Dreamful Thinking: Anti-Reforms of Health Care in Georgia


Progress cannot be organized.

– Ludwig von Mises

Many of the projects and ideas presented by the Georgian government are good examples of wishful thinking. However, when the ruling party is called Georgian Dream (which in Georgian means to daydream, but may be understood in English also as dreaming in one’s sleep), a pursuit of wishes and dreams should not surprise anyone.

In fact, the Dream party had a lot of dreamful ideas, which eventually turned out to be truly nightdreams, as many of them relied on incorrect calculations and models. So, some of them went even further – to dreamful thinking. The most relevant among them is a healthcare reform.

A person’s attitude towards their health and health care in many respects coincides with the main question of mankind in recent centuries – what do we need: capitalism or socialism?  (Many think it is better if the others work hard, while they themselves enjoy the fruits of their labor.)

In particular, socialism and socialized health care have the same advantage (cheapness) and disadvantage (quality). Meanwhile, capitalism and private health care have quality- and demand-appropriate prices plus constant efforts to improve and renew (because of the competition).

Although such an issue may be seen in all sectors, in the case of healthcare we are dealing with human health and connected with it – life. Poor quality means not only poor service and wasted money, but also greater dangers.

Imagine, for example, we want to buy apples and they are of bad quality; we can just refrain from buying them or, alternatively, refrain from other options and return to buy the apples, it comes down to what is our priority. Whether we buy apples or not, our lives are not connected with them, but in the case of health care – it depends a lot.

Therefore, the quality of the health treatment is crucial. That is, existence of quality apples is not a vital issue, while the quality health care – is; In the case of apples, we refrain from buying bad apples, while in the case of health, we have no other choice – have to use what we have.

We can throw away the bad apple, we do not need to consume it; but we cannot miss the bad health care, and the money is paid by our own tax. In the conditions of developed capitalism, the rich order and pay for better health care and thus help the poor to use the high-quality technologies and medicines; end of the shortage of quality services and medicines is provided only by a wealthy buyer in the free market.

Under socialism, in the contrary, everyone is almost equal, and no one can pay for high technology and good medicine or use someone else’s purchased ones – a deficit reigns. The (political) elites receive relatively better services beyond the threshold, and, hidden drugs are relatively easily accessible to them.

The capitalist approach is to raise the standard of living of everyone so that they can themselves afford the better-quality health services instead of asking for an affordable ones. With proper personal and family priorities and income growth, good health care will be available to everyone, as well as a good TV, car, apartment, clothes or products.

What can be an alternative to this? Poverty and affordable low-quality imitated health care. If we draw a parallel with access to education (or call it affordable education), – its low quality also has a bad effect on living conditions, but not a vital impact – it is still possible to live with a low level of education, though very poorly.

The Soviet Union also had a universal health-care system, with thousands of hospitals and even small medical centers in almost every village; the emergency was also “free” as everything in general was supposedly free of charge. What’s more, the Soviet Union also had the most complex and large-scale control (in the Soviet sense of the word) and inspection system in the world that nobody could escape.

Everything was free and in fact not. The so-called Free (in which the same people paid the money) was as poor quality as everything else. The Communist Party was a world champion in election promises and propaganda – the young will not even imagine of such a falsity.

In a parallel world, everything was, of course, for payment, often referred to as bribery – it was actually an illegal fee.

Hospitals were extremely dirty, technology – impossibly obsolete, salaries – catastrophically low… Under these conditions, doctors preferred to take money from the patients directly, though illegally. There was no other way – it was still very good, because the fees could imitate the market prices, – those for whom people were ready to pay more were considered better quality doctors.

Every physician could have a special pocket on the uniform, or tray in the table where his service fee was to be placed.

In parallel, the state had officially created elitist (or rather elit) health care for the so-called CEKA (Central Committee of the communist party) and government members. This should surprise you if you heard that Czech beer or even shoes were just for CEKA. Either you had to be from the family of a CEKA member or a very closely related to reach out for the elite services.

No one should think that the elite clinics of that time were also elite in quality. The services of that time will not come close to the normal clinics of today with any parameters – quality, technology, cleanliness, relationships, financial order…

Today, Georgian clinics perform surgeries on the heart, eyes, etc. that we would not have dreamed of before. Visiting of many clinics has even become enjoyable. Most importantly, many foreign healthcare companies are interested in investing in Georgian healthcare.

