The Burden of Out-of-Pocket Payments for Health Care in Tbilisi, Republic of Georgia

The breakup of the Soviet Union and the ensuing economic and social turmoil have had a strong impact on the functioning of the health care systems in the new states that were created. The economic downturns experienced by many states of the former Soviet Union limited the resources available to fund health care delivery. All but forced by falling health care budgets and encouraged by international organizations touting the benefits of privatization, many states of the former Soviet Union have moved to reduce public support for health care and to privatize large portions of their health care delivery system. However, economic disruption and rapid structural changes can negatively affect the functioning of a health care delivery system as well as the health of the population. In this article, we assess the effects of transition on several aspects of health care access and financing in the Republic of Georgia's capital city, Tbilisi.

The Republic of Georgia is a small mountainous country of 5.4 million people bordering the Black Sea, Russia, Turkey, Azerbaijan, and Armenia (Figure 1). On the eve of independence in 1990, Georgia appeared to be a relatively well-off republic with a bustling tourist industry, a prosperous agricultural sector, and a strong industrial sector. Although never quite achieving the health standards of Western Europe, the Republic of Georgia enjoyed the health profile of a high-income country under the Soviet regime with high life expectancy, low infant mortality, and chronic diseases such as cardiovascular disease and cancer as the major causes of mortality.¹ Following independence, however, Georgia has seen increasing economic and social turmoil. A brutal civil war in 1991 and fighting in various separatist regions, such as Abkhazia, plunged Georgia into economic collapse, civil unrest, and armed conflict. The situation was complicated by the influx of 270 000 refugees mainly into the city of Tbilisi as a result of the conflict in Abkhazia. In the early 1990s, Georgia experienced an 18% increase in mortality, an increase in infant mortality, and decreasing immunization rates.^{2 - 3} In this period of economic and social collapse, the gross domestic product dropped by 75% and health care financing suffered. Health care spending decreased from the equivalent of US $95.50 per capita in 1985 to US $0.90 in 1994.⁴ The health care system suffered severe damage to capital assets, such as buildings, and to the morale of the medical personnel.^{1 ,5 - 7}

In 1995, with the stabilization of the economic and political situation in Georgia, the government initiated health care reforms in an effort to restore the functionality of the health care system. The initial goal was to salvage as much of the original centralized system inherited from the Soviet Union as possible, costly and inefficient though it may have been.² In the Soviet system, the government owned and controlled the entire health care system, which was financed through a global budget raised from centralized resources. However, given the dire economic situation, the Georgian government needed to dismantle this social safety net and radically scale down its involvement in the health sector. It redirected its activities from direct provision of care toward regulatory, licensing, and financing functions. The government continued to maintain only a minimal role in the provision of health care through its public health activities and the financing of a basic health care package.^{2 ,8}

Despite recent improvements in the Georgian economy and stabilization of some internal conflicts, the Republic of Georgia remains a poor country with an official per capita gross national product of US $983 in 1999⁹ and an annual per capita income of approximately US $394 (found in this study). Currently, the average urban household in Georgia spends more than 50% of its monthly income on food, leaving few resources for other needs including health care.⁷ Prompted by the economic collapse and social upheaval of the mid-1990s, the Georgian government was forced to initiate a series of health care reforms to relinquish its central role in organizing, managing, and financing the health sector. By the late 1990s, the central government could only maintain minimal financial involvement in the health sector because of poor tax revenues. In 1998, it allocated 1.7% of gross domestic product for health care expenditures and distributed less than 50% of these allocated funds.⁷ Despite the efforts of the Ministry of Health to manage the health care system in an efficient and cost-effective manner, the lack of funds in the budget for health care forced the ministry to decrease its activities in the provision of health care and privatize the health care system. However, the transition to a market-driven system has been slow, as the vacuum created by reform has not been filled by private enterprise.

