFECTIVE GOVERNANCE OF STRATEGIC PURCHASING A third limitaƟ on is that the legacy of organizaƟ onal culture and work pracƟ ces is more suited to control and compliance than to the strategic use of fi nance for health- sector development and performance improvement. The MHIF (like the public sector more widely) lacks tools and ways of working that would enable it to hold managers and teams responsible for the compleƟ on of outputs and acƟ viƟ es. Finally, there is a limit to which MHIF management can be expected to lead eff orts to improve governance and strengthen a weak and inacƟ ve SB; this really amounts to managers holding themselves to account. A weak board can readily be avoided or infl uenced in its decisions by strong managers in any country. In a post-Soviet context where reporƟ ng poor or even disappoinƟ ng performance to any oversight bodies usually leads to punishment regardless of whether it was due to factors beyond management control, managers are understandably reluctant to set challenging performance targets for their organizaƟ ons or to report problems openly to the SB. The MHIF also faces periodical calls for its aboliƟ on or incorporaƟ on into the MOH from consƟ tuencies opposed to the reform model it represents, along with calls for changes of leadership on poliƟ cal rather than performance grounds. These forces are someƟ mes represented on its SB. This is a very diff erent context from the western European concept of a board of directors as a construcƟ ve “criƟ cal friend”, supporƟ ng the management to strive for improvement (InsƟ tute of Directors, 2018b). It can be a risky and unrewarding acƟ vity even for a very good CEO to put eff ort into developing and working with the SB. 34 HEALTH FINANCING CASE STUDY NO. 16 A major strength of the Kyrgyz health fi nancing and purchasing system is the fact that there is a single purchaser, pooling some 80% of public expenditure and almost all spending on personal health services. This minimizes the issues of fragmentaƟ on noted in the WHO assessment framework as a major challenge in many health fi nancing systems. At the health-system level, the WHO assessment framework for governance brings out the importance of consistency and coherence across the mulƟ ple bodies involved in governance funcƟ ons. Because the MHIF’s CEO and management board have mulƟ ple lines of accountability under the current organizaƟ on of the health fi nancing system in Kyrgyzstan, an eff ecƟ ve triangle of coordinaƟ on and accountability – MOH, MOF and the MHIF’s SB – needs to carry out the four main tasks of governance. Unless these three bodies align their policies and implementaƟ on plans for the health system, and coordinate their oversight, they will be hampered in their ability to hold the MHIF accountable for making progress on the interrelated objecƟ ves of improving fi nancial protecƟ on against catastrophic expenditures and improving access to cost- eff ecƟ ve health services of reasonable quality. The paper has documented how the lack of coordinaƟ on across these bodies, as well as specifi c shortcomings within each body, has hampered the eff ecƟ ve exercise of governance funcƟ ons. This triangle of governance has operated eff ecƟ vely (in coordinaƟ on with the Prime Minister’s administraƟ on) in seƫ ng a broad health-sector vision and strategy, though the SB itself has not played a signifi cant role. There has been reasonable stability in health system strategy and structures over Ɵ me, and the latest strategy for 2019–2030 “Healthy Person – Prosperous Country” was recently approved. UnƟ l now, however, none of the three oversight bodies has played a role in ensuring that the strategy is translated into specifi c goals for the MHIF – measurable desired achievements, followed by specifi c iniƟ aƟ ves and programmes to be performed by the MHIF to reach these goals – for which they could hold the MHIF management accountable. As noted earlier, inconsistent or confl icƟ ng policies and operaƟ onal acƟ ons have someƟ mes been adopted by the three oversight bodies. One example of policy inconsistency which has proved to be an obstacle to good governance in the last decade is the wide fi nancing gap for the SGBP. Longstanding failure to address the mismatch between the SGBP and the MHIF budget constraint (combined with lack of MHIF autonomy and infl uence noted below on key health fi nancing decisions) undermines the ability to hold the MHIF to account for fi nancial protecƟ on or access to SGBP services. But there are also examples of MHIF using its contracƟ ng and payment leverage to achieve effi ciency gains and some performance improvement. As well, there are examples of alignment of acƟ on across the MOH, key providers and the MHIF in some priority areas of the strategy, parƟ cularly in priority disease areas such as increasing detecƟ on of hypertension and improving effi ciency in tuberculosis control services. 