It is important to say that nothing was to achieve this, – I recall again that just 15 years ago the Georgian healthcare system looked like a Soviet chicken farm. More can be said and boldly – the reforms carried out before 2013 are, in fact, the only source of these improved services and for a long time we would not have had those improvements.

What exactly was being done in the healthcare sector during those reforms has been described in various studies, and I will not go into bringing them here – I do not think anyone has forgotten and it is necessary to remind them. The fact is that up to 200 new clinics have emerged and there have been queues of investors who have invested resources in clinics, insurance and pharmaceutical services, (interestingly, in pharmaceutical manufacturing).

As the insurance industry has radically improved, clinics have relied heavily on the new technologies and qualifications. Soviet health care quality problems, illegal treatment and payment, informal relationships either completely disappeared or drastically reduced.

The public health-care system for the selected groups of the population was based on the vouchers, competition, decentralized delivery of the services and checking of the procedures, quality, and prices.

All of this, and more, emerged 10 years ago when the private sector came to power and made great improvements in competition with each other and foreign clinics, all – outcomes of deregulation, liberalization and privatization.

State-funded, through the insurance system, involved pensioners and other disabled people (and some other categories of people as exceptions), in parallel the private insurance developed rapidly. Although this system did not work perfectly, it was constantly moving in the direction of improvement.

As mentioned above, many new clinics and insurance offices have emerged. At the same time, tens of thousands of individuals and families have been involved in private insurance services.

The downside of the system was considered to be the problems of financing expensive surgeries. Such a problem can exist everywhere and covering it could be one important political step that could be taken from 2013 onwards. In any occasion, it would be very important that state-funded services did not lead to overuse of resources by clinics and the population, as well as encouraging poor quality.

After 2012, the government announced the introduction of a universal health-care system, which means financing the health needs of the population at the expense of the state (taxpayers), paying from the budget according to the invoices issued by the clinics.

The announcement of universal health care was an illusion that high-quality scarce health services could be accessible to everyone and at the same time free of (direct) charge. In general, offering any goods for free leads to excessive demand and automatically – quality deterioration.

Georgia’s post-2004 reforms could create some kind of illusion among the population, and especially among politicians, that it was all easy, resulted from foreign aid and / or was simply accidental. Moreover, many believed that more could easily be done.

Such illusions usually appear to people who either do not understand anything about political life or world market trends, and of course money is falling from the sky. The truth is simple, you should always try to do what works and reject what does not work, especially if you are a poor country.

It seems that the economic policy announced by the Dream government was created by such mistaken people. They believe that (progress can be made) if there is money, the result will come by itself and all the hidden problems can be solved. Such was the case with the so-called health care reform. The policy that has derailed the system previously created and has, in fact, brought health services to a crisis.

Systemic changes have driven private insurance out of state-provided health care, and the government has begun to pay directly and control related costs. Such a development has been in the interest of many hospitals – the government pays, and it is virtually impossible to check, so, prescribe as much as you want procedures and medicines, and so on.

I mentioned the medications and now also recall the government sudden announcement of a multi-thousand list of medications that must have been prescribed by a doctor. Within a few months all the pharmacy chains managed to resolve this issue (here I will not specifically mention – how).

Public health expenditures have tripled in a few years (although the Georgian Lari has partially contributed to this) – the system has virtually ended all years in debt. The government began to introduce certain methods of checking and limiting various expenditures – but with each new step more problems followed.

Privileged and discriminated service providers have emerged, queues for services have been reduced and in some cases the motivation to invest in new technologies and purchase high quality medical equipment has diminished or disappeared.

There has been an increase in cases of informal relationships and other types of transactions between the patient and the doctor. The centralized and monopolized system of financing and audits was understood by the clinics easier to deal with than the very thorough private insurance checking.

In fact now the universal system in many cases covers only a small part of the costs and patients are forced to bear some part of the costs. The problems are already a matter of separate examination. However, if the government continues to further control prices and the financial activities of clinics and increase its own intervention, this system is doomed to return to the Soviet reality, the elitist healthcare model.

Many business operators in the system already openly stated their dissatisfaction and problems of investing and developing, or sometimes operating sectors of the health care provision.

Finally, this health-care anti-reform may not have been worthy of such attention if not for the already existing failures and the increase in the intensity of government intervention. Without a quick and decisive halt to this trend, the people of the country are expected to fall into this trap for very long time, as it will be virtually impossible to support such a risky politics change.

Gia Jandieri