In the process of divesting, the government relinquished the financial responsibilities involved in managing individual health care facilities. Decentralization shifted the burden of health care financing from pooled resources redistributed through the government to out-of-pocket expenses paid directly by individual patients. Under the new system, 87% of health care expenditures are financed by patients through formal and informal payments at the point of service.² With out-of-pocket expenses constituting such a large part of total health care financing, affordability has emerged as a major issue in health care. Previous studies demonstrated increasing problems with access to health care and decreased utilization of health care facilities in Georgia.^{10 - 13}

The official health care system in Georgia consists of hospitals and outpatient clinics (polyclinics) staffed by physicians, but many people turn to other informal sources like friends or relatives for advice and treatment. Notably, Georgia has a large number of unemployed individuals trained as physicians who may offer advice and treatment to their friends and relatives.

Recent years have apparently brought many changes, but few improvements for the population of Georgia. Given concerns about the heavy burden of out-of-pocket expenditures, problems with access to health care, and the paucity of information about the effects on patients, this study was conducted to assess patients' use of and access to health care services, their out-of-pocket health care expenditures and sources of funding, and their attitudes toward medical and pharmaceutical insurance.

We conducted a survey of households with at least 1 sick member in Tbilisi. Tbilisi is the capital as well as the major urban center of the Republic of Georgia and contains approximately 1.38 million people, 25% of Georgia's total population. This survey therefore represents the perspective of the urban population of Tbilisi, which differs markedly from the rural population of the Republic of Georgia.

A probability-proportionate-to-size cluster survey of households residing in Tbilisi was performed. The city was divided into 10 administrative districts. The number of clusters per district was determined by setting the number of clusters proportional to the population listed in voter eligibility records. Voter eligibility records were used to set proportionality as they were updated for the parliamentary election in November 1999 and reflect the most up-to-date assessment of the population. A total of 31 clusters were selected. Each cluster was set to contain 8 households that had at least 1 ill household member in the last 6 months and were willing and able to participate in the study, giving a total sample size of 248 households.

Individual clusters in each district were selected by randomly choosing an address on a detailed map of the district. These addresses served as the starting points for the second stage of the survey. Starting at the chosen address, every fourth household was solicited until a total of 8 households had been interviewed. Every fourth household was defined as either every fourth house or if in a large apartment building every fourth floor. A household was defined as a set of people (adults and children) living in a common space and having a shared economy.

A total of 597 households were approached. Of these households, 150 refused to be interviewed or were not available to be interviewed, and 447 were willing and able to participate in the study (response rate of 75%). The head of household, defined as the primary provider for the household, responded for each household. Heads of households considered "willing and able" to participate in this study were able to answer the door when approached and gave informed consent to participate in the study. Of these 447 households, 248 (41.5%) also indicated that there was at least 1 ill household member in the last 6 months. The 248 households included in the study were distributed evenly among 31 clusters. No information was collected on households that either refused to be interviewed or were unavailable to be interviewed.

The purpose, benefits, and limitations of the survey were explained to respondents and informed consent was obtained orally before proceeding with the interview. Identifying information was not recorded to maintain respondents' anonymity. This study was approved by Stanford University's institutional review board.

Interviews were conducted in Georgian and Russian by 7 interviewers from the Sociology Department of Tbilisi State University who had prior experience conducting sociological surveys. Each interviewer received training by participating in the pilot study. Twenty percent of the interviews were directly observed and supervised by the lead author (J.S.). Surveying was conducted between October 20 and November 5, 1999. Interviews were conducted at various times of the day from 10 AM until 10 PM, and on every day of the week including Saturday and Sunday. All the interviews for each cluster were completed during the same day.

The survey instrument was designed in Tbilisi during September and October 1999 after consultation with local physicians and patients, and was pilot tested among 30 random households in 3 different districts of Tbilisi. The survey was translated into Georgian and Russian, then back-translated to ensure accuracy.

The questionnaire consisted of 25 multiple-choice questions. The survey queried for the age and sex of all household members, the illness characteristics of ill household members, ill household members' responses to the illness, their reasons for choosing particular responses, the cost of treating their illness, their means of financing out-of-pocket health care expenditures, the biggest problem they have in obtaining health care, and their willingness to pay a fixed sum of money every month to receive free health care and medicines (ie, to purchase insurance). We were most concerned about access to care and financing among those with serious conditions, as opposed to those with common nonsevere illnesses that can typically be treated without seeking formal medical advice. Thus, respondents were asked to rate the seriousness of illnesses of ill household members, with serious illnesses defined as those that warranted significant concern about lifelong disability or death.