6. CONCLUSION: KEY CHALLENGES, POSITIVE ACHIEVEMENTS AND LESSONS 6.1. GOVERNANCE OF THE HEALTH PURCHASING SYSTEM 35CONCLUSION: KEY CHALLENGES AND POSITIVE ACHIEVEMENTS AND LESSONS The division of roles and authority to take decisions between the MHIF management and its mulƟ ple governance bodies – principally the MOH, SB, MOF and PAC, but also the Prime Minister who appoints the CEO – is not always clear and coherent. The SB’s role largely overlaps with those of the MOH and MOF. Where there is role overlap, the SB could be the forum for regular processes for coordinaƟ on of decision-making between the MHIF, MOH and MOF, but unƟ l now it has not carried out this funcƟ on. The legal framework and status of the SB does not give it the formal level of decision authority, duƟ es and responsibiliƟ es found in company boards of directors or trustees of private nonprofi t-making organizaƟ ons. The boards of comparable MHI enƟ Ɵ es in the region, such as Estonia, have much greater infl uence over innovaƟ on of payment methods, can fi ne-tune details of the benefi t package through clinical guidelines or protocols, and have more freedom to contract innovaƟ vely and selecƟ vely for some services. Because the MHIF has no authority to issue regulaƟ ons, it requires MOH approval even for very operaƟ onal maƩ ers which are usually delegated to an MHIF’s management. This diverts the MOH’s focus away from a results-oriented approach to MHIF accountability and perpetuates the legacy of detailed prior controls over operaƟ ons. Giving greater decision-authority to the SB would give it the potenƟ al to act as the primary oversight authority, and the forum for coordinaƟ ng decisions across other key governance actors: notably the MOH and the MOF. On the other hand, the MHIF has responsibility for, and an implementaƟ on role over, some aspects that in many countries are the responsibility of the MOH and its aƩ ached agencies. In the absence of an MOH-led system of quality management, the MHIF sets quality indicators and targets and monitors them as part of a new quality-based payment iniƟ aƟ ve. Similarly, in the absence of any acƟ ve ownership role by the MOH to monitor provider fi nancial performance and effi ciency (e.g. to take acƟ on where public providers have fi nancial defi cits), the MHIF is responsible for fi nancial monitoring of public providers and for negoƟ aƟ ng soluƟ ons for unsustainable MOH providers (such as changes in staffi ng and opƟ mizaƟ on of some faciliƟ es). To enable the MHIF to focus on its primary purchaser role, an alternaƟ ve governance body should be responsible for addressing ownership issues of public health- care providers, such as fi nancial non- sustainability and mismanagement, and for making decisions on investment and disinvestment in the public health facility network. Although the MHIF’s SB has a formal mandate to supervise the MHIF with regard to its results (outcomes for the public), and not just its acƟ viƟ es, the SB has only recently taken steps towards this. It has recently begun to insƟ tute more regular meeƟ ngs. In 2017 the SB approved the MHIF’s fi rst insƟ tuƟ onal strategy, and since then it has received regular reports from MHIF management. However, this has 6.2. GOVERNANCE OF THE PURCHASING AGENCY: THE MHIF Importance of clear and coherent division of decision-making authority among the governance bodies and the MHIF Importance of strengthening supervision and focusing it on results in the public interest 36 HEALTH FINANCING CASE STUDY NO. 16 The documents that form the main focus of the MHIF’s governance relaƟ onship with its SB – its insƟ tuƟ onal strategy and regular reports – are not yet readily available to the public. Nevertheless. the MHIF’s management iniƟ aƟ ve to submit these documents to its SB represents an increase in transparency. The MHIF has also increased internal transparency in its relaƟ onships with providers by introducing Benefi ts of increased transparency and public information been an iniƟ aƟ ve of the MHIF’s CEO; the SB and the other two oversight bodies (MOH, MOF) have been relaƟ vely passive. Current management iniƟ aƟ ves to improve reporƟ ng to the SB are helpful iniƟ al steps but will inevitably face limitaƟ ons