Of all the major sectors in the Mongolian economy, only one has failed to stage a significant recovery since the end of socialism. Industry, agriculture, mining, manufacturing and education have managed to claw themselves back from the collapse after the end of Soviet subsidies, and some are now in better shape than they were previously during the 1990s. Health care has not. While it is much improved from when it bottomed out during the troublesome days of the mid-1990s, largely as a result of work undertaken by a number of donors and a few local doctors, small investments made by international medical groups and intervention for a time by the international community, it is nowhere near where it should be. It is underfunded, lacking in qualified doctors and almost devoid of preventative care.

KEY ISSUES: Reforming and restructuring the sector is of vital importance. Like several other countries, Mongolia must find ways to ensure adequate health of its poor, of which it has many, and of its most vulnerable, such as its self-employed herders. The country is confronted with the traditional challenges of health care delivery. It is also up against some additional challenges that make the right policies and initiatives that much more important. Mongolia is coming into great mineral wealth and has to spend it wisely to guarantee a prosperous future beyond the end of the mining sector surge.

Health, like education, is an area in which investment now can pay off over generations in terms of productivity, longevity and quality of life. At the same time, there are health dangers that come from vast and sudden mineral wealth, an unappreciated component of the Dutch disease. Obesity and habits such as smoking and excessive drinking may accompany the mining boom, and Mongolia has to make sure it has medical facilities available to address such problems, particularly in terms of preventative medicine. As such, these are testing times for the country according to Ts. Bolormaa, the president of the Mongolian Public Health Professionals’ Association and hospital project director at MCS Holding. “Resource-rich countries end up in not such a good situation.”

RELATIVELY EFFECTIVE: During the socialist era, a relatively effective health care system was established under guidance and with the financial support of the Soviet Union. The country’s first hospital, National Central Hospital, located in Ulaanbaatar, was opened with Russian help in 1925, just four years after Mongolia became the second Communist country.

During the next 60 years, a centralised and authoritarian health care system was built up that not only established a large network of major hospitals, but also a network of clinics in the countryside that could provide basic services. Medical care was free at the point of delivery and guaranteed to all.

The so-called Semasko model was in the end flawed.

It was highly hospital-dependent and curative, dealing with disease as it came along, and focused more on effective treatment and hitting obvious benchmarks of medical progress – such as vaccinations given and infant mortality – rather than on achieving a more balanced approach to patient care. Most of all, it was extremely expensive. Health care successes, like many achievements of the socialist era, were accomplished by throwing resources at the problem rather than understanding the root cause of the problem and deploying resources effectively.

Mongolia was especially investment-intensive in terms of health care, as providing even the most basic care to the least densely populated nation required an expensive network of facilities and services.

START OVER: When Soviet assistance was withdrawn, the system collapsed. The first decade after the peaceful revolution, the emphasis was on cutting budgets, with the government short of funds and forced into reducing expenditure. Into the vacuum came a flood of international assistance, both in terms of advice and cash. The loss of Soviet money was somewhat replaced with support from the donor community.

According to the World Health Organisation’s (WHO) Health Systems in Transition report of 2007, between 1991 and 2003, the international community provided some $213.73m of support to the Mongolian health sector, of which $71.6m was in the form of grants and $142.14m was in the shape of loans. Japan was the largest contributor, and the UN was number two. Grants peaked in 1998 at $10.52m. Nevertheless, the health care system was in shambles after the withdrawal of Soviet assistance.

“The situation was very serious,” said Paul Choi, general director of Yonsei Friendship Hospital, a Korean-invested hospital founded in Ulaanbaatar in 1994. “There were hospitals, but it was like there was nothing. For example, no incubators, just baskets; not enough antibiotics, just penicillin; not enough diagnostic tools, just one CT scan, and it was often broken. For two and a half years, there was no CT scan available in the country,” Choi told OBG.

BENCHMARKS: According to the figures from the World Bank, in 1981, the country had 9.81 physicians per thousand people (up from 1.37 in 1965). That fell to 2.54 in 1990 and only rose to 2.76 in 2010. Hospital beds per 1000 peaked at 11.486 in 1991, fell to 7.5 in 2002 and continued to drift down. By 2010 the number stood at 5.8.

Health care spending as a percentage of GDP was an estimated 6% in 1989. A decade later, it was 3.3%. The country, which had lost one-third of its economy when Soviet assistance vanished, was rapidly disinvesting in social services as spending went from 50.2% of GDP in 1989 to 26.9% a decade later.

IMPROVED PERFORMANCE: Surprisingly, the country has performed well in terms of certain benchmark health care metrics. Despite the gutting of the economy, the population has been getting healthier over time. Infant mortality did drop precipitously under the Soviets, from about 108 deaths per 1000 live births in 1977 to 72.5 in 1991. But the trend continued during and after the uncertainty of the 1990s, hitting 25.5 in 2011 (that compares with an OECD average of 6.5 and a world average of 36.9, respectively).

It is a similar story with life expectancy at birth, with the number at 49.6 in 1961, then rising to 60.5 in 1990 and continuing to climb apace to 68.7 in 2012. Mongolia overtook Russia in terms of life expectancy at birth in 2004 (though Russia came back later in the decade, and the two were the same in 2012).

Much of the success is a function of international aid coming in and replacing critical parts of what fell apart after the end of socialism. It is also a result of general trends internationally. Vaccines, new medicines and advances in care have led to a fall in infant mortality and longer lifespans in even the poorest of countries – world average life expectancy has risen from 65.4 in 1990 to almost 70 in 2012.

While Mongolia’s economy has been growing rapidly, which has positively affected medicine, this has also skewed some of the statistics and obscured much of the story. Health care spending has been stuck at about 5% of GDP (and at times has dropped lower) since 1995, but the economy has been growing, so actual public spending has risen with it. Health care spending per person in current dollars rose from $20 per person in 1995 to $120 per person in 2010.

