The present review includes a macro analysis of the healthcare sector; key indicators of the sector and a comparison with other countries; financial indicators of the retail pharmaceutical sector, hospitals, and clinics; government spending on health services; and challenges in the sector.
The healthcare sector differs from other economic sectors in its characteristics. It should be noted that a proper healthcare system is important for the development of the country. The rapid spread of COVID-19 in Georgia has dramatically increased healthcare sector expenditures. Therefore, the government allocated additional financial resources to manage the pandemic. Despite these measures, the share of healthcare in GDP is still less than the recommended minimum, while the budget overspending is increasing every year. In addition, the prices for medical services and medicines increased in step with the spread of the pandemic. Notably, referrals to a doctor as well as the sector’s revenues declined in line with rising prices and the pandemic.
Periodic reviews of the healthcare sector will allow us to identify current challenges and help increase access to information about state budget expenditures as well as ongoing changes in the sector.
- The turnover of Georgia’s retail pharmaceutical and healthcare sector reached GEL 3.1 bln in 2020 and is expected to exceed GEL 3.4 bln in 2021. Theturnover of the pharmaceutical sector has increased by 16% on average over the last five years and reaches 65% share of the market (GEL 2.2 bln). The turnover of hospitals and clinics has increased moderately (+7%) over the last five years and is expected to reach GEL 1.2 bln as of 2021.
- The COVID-19 pandemic has drastically reduced hospital referrals for other diseases.The total number of referrals decreased by -42% in 2020. The main reason for this is the caution of the population due tothe pandemic. Therefore, revenues of the hospitals decreased (-7% YoY) and amounted to GEL 1,078 mln in 2020. Meanwhile, total revenue had been increasing 24% on average during 2016-2019.
- Prices in the healthcare sector dramatically increased in the last five years. Prices of medicines increased by +64% in 2021, compared to 2016. Outpatient services became +35% and health insurance +31% more expensive in the same period. In-patient services are characterized by relatively less inflation, although their prices increased by +11%.
- The average monthly expenditure of households in the retail pharmaceutical market and healthcare sector amounted to GEL 161 and GEL 96 in 2021, respectively. The monthly expenditure of a household in the retail pharmacy market has increased by 16% on average over the last five years and amounted to GEL 161 in 2021. Household expenditures on healthcare services are also increasing (+7% average per year), reaching GEL 96.1 in 2021.
- Increased prices are partially due to the COVID-19 pandemic. In 11 months of 2021, prices of medicines rose by 14.6% on average, and inflation in outpatient services amounts to 8.7% as of 11 months of 2021.
- The real wage in the healthcare and social services sector has not increased since 2016. Nominal wages were growing by 4.7%, on average, during 2016-2021 and amounted to GEL 1,108 in 2020. However, the purchasing power of the wages did not change due to high inflation, as compared to 2015.
- The average monthly salary of employees in the private health sector is higher. The average monthly salary of employees in I&II category hospitals was GEL 1,423 in 2020. The average salary of people employed in the public health sector is -24% lower compared to that figure.
- The medical profession is popular in Georgia, and the country occupies a leading position in the total number of physicians and nurses. Georgia holds one of the leading positions in the number of medical staff, 12.8 physicians and nurses per 1,000 persons, which is higher than the average of other countries (11.2). Despite the solid amount of medical staff, there are 0.9 nurses per doctor, which is much less when compared to other countries.
- The government spending on healthcare is less than the World Health Organization’s (WHO) recommended minimum (5%) of GDP. In 2020, spending on healthcare accounted for 3.6% of GDP, which is +1.1 p.p. more than in 2019.
- Referrals to a physician have doubled with the launch of the universal healthcare program. In 2020, one person was referred to an outpatient and polyclinic physician on average 3.7 times, while the figure was 1.9 on average until 2013. Despite the increase in referrals, the average referral to a physiciannumber in Georgia is low compared to the other countries’ average rate (8.3).
- UHC overspending is mainly balanced with reduced spending on other programs. Overspending on UHC is higher than 10% on average in the last five years.
- The pandemic has also reduced referrals to universal healthcare programs. Total referrals were reduced across the country by 32,301 in 2021 compared to last year. Notably, emergency outpatient referrals decreased by 16%, along with planned outpatient referrals, in 2021. In-patient emergencies decreased by -33% compared to 2019.
- The government spent more than GEL 600 mln on managing the pandemic in 2021. The annual budget of the Ministry of Health in 2016-2020 increased by 17% on average, which is largely due to programs for managing Covid-19.
- Only 17% of the population uses private insurance in the country. The exclusion of the people with the highest income from the universal healthcare program in 2017 did not affect the usage of private insurance. The average annual growth of the beneficiaries was 3% during 2016-2020 and reached 600,000 beneficiaries in 2020.
- The pandemic has slowed the growth of international students in healthcare programs slightly, although the number of international students is at a record high at 12,692 students as of 2021. 69% of foreign students are enrolled in the master's program and 31% in the bachelor’s program in 2021.
It is important to increase healthcare sector expenditures and provide target spending for the universal health program.
Public spending on healthcare in Georgia is lower than the World Health Organization’s (WHO) recommended minimum (5%). In 2020, Georgia's healthcare spending was 3.6% of GDP and is not expected to change significantly in 2021. Nowadays, referrals to a physician are, on average, 3.7 per year in Georgia, which is lower than the average rate in other countries (8.3).
The population must be able to visit a physician and increase targeted funding for the low-income group of the population. This considers supporting the socially vulnerable population with medicines.
Higher flexibility for the government to register new drugs will increase market competition and reduce the prices of medicines.
Prices in the healthcare sector have risen sharply over the past five years. Prices of medicines increased by +64% in 2021 compared to 2016. To reduce prices, it is important to quickly register imported medicines, which will increase market competition and help reduce prices.
Encouraging private insurance and creating a unified database will reduce the costs of the universal healthcare program, and the budget will not be balanced by reducing spending on other programs.
Only 17% of the population uses private insurance in the country. More than one million people are employed, while private insurance has only 600,000 beneficiaries. It is also important that private insurance companies provide the state with the information about their beneficiaries in order to lead to the development of a unified database. Proper budget planning will reduce overspending and increase funding for other programs.
Under the conditions of low salaries of physicians, the stimulation of the medical sector by the state, which implies encouraging the development of training and medical tourism, will help increase salaries in the sector and retain qualified staff.
The number of international students in the healthcare sector is at a record high of 12,692 in 2021. The increasing number of international students is a new opportunity for the sector to increase the wages of existing medical staff while having scarce funding and provide new financing sources. It is also important for the government to promote the development of medical tourism.
This material has been financed by the Swedish International Development Cooperation Agency, Sida. Responsibility for the content rests entirely with the creator. Sida does not necessarily share the expressed views and interpretations.
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