as a basis for generaƟ ng challenging (but realisƟ c) results objecƟ ves and indictors, given the history and context of puniƟ ve responses to performance issues. At this stage, the SB has not demonstrated capacity to be the main governance body for the MHIF. Other elements of the formal government environment in line ministries, together with informal mechanisms through networks of supporters of reform, have taken the weight of responsibility for responding to major challenges and managing risk facing the MHIF and the single-payer system. To a large degree, this refl ects the country context. In sectors other than health, we do not see examples SBs or corporate governance boards playing a steering role or holding organizaƟ ons accountable for results. In the absence of familiar examples of this model of governance, the Kyrgyz Government, civil society and the MHIF SB members themselves do not expect the SB to play such a role. The MOH does, however, convene the Joint Annual Review of the health strategy with development partners at which the MHIF, along with other agencies of the health system, reports on implementaƟ on progress in the strategy at a high level regarding the strategy’s objecƟ ves. Although the prospects for increasing MOH capacity to provide the technical support for this process are very constrained in the Kyrgyz context, external support can conƟ nue to strengthen the process, with benefi ts for governance. Some stakeholders (including parliamentarians and development partners) raise challenges over results as well as acƟ viƟ es in these reviews, drawing on externally-supported technical inputs as well as naƟ onal experƟ se. Recent review of the ongoing third health sector strategy called for a more results-oriented approach to monitoring and accountability by the MOH.11 However, a signifi cant barrier to strengthening the MOH’s role in holding the MHIF accountable for results is the tension between the MOH’s stewardship role (focused on outcomes for the public) and its role as owner and sponsor of the public-sector provider network. Complementary reform – the MOF’s programme budgeƟ ng reform – has led the MOF to iniƟ ate a process of puƫ ng in place a more results-oriented reporƟ ng regime for MHIF alongside the budget, though SMART12 indicators and realisƟ c targets have yet to be developed and will have to align with the monitoring indicators used in the health sector strategy and by the MHIF for reporƟ ng to the SB. In a best- case scenario, the MOF role in advocaƟ ng for results-oriented monitoring through the budget framework for both the MOH and MHIF could provide an entry point for greater alignment of oversight between the MOH and MOF. 11 This secƟ on of the paper draws on an unpublished paper by Oxford Policy Management (OPM), enƟ tled Independent review of Den Sooluk and project in support of mid-term review, produced for the MOH and development partners and disseminated in 2016. 12 That is, Specifi c, Measurable, Achievable, Relevant, Time-bound indicators. 37CONCLUSION: KEY CHALLENGES AND POSITIVE ACHIEVEMENTS AND LESSONS standard operaƟ ng procedures that reduce undesirable local management discreƟ on and make the MHIF a more predictable and understandable counterpart for providers. These are important steps. Yet meaningful reporƟ ng, informaƟ on to enable the SB to take robust decisions, idenƟ fy and manage risks and exercise real accountability have been hampered by very deep-rooted weaknesses in the range and quality of data available in the MHIF and MOH informaƟ on systems and weaknesses in capacity to analyse the data. Issues with data on health service provision and quality of care also hamper the MHIF’s ability to carry out its purchasing funcƟ ons and produce informaƟ on for policy formulaƟ on. There remains room for improvement in the transparency of MHIF reporƟ ng to the public, and this should be complemented by addressing conducive factors. The MHIF SB and PAC provide for stakeholder parƟ cipaƟ on in governance structures from contributors, worker representaƟ ves and civil society. In pracƟ ce, this has not resulted in meaningful engagement of stakeholders in governance funcƟ ons. Stakeholder representaƟ ves without governance experience or health-sector knowledge on these boards have proved to be passive SB members, unprepared and cauƟ ous about taking on governance responsibiliƟ es. Lack of clarity about how stakeholder members of the SB and PAC are themselves accountable to the consƟ tuencies they represent, and lack of rules to address confl icts of interest also lead