Household data was collected on the level of education of each household member, the number of income sources per household member, and the monthly household income from all itemized sources (eg, wages/salaries, pensions, stipends, trade, rental of property, remittances from relatives, and other sources). The total household income was computed as the sum income from all sources. Household income and health care cost data were collected as continuous variables and all other questions used response categories, allowing for write-in information if needed. Responses that did not fit the predetermined categories and nonresponses comprised a small percentage (<5%) of the answers to each question.

Data were analyzed using Epi Info 6.04 (Epi Info, CDC, Atlanta, Ga) on 2 levels: households and ill household members. Analyses included frequencies of responses to the various survey questions and simple comparisons between different groups.

The 248 households included in this study represented 952 total household members, including 306 household members who had been ill in the past 6 months (Table 1). Average monthly household income was 229.50 Georgian Lari (GeL) or approximately US $117.70. Per capita monthly income was 64.10 GeL (US $32.90). During the time period spanned by this survey, the value of the GeL fluctuated from 1.85 to 2.10 GeL to US $1. We provide comparison figures in US dollars computed at an exchange rate of 1.95 GeL to US $1.

The sample population of households with ill household members does not differ in household size and income from population characteristics observed in other studies.^{10 - 12} The characteristics of household members who comprise these households are similar in terms of age and sex distribution, education status, and employment status to data from recent studies of the Georgian population.^{10 - 12}

Figure 2 shows the distribution of illness types reported by respondents. Among ill household members, respiratory diseases were the most prevalent (22% of total illnesses observed). The next most prevalent were cardiovascular and abdominal diseases. Forty-four percent of illnesses (136) recorded in this study were considered serious by respondents. Patients with serious illnesses were found to be older (mean [SD], 47.8 [21.2] years vs 34.7 [19.5] years) and were more likely to be male (odds ratio [OR], 1.8; 95% confidence interval [CI], 1.2-2.6) than the sample population of all household members. Cardiovascular diseases form the largest block of serious illnesses observed here, followed closely by abdominal diseases and cancer. Respiratory diseases comprised only a small portion of serious illnesses.

Fifty-one percent of ill household members used official medical services, such as hospitals and outpatient clinics. Thirty percent (93/306) sought advice from a relative or friend with medical expertise, 6% (17/306) sought advice from a relative or friend without medical expertise, 6% (17/306) treated their conditions with traditional medicines, and 7% (20/306) did nothing.

Those with serious illnesses were likely to seek care from hospitals or clinics: 82% of those with serious illnesses used official medical services, as opposed to 27% of those with less serious illness. Among the 18% of household members with serious illnesses who did not seek official health care services, most sought the advice of a friend or relative with medical knowledge.

The ill household members who used health care facilities were 2.3 times as likely to use hospitals rather than polyclinics, with 31% of all ill household members seeking treatment in a hospital. The use of medications was widespread with 86% of all ill household members purchasing medicines to treat their illness. Although most of those with serious illnesses sought care from official sources, 10% of all ill household members and 6% of those severely ill did not use official health care services because hospital care, physician visits, laboratory tests, or medicines were too expensive. Sixteen percent of all ill household members and 18% of those who were severely ill were unable to afford all the medications necessary to treat their illness. Ill household members who could not afford official health care services came from households with lower average monthly per capita incomes (46.7 [SD, 36.2] GeL [US $23.9] vs 64.2 [SD, 52.2] GeL [US $32.9]). Those who could not afford all the medications needed also had lower average monthly per capita incomes (48.6 [SD, 30.4] GeL [US $24.9] vs 67.0 [SD, 55.5] GeL [US $34.4]).

To evaluate the burden of out-of-pocket expenditures, we recorded for the last 6 months out-of-pocket expenditures made for hospital care, outpatient visits, laboratory tests, medicines, and traditional medicines (Table 2). The costs recorded in this study include official as well as informal payments, such as direct payments to health care staff for care and supplies, which can be sizable in the Georgian health care system. The average cost of treating an illness was 100.1 (SD, 223.6) GeL (US $51.3) per illness. On average, health care costs constituted 9.1% of total household income for a household with at least 1 ill member. Average annual per capita out-of-pocket health care spending was 64.3 GeL (US $32.9). The largest share of total expenditures was hospital care (46%) followed by medicines(26%).