to reluctance to give stakeholder parƟ cipaƟ on a greater role. It should be possible in the Kyrgyz context to address these challenges to a greater extent, although this will require acƟ on beyond the health sector. The PAC legislaƟ on, in parƟ cular, is cross-sectoral, applying to all public sector bodies. Review of civil society representaƟ on on the SB could be iniƟ ated by the health sector. Importance of balanced, capable stakeholder participation with attention paid to confl ict of interest Lack of familiarity and experience with the role of governance bodies aff ects all the members of the SB. The result is an SB that lacks capacity to assess the proposals it receives from MHIF management and to provide an appropriate balance of challenge and value-adding, supporƟ ve oversight and advice to the MHIF CEO and management team. A recent iniƟ aƟ ve to train board members aƩ empts to tackle this. In addiƟ on, proposals to revise the membership of the SB have been developed to ensure it has members with knowledge of the health sector, strategy, law or MHIF funcƟ ons, as well as fi nancial skills which are required to parƟ cipate in an audit commiƩ ee. In the MOH and MOF divisions that have governance roles in relaƟ on to the MHIF, there is also insuffi cient understanding of results-oriented governance, although these organizaƟ ons do have a small number of staff with health-sector and 6.3. CONDUCIVE FACTORS RELEVANT TO GOOD GOVERNANCE 38 HEALTH FINANCING CASE STUDY NO. 16 public fi nancial knowledge relevant to MHIF governance. In the MOH, very small numbers of staff , high vacancy rates and turnover will present ongoing challenges to the development of these organizaƟ ons’ roles in governance. The MHIF itself has proved to be a posiƟ ve entry point for developing conducive factors: the MHIF has a strong interest in improving data, strengthening its analyƟ cal skills, and systemaƟ zing its internal strategic planning and reporƟ ng processes. The MHIF has welcomed support from WHO and other development partners in these areas, and they all have posiƟ ve spill-over benefi ts for MHIF’s relaƟ onship with its governance body and the quality of inputs the SB receives. The iniƟ aƟ ve to strengthen MHIF governance in Kyrgyzstan has come from its management, with support from development partners. Having a management team in the MHIF that has a culture of holding itself accountable and striving for improvement creates condiƟ ons for governance to add value. 39CONCLUSION: KEY CHALLENGES AND POSITIVE ACHIEVEMENTS AND LESSONS Experience with MHIF governance over 20 years has demonstrated that it is very diffi cult to create new governance mechanisms for an autonomous public health insurance agency in a context with liƩ le experience of classic “western European” corporate governance and limited governance capacity. At the same Ɵ me, the mulƟ ple lines of accountability of the MHIF have provided eff ecƟ ve checks and balances, and there is a process for bringing health- sector stakeholders together periodically to develop naƟ onal strategies. Greater focus on clarifying and dovetailing the new governance mechanisms which guide how the SB interacts with the exisƟ ng lines of accountability and authority could have been helpful. In the last two years, eff orts by the MHIF CEO and management team, supported by WHO, to put in place basic good governance pracƟ ces in strategy formaƟ on, reporƟ ng to the board and transparency of board decisions have been put in place, and training has been off ered to SB members. Very pracƟ cal support to the MHIF management and board members along these lines has proved to be both necessary and helpful as an entry point for strengthening governance. However, these can only be fi rst steps. UlƟ mately, the management of an agency cannot be expected to set itself challenging targets and openly disclose disappoinƟ ng performance and unanƟ cipated problems to a weak SB. This is a major issue in a context such as that of Kyrgyzstan where this type of accountability is not well established and where there is a history and culture of hierarchical control, exercised in someƟ mes arbitrary and puniƟ ve ways. Strengthening the process of translaƟ ng the high-level health sector strategies into insƟ tuƟ onal strategies for all of the implemenƟ ng agencies – the MHIF, but also the MOH and regulatory agencies – can help to make policy formulaƟ on more realisƟ c. The MHIF has made a start on this, but there is a need for coordinated acƟ on to do this in other agencies in the health sector. It is inevitable that the MHIF will conƟ nue to have mulƟ ple lines of accountability: this is not unusual for similar agencies internaƟ onally. With some changes to its membership and charter, the SB could be developed into the body that brings these mulƟ ple lines together – the MOH, MOF, prime minister’s administraƟ on, other involved government bodies and the parliamentary health commiƩ ee. The SB could further be clearly mandated to coordinate the MHIF’s insƟ tuƟ onal strategies and implementaƟ on plans with the wider sector strategy and to monitor the MHIF’s progress. The SB could become the approver of the MHIF strategy, structure and annual reports, and could make agreed binding recommendaƟ ons on policies and regulaƟ ons proposed by the MHIF to the respecƟ ve ministries (usually MOH or MOF) or Government (whichever 7. RECOMMENDATIONS 40 HEALTH FINANCING CASE STUDY NO. 16 7.1. STRENGTHENING THE AUTHORITY AND CAPACITY OF THE MHIF SUPERVISORY BOARD TO BRING MULTIPLE LINES OF ACCOUNTABILITY TOGETHER has statutory authority). Strengthening the role of the SB will require regulaƟ on and carefully brokered agreement, reinforced by clear standard operaƟ ng procedures. Although the Kyrgyz MHIF has limited capacity, it has higher capacity on health fi nance than the MOH has. The health system would benefi t from giving the MHIF clearer authority and greater infl uence on health fi nancing policy and regulatory decisions. In the Kyrgyz context, any suggesƟ on to increase the autonomy of the MHIF is widely misunderstood to mean that the MHIF management (as disƟ nct from the SB) would be given greater power. Consequently, any recommendaƟ ons for increasing the authority of the MHIF SB need to be communicated carefully to emphasize that checks and balances are vital. In a well-governed system, the mandate and autonomy given to the MHIF should be matched by commensurate accountability – to the SB (and via the SB to the Government) – and the necessary capacity for making and implemenƟ ng the decisions within its authority (Savedoff & GoƩ ret, 2008). This increase in accountability is not feasible without conƟ nuing to address the weaknesses in capacity of the SB, as described in this paper, through regular inducƟ on training of new board members. In addiƟ on, further work to put in place good governance pracƟ ces and to strengthen reporƟ ng to the board would assist the SB to focus on strategic issues and to monitor results in order to hold the agency accountable in the public interest. In order to empower the SB, it might be necessary to clarify its decision authority in primary legislaƟ on. Without this, it will remain diffi cult to get the members – in parƟ cular the MOH and MOF – to take their SB roles seriously and use the SB as the key forum for discussing and reaching joint agreement on policy and strategy. A legislaƟ ve mandate would be able to make the SB the primary accountability body and forum for coordinaƟ on. The SB could be given authority to make decisions on aspects of health fi nancing policy and strategy maƩ ers currently assigned in law variously to the MOH and other line ministries. It might be possible, for instance, as with the Estonian Health Insurance Fund, to give the SB the role of being the forum in which key strategic policies and regulatory decisions currently made by the MOH and MOF separately are made in a single joint process, allowing greater coordinaƟ on and enabling a balancing of views of the key government agencies with a role in health fi nancing. As in Estonia, the SB could become the body that discusses and approves proposals on the benefi t package, strategic budget allocaƟ on, provider payment and pricing before they are submiƩ ed to the Cabinet of Ministers. In this context, focusing the membership of the governance body on representaƟ on of agencies with key roles in MHIF accountability (notably the MOH, MOF, prime minister’s or presidenƟ al administraƟ on, parliamentary health commiƩ ee) may be appropriate, using the SB as a mechanism for bringing mulƟ ple lines of governance together and coordinaƟ ng them. However, devising mechanisms to ensure there is some conƟ nuity of board membership during government transiƟ ons would also be helpful. It is also worth considering whether to give the SB a role in making recommendaƟ ons to the Government on the selecƟ on of the MHIF’s CEO. This is usually a role of the governance board. In some countries, board involvement can help to reduce poliƟ cizaƟ on of the appointment and reduce instability in the post. But in the Kyrgyz context, given that most SB members themselves are poliƟ cal appointees and subject to turnover when the government changes, it is not clear that SB involvement in the appointment would make a diff erence. 