Health care costs were not evenly distributed. The top 10% of health care spenders accounted for 62% of health care expenditures and the top 20% of spenders accounted for 82% of health care expenditures. Their average cost of treatment was 614.4 GeL (US $315.1) and 392.8 GeL (US $201.4), respectively.

Out-of-pocket health care financing strategies varied across households. The majority (61%) of ill household members used money saved at home to finance their health care expenditures (Figure 3). A smaller proportion (19%) used strategies such as selling personal items or borrowing money from relatives or friends to pay for health care. These kinds of strategies were more prevalent among those with serious illnesses (33%) vs those with nonserious illness (8%). Selling personal items or borrowing money accounted for a relatively large proportion of total spending: 16 262 GeL (US $8339) or 53% of total out-of-pocket health care spending in this survey.

Ninety-three percent of household respondents complained about the prohibitive costs of health care. They ranked hospital costs as their top concern, followed by the costs of outpatient care and medications. The quality of health facilities and health care workers was a lesser concern with only 7% of respondents listing these as the number one problem in health care.

Eighty-seven percent of heads of households surveyed were interested in paying a fixed sum of money every month to have free hospital care, outpatient services, laboratory tests, and ambulance services for household members. Each respondent was willing to pay on average 8.4 (SD, 6.9) GeL (US $4.3) per month per household. A smaller percentage of respondents (71%) were interested in paying a fixed sum of money every month to receive free pharmaceuticals for household members. Each household was willing to pay on average 5.3 (SD, 4.7) GeL (US $2.7) per month per household to receive free medications.

This study found patients in Tbilisi facing problems with health care access and financing. Ninety-three percent of households with ill household members listed costs as the main deterrent to obtaining health care. A portion of the study population (10%) reported they did not use official health care services because they were too expensive. Sixteen percent of ill household members could not afford all of the medicines they needed. These ill household members who were unable to access health care due to cost had lower monthly per capita incomes as compared with the rest of the sample population.

Our study reports rates of "access" to health care that are similar to rates of other studies performed in the Republic of Georgia^{10 ,12 - 13} and in the United States.^{14 - 16} Unfortunately, "access" statistics are difficult to interpret as the proportion of the population unable to access health care varies depending on study designs, study populations, and definitions of access. For example, this study did not report on ill persons who received some but not all of the care they needed. More importantly, this study did not assess the level of care provided to patients who used official medical services. The Republic of Georgia has an excess capacity of physicians (1/245 people) and hospital beds (4.5/1000 population).¹ Thus, "accessing" official health services, as in consultation with a physician or a hospital stay, may not be the major deterrent to getting adequate medical care. Anecdotal evidence suggests that health care services provided in Georgian hospitals and clinics are below the standard of care and many medications and procedures, such as cardiac catheterizations, are simply unavailable to the average Georgian. Prior studies have documented that the majority of hospitals did not meet basic safety criteria, had poor hygienic conditions, and contained depreciated or obsolete equipment.¹ Moreover, access to health care has to be understood in light of the relatively minuscule absolute amounts that Georgians spend on health-related expenditures. Using data from this study, approximate per capita health care spending is estimated at $33 per year in comparison with $4358 spent per capita annually in the United States in 1999.¹⁷ It is clear that the smaller absolute amounts available for health care account for many of the deficiencies in Georgian health care. Though physician and other health professional services may be available in Georgia at reduced rates in comparison with the United States, many components of the provision of health care, such as pharmaceuticals and medical equipment, are only available at international prices.