41RECOMMENDATIONS The MHIF experience suggests that the SB is not an eff ecƟ ve forum for wide or representaƟ ve public and stakeholder parƟ cipaƟ on. It leads to an unwieldy board with many passive members. Stakeholder representaƟ on at SB level requires members who also have governance and sector knowledge in order to have confi dence to parƟ cipate in meeƟ ngs. They need to be accountable to the public. RepresentaƟ on of the parliamentary health commiƩ ee on the board meets these criteria. The Kyrgyz experience with PACs highlights the need for this type of public representaƟ on mechanism to have both requirements on skills and rules on confl ict of interest. Nevertheless, the posiƟ ve experience of the Kyrgyz health authoriƟ es with widespread consultaƟ on over strategy formulaƟ on demonstrates the willingness of the health system to communicate with and listen to stakeholders. There seems to be potenƟ al to amend the selecƟ on criteria and balance of membership on the MHIF PAC and ensure longer terms for members in order to make it a more construcƟ ve and engaged forum for providing civil society input to the MHIF SB’s key decisions. As with the SB, there is a need for inducƟ on training and for puƫ ng in place good pracƟ ces for seƫ ng board agendas and reporƟ ng to and from the PAC. There is a case for reducing the number of passive stakeholder members in the SB, streamlining representaƟ on of external stakeholders and civil society, and developing alternaƟ ve mechanisms for the MHIF to engage stakeholders in decisions that aff ect them, drawing on these more posiƟ ve experiences. For instance, public parƟ cipaƟ on might be enhanced through consultaƟ on over decisions on the benefi t package, strategic purchasing prioriƟ es and service changes iniƟ ated through contracƟ ng, or obtaining input on paƟ ent experience as part of quality monitoring Wider civil society input on health fi nancing policy and MHIF performance would be enhanced by increased transparency to the public – e.g. through publicaƟ on of the insƟ tuƟ onal strategy, plans and reports on the website. PublicaƟ on of informaƟ on could help to create ciƟ zen and stakeholder pressure for improvement in the work of the SB (Kaplan & Babad, 2011). There is likely to be potenƟ al to make faster progress in tackling the challenges of strategic purchasing in the Kyrgyz single- payer system by focusing on strengthening the internal management and capacity of the MHIF in key areas – such as data analysis, contracƟ ng, refi ning of provider payment methods, and fi nancial management. Developing results-oriented governance at the level of the SB is likely to be a much slower process, although it is an important complement. These key areas of internal capacity development are in any case conducive factors for more eff ecƟ ve governance. Although the Kyrgyz health system has had some very posiƟ ve experiences of technical 42 HEALTH FINANCING CASE STUDY NO. 16 7.2. DEVELOPING MORE BALANCED AND MEANINGFUL STAKEHOLDER PARTICIPATION 7.3. SUPPORTING MHIF INTERNAL MANAGEMENT AND CAPACITY – FACTORS CONDUCIVE FOR GOOD GOVERNANCE The above recommendaƟ ons are built around an aim of making the “classic” model of governance of an independent MHIF by an external SB work more eff ecƟ vely in the Kyrgyz context. However, it is perhaps worth considering alternaƟ ves to the “classic” model of governance in this type of country context. One opƟ on would be to focus on conƟ nuing to build strong internal management, systems and capacity in the MHIF and strengthening processes for coordinaƟ on with the MOH and MOF – the main triangle of accountability. It could make sense to develop and formalize this coordinaƟ on of government oversight and accountability for the MHIF within the exisƟ ng system of Cabinet commiƩ ees chaired by the Vice Prime Minister or presidenƟ al administraƟ on. Under this opƟ on, the SB could conƟ nue to play a role as a forum for discussion and consultaƟ on with key stakeholders, rather than as the main or primary oversight body. The SB could sƟ ll have value as a complement to tradiƟ onal governance mechanisms based on hierarchical line-ministry controls. The Government could consider merging the role of the SB with one of the mulƟ ple other government-appointed commiƩ ees for overseeing health policy and strategy in order to reduce the number of parallel processes. The Kyrgyz experience brings out the importance of support for developing both ends of the accountability relaƟ onships – clarifying the MOH stewardship roles and the MOF oversight roles, and building relevant capacity to play a major role in MHIF governance. This is important under both the “classic” model of governance or the alternaƟ ve suggested here and focused on using the SB as a forum. In parƟ cular, there would be benefi t from building the MOH’s and MOF’s internal capacity and business processes for reviewing MHIF insƟ tuƟ onal strategy, aligning it with budget formulaƟ on, monitoring results, and responding to MHIF policy and regulatory proposals. Health-sector investment in these capaciƟ es would benefi t from wider mulƟ sectoral eff orts to strengthen general government processes for coordinaƟ on and accountability lines – such as the Cabinet commiƩ ee processes and the budget processes. assistance and support from development partners, the MHIF’s experience also suggests that there is no subsƟ tute for building internal capacity for analysis for contracƟ ng providers and reporƟ ng to stakeholders and that technical assistance works best when it is embedded and works closely with relevant internal staff (World Bank, 2016; World Bank, 2018). PracƟ cal help to the MHIF’s management to put in place the basic governance pracƟ ces of insƟ tuƟ onal strategy formulaƟ on, board agenda-seƫ ng and board reporƟ ng has shown promise in the Kyrgyz context, and would have been benefi cial when the MHIF was fi rst established as an independent agency. 43. RECOMMENDATIONS 7.4. CONSIDERING ALTERNATIVES TO THE “CLASSIC” MODEL FOR GOVERNANCE OF AN INDEPENDENT HEALTH PURCHASING AGENCY 8. REFERENCES Akkazieva B, Jakab M, Temirov A (2016). Trends in out-of-pocket expenditures and utilization of health services in Kyrgyzstan: 2000–2014 Kyrgyz Integrated Household Budget Survey Health Module. Copenhagen: World Health Organization Regional Office for Europe. http://www.euro.who.int/__data/assets/pdf_file/0019/329221/Long-term- trends-KGZ.pdf?ua=1 Cashin C, Bloom D, Sparkes S, Barroy H, Kutzin J, O’Dougherty S (2017). Aligning public financial management and health financing: sustaining progress towards universal coverage. Health Financing Working Paper, No. 4. (WHO/HIS/HGF/HF WorkingPaper/17.4). Geneva: World Health Organization. https://apps.who.int/iris/bitstream/hand le/10665/254680/9789241512039-eng.pdf;jsessionid=E4479753A10525B96B5ABFFB53F 62B28?sequence=1 Government of Kyrgyzstan and development partners. Joint Annual Review: Joint Review summary notes/reports, 2013–2017. Ibraimova A, Akkazieva B, Ibraimov A, Manzhieva E, Rechel B (2011). Kyrgyzstan: health system review. Health Systems in Transition. 13(3). European Observatory on Health Systems and Policies. Copenhagen: World Health Organization Regional Office for Europe. http://www.euro.who.int/__data/assets/pdf_file/0017/142613/e95045.pdf Independent Commission on Good Governance in Public Services (2004). The Good Governance Standard for Public Services. London: Office of Public Management (OPM) and the Chartered Institute of Public Finance and Accountancy (CIPFA) (https://www.jrf. org.uk/sites/default/files/jrf/migrated/files/1898531862.pdf, accessed 13 June 2019). Institute of Directors (2018a). Standards for the board: What is the role of the board? Online publication. London: Institute of Directors (https://www.iod.com/services/information- and-advice/resources-and-factsheets/details/What-is-the-role-of-the-board, accessed 13 June 2019). Institute of Directors (2018b). Director competency framework. Online publication. London: Institute of Directors (https://www.iod.com/training/iod-approach/iod- competency-framework, accessed 13 June 2019). Jakab M (2007). An empirical evaluation of the Kyrgyz health reform: does it work for the poor? (PhD dissertation). Cambridge (MA): Harvard University. Jakab M, Akkazieva B, Habicht J (2018). Can People Afford to Pay for Healthcare? New evidence on financial protction in Kyrgyzstan. Copenhagen: World Health Organization Regional Office for Europe. http://www.euro.who.int/__data/assets/pdf_ file/0007/381589/kyrgyzstan-fp-eng.pdf?ua=1 Jakab M, Kutzin J, Chakraborty S, O’Dougherty S, Temirov A, Manjieva E (2005). Evaluating the Manas Health Sector Reform (1996-2005): Focus on Health Finance. Manas Health Policy Research Project: Policy Research Paper, No. 31. Bishkek: Health Policy Analysis Centre. http://hpac.kg/wp-content/uploads/2016/02/EvaluationofHealthfinancing_E_ PRP31.pdf 44 HEALTH FINANCING CASE STUDY NO. 16 Kaliev M, Meimanaliev T (2016). The