The majority of the population represented in this study was able to obtain care, but had trouble financing their health care expenditures. In relative terms, the average household in this study spent 9.1% of its income on health care expenditures. However, health care costs are not distributed evenly. In both the United States and the Republic of Georgia, the sickest 10% reflect a majority of costs with the top 10% of health care spenders accounting for 69% of total health care expenditures in the United States¹⁸ and 62% of total health care expenditures in our study. However, the Republic of Georgia lacks risk-pooling mechanisms to distribute the burden of health care expenditures. Eighty-seven percent of US citizens have either government or private health insurance¹⁹ and 83% of US health care costs are covered through risk pooling via government programs or private insurance.²⁰ Given health care reforms resulting in the lack of government involvement in health care and the dearth of free market options, the majority of Georgians do not have any means of risk pooling, thus forcing families with ill household members to adopt impoverishing strategies to pay for health care. In our study, 19% of ill household members were forced to adopt strategies, such as borrowing money or selling personal items, to cover health care costs; these strategies were used to finance 53% of total out-of-pocket health care expenditures. Given the economic condition of most households in Georgia, it is likely that the adoption of these strategies forces households into further financial difficulties and may exacerbate current economic difficulties.

Previous studies demonstrate a clear correlation between poverty and illness showing that people of lower socioeconomic backgrounds are more likely to be ill.^{21 - 24} As shown in this study, households with ill members are frequently faced with burdensome health care costs. This downward spiral, reinforced by the dismantling of the social safety net, has made the poor of the Republic of Georgia vulnerable to impoverishment secondary to high health care costs. Thus, high health care costs may lead to increased income inequality and may be a contributing factor to the current rise in socioeconomic inequality in Georgia.

Risk pooling is not only critical for the redistribution of health care costs, but it may also affect the pattern of health care utilization. Currently, patients in Georgia predominantly use health care facilities for acute illnesses.⁹ Risk pooling with guaranteed access to health care may help increase the use of preventive services. For example, studies have shown a high prevalence of untreated hypertension in Georgia.^{25 - 26} Increased access to general preventive services for the treatment of hypertension may significantly decrease the morbidity, mortality, and expenditures associated with cardiovascular and cerebrovascular diseases.

Further development of the health care system in the Republic of Georgia would benefit from the creation of new risk pooling mechanisms, but there is confusion about the appropriate model for risk pooling and the appropriate mix of public and private involvement. One option for achieving risk pooling is the design of a private insurance system in which households could pay premiums in return for coverage for some or all of their health care costs. This study found widespread support for a system of risk pooling along these lines among households with ill members. However, the results of our study also suggest the difficulties of constructing such a system in Georgia. The amount that household members are willing pay is sufficient to cover only 54% of the health care costs they incurred during the 6-month period of this study and it is not clear that the amounts reported in this survey correlate with actual willingness to pay should such a system be put in place. Moreover, this survey only included households with at least 1 ill member and it is unlikely that households with no ill members, who may be less familiar with the costs of health care and see less direct benefit, would be willing to pay into a risk-pooling scheme.

A pure market solution for risk pooling in the Republic of Georgia is problematic. The marketization of health care in the Republic of Georgia has not provided adequate risk pooling solutions in the last 5 years, as private insurance has not taken hold. The Russian experience shows serious deficiencies with the attempt to introduce market forces into the provision and financing of health care through their government-based, mandatory insurance program.^{27 - 32} As in Russia, free markets are still an abstract concept in Georgia and cannot be expected to equitably and efficiently distribute health care services. Without a well-developed middle class with at least a modicum of disposable income, an established network of private insurance companies, and an array of competing medical institutions, it is unlikely that a purely market-based insurance system could work. At this point, Georgia does not have any of these prerequisite conditions.

Even in developed countries with strong private sector insurance systems, such as in the United States, the government plays a large role in providing, distributing, and financing health care. Prior to the fall of Communism, the Georgian government had a monopoly on provision, distribution, and financing of health care and much of the Georgian population still expects the government to be the leader in the health care sector. Thus, risk pooling through the government may be a sensible solution. However, due to its poor fiscal state, the government is unable to finance a risk-pooling scheme through tax revenues, though it may be the appropriate organ to help initiate a voluntary risk-pooling program to cover health care costs.

The health situation in Georgia has deteriorated. Absolute and relative health care spending is low. The shift from collective to individual responsibility initiated by marketization has placed a severe burden on the population with most individuals paying for health care through out-of-pocket expenditures. A portion of the population cannot access health care because of cost and a significant portion of the population is forced to use impoverishing strategies to finance health care expenditures. Creative approaches to risk pooling are needed for the future development of the health care sector and to achieve equitable distribution of health care in the Republic of Georgia.