history of the health care system of Kyrgyz Republic (20 years of experience) (in Russian). Bishkek: Triada Print. Kaliev М, Azizbekova J, Mamatova K, Borchubaeva G, Duisheev E, Shabdanov M, Temirov A. (2012). A financing gap in the implementation of the State benefits package program in health institutions of the single payer system. Manas Health Policy Research Project: Policy Research Paper, No. 79. Bishkek: Health Policy Analysis Centre. http://hpac.kg/wp- content/uploads/2016/02/PRP79.ENG.pdf Kaplan RM, Babad YM (2011). Balancing influence between actors in healthcare decision making. BMC Health Serv Res. 11:85. https://bmchealthservres.biomedcentral.com/ articles/10.1186/1472-6963-11-85 Kutzin J, Jakab M, Shishkin S (2009). From scheme to system: social health insurance funds and the transformation of health financing in Kyrgyzstan and Moldova. In: Chernichovsky D, Hanson K, editors. Innovations in health system finance in developing and transitional economies. Advances in Health Economics and Health Services Research. 21:291–312. https://www.emerald.com/insight/publication/doi/10.1108/S0731-2199%282009%2921 Kutzin J, Jakab M, Cashin C (2010). Lessons from health financing reform in central and eastern Europe and the former Soviet Union. Health Econ Policy Law. 5(2):135–47. https:// www.cambridge.org/core/journals/health-economics-policy-and-law/article/lessons- from-health-financing-reform-in-central-and-eastern-europe-and-the-former-soviet-uni on/43859F5A65CDD68000122EFB6A0BEDF5 Kutzin J, Ibraimova A, Jakab M, O’Dougherty S, (2009). Bismarck meets Beveridge on the Silk Road: coordinating funding sources to create a universal health financing system in Kyrgyzstan. Bull World Health Organ. 87(7):549–54. https://pdfs.semanticscholar. org/1279/c87e7ea6e47f87e3d52410c88a3a0489caad.pdf MHIF (2017). Development strategy of Mandatory Health Insurance Fund under the Government of the Kyrgyz Republic for 2017–2020. Bishkek: Mandatory Health Insurance Fund. O’Dougherty S, Akkazieva B (2016). Integration of specialised services into SGBP including link to strengthening purchasing arrangements. Technical Report. Copenhagen: World Health Organiaztion Regional Office for Europe. Phua KH (2017). Governance issues in health financing. In: Quah SR, Cockerham WC, editors. The International Encyclopedia of Public Health. New York (NY): Academic Press. Purvis G, Seitalieva C, Jakab M, Kojokeev K, Murzalieva G, Djemuratov K, Kutzin J, Cochrane D, Mukeeva S, Schuth T, Uchkemirova R, O’Dougherty S, Chakraborty S, Murzakarimova I, Kadyrova N (2005). Evaluating the Manas Health Sector Reform (1996-2005): Focus on restructuring. Manas Health Policy Research Project: Policy Research Paper, No. 30. Bishkek: Health Policy Analysis Centre. http://hpac.kg/wp-content/uploads/2016/02/ Evaluationofrestructuring-Final_E_PRP30.pdf Savedoff W, Gottret P (2008). Governing mandatory health insurance. Washington (DC): The World Bank. http://siteresources.worldbank.org/HEALTHNUTRITIONANDPOPULATION/ Resources/Peer-Reviewed-Publications/GovMandatoryHlthIns.pdf World Bank (2008). Economic Overview 2008: Kyrgyz Republic. Washington (DC): The World Bank. 45. REFERENCES World Bank (2013). Toward universal coverage in health: the case of the state-guaranteed benefit package of the Kyrgyz Republic. (Giuffrida A, Jakab M, Dale EM, UNICO Studies Series, No. 17). Washington (DC): The World Bank. http://documents.worldbank.org/ curated/en/685631468278090377/Toward-universal-coverage-in-health-the-case-of- the-state-guaranteed-benefit-package-of-the-Kyrgyz-Republic World Bank (2016). Independent Evaluation Group (IEG) review of the Implementation Completion Report of the World Bank Second Health and Social Protection Project in Kyrgyz Republic. Washington (DC): The World Bank. http://documents.worldbank.org/ curated/en/989911483075211353/Kyrgyz-Republic-Health-and-Social-Protection-Project World Bank (2018). Kyrgyz Republic: Support for improvement of public financial management. Final report. Report commissioned by the World Bank from AVAG Solutions Ltd., June 2018 (unpublished). WHO Regional Office for Europe (2008). Stewardship/governance of health systems in the WHO European Region. Document EUR/RC58/9. Copenhagen: World Health Organization Regional Office for Europe. http://www.euro.who.int/__data/assets/pdf_ file/0016/70180/RC58_edoc09.pdf WHO (2019). Governance for strategic purchasing. An analytical framework to guide country assessment. Geneva: World Health Organization. Conference Copy (WHO/UHC/ HGF/Guidance/19.6). 46 HEALTH FINANCING CASE STUDY NO. 16