MORE INFORMATION: Liberation from socialism has aided matters as well. While the loss of Soviet subsidies and assistance were devastating at first, reform has brought certain counterbalancing benefits.

The Mongolian people now have greater freedom and are exposed to more information, including health-related information from outside of the country. They can engage in discourse and consult with their health care providers. The centralised system was very good at delivering what it was told to deliver, but it lacked the feedback mechanisms and the benefits of market forces. It is also important to note that the socialist system was very asset-intensive; it built hospitals and got personnel into the field. Modern Western medicine is more focused on results and returns, and tries to do more with less, so the drop in the number of hospital beds may be more an indication of innovation and reform than a sign of lack of investment. Indeed, at five beds per 1000, Mongolia sits within OECD averages.

The country does nevertheless suffer a number of legacy issues that contribute to the health care challenges. At the time of writing, it had the highest rate of liver cancer in the world, six times the world average and twice as high as the number two and three nations (Mozambique and Thailand, respectively). More than 10% of all deaths in the country are in fact the result of this disease. The prevalence of hepatitis B and C is largely to blame. According to a recent WHO report, 77% of Mongolians have been exposed to hepatitis B and 10-22% of the general population suffer chronic hepatitis B infections. While hepatitis is common in Asia, the rates of infection are acute in Mongolia, and research has not yet been able to fully explain the reasons why.

DRINKING PROBLEMS: Alcohol plays a role in the high rates of liver cancer. While survey data suggest total overall consumption is relatively low in the country – between 3 and 9 litres per year per person, far less than Russia’s 15 – critics question the official statistics. Anti-alcohol advocates say that there is probably quite a bit of underreporting, and argue that it is not the overall number that is central, but the rates within certain segments of the population, and ultimately the way that alcohol is consumed.

Sean Armstrong, a former coordinator for Médecins du Monde in Mongolia, a non-governmental humanitarian aid group, has asserted that the top quintile of the population consumes 86% of the alcohol in the country, with a high percentage of the population abstaining from drinking, and that 70% of what is consumed is vodka (compared with 50% in Russia), and that 18% of men binge drink every week. The WHO has estimated in the past (2006) that 22% of men are alcohol-dependent. In addition to liver cancers, alcohol abuse has been linked with cardiovascular diseases, crime, accidents and domestic violence.

Many theories abound about Mongolia’s alcohol problem. It is said to be the result of the Russian influence or because vodka was used by occupiers (Russia and China) to keep the people compliant. Others say that the government has historically made too much money on alcohol and has promoted its consumption. Economic difficulties, particularly those experienced during the collapse of the 1990s, are also blamed. On the other hand, prosperity is sometimes seen as the cause. “Economic growth means more alcohol,” Choi told OBG.

Other legacy health issues in Mongolia include pollution and a diet high in fats and low in fresh fruit and vegetables. In a study published in January 2010, it was found that Ulaanbaatar has concentrations of PM2.5 (particles less than 2.5 micrometres in size) on average seven times WHO standards, and were 14 times higher in the winter when more coal is burned. In parts of the city, the concentrations are even higher. The study said that one in 10 deaths in the capital can be attributed to high levels of pollution. Toxic chemicals, such as arsenic, are often found near mining facilities and research indicates that residents of these areas have been affected.

CARE GAPS: A large number of reforms have been undertaken. While the 1992 Constitution does not guarantee free health care, as was the case in the socialist era, it instead makes health care a right. The Mongolian Citizens Health Insurance Law was passed in 1993, and in 1994 social health insurance became effective. In practice, the programme has not been very effective. Many people were not qualified for national health insurance or did not get it due to bureaucratic delays. The Health Act of 1998 required hospitals to treat a number of diseases, including cancer and tuberculosis, free of charge. Health insurance was made compulsory in 2003 so the system as a whole would not be weakened by adverse selection. Further reforms in 2006 called for essential services to be funded by the state budget, with the Health Insurance Fund paying for other services.

The system still has many gaps today. People with maladies that should be treated free of charge by the state find themselves burdened with fees and out-of-pocket expenses. Hospitals, some with large socialist-era physical plants and inefficient staff, consume a large portion of the health care budget. Provinces tend to be under served while Ulaanbaatar has too many hospitals and too many doctors. Corruption is still a problem – fees are often adjusted upwards for people who can afford it. Indeed, many of the issues that plagued the socialist system remain. The emphasis is on the curative rather than preventative; most cancers, for example, are caught at a very late stage.

“Basically, the hospital system is not in good shape,” said Bolormaa. “We did not have much investment in the sector. We have a Soviet model of hospital infrastructure – big hospitals with lots of fixed expenses to maintain the big buildings. And they do not meet standards for patient safety.”

DOCTOR TRAINING: The quality of the doctors is also low, according to some professionals. Because the Ministry of Health does not have the budget for training, people enter the medical professional without adequate clinical experience. The country also lacks quality standards, up-to-date clinical protocols and proper monitoring, according to a 2009 report by the Ministry of Health. The report also noted a deterioration in the quality of the services provided, and highlighted that accreditation was more focused on structure than on quality of care. “We realise it is difficult to train residents,” said Choi. “The Ministry of Education and Science does not have the budget. There are too many unqualified doctors.”

The state of the health care system drives many Mongolians to seek care abroad. They travel mainly to China and Korea. Some also go to Russia, and not just the wealthy. Mongolians in border areas will cross over to the neighbouring country to seek medical treatment. Foreigners seriously injured in the country are invariably evacuated for care elsewhere.

GRADUAL IMPROVEMENTS: For a number of reasons, the health care system will naturally evolve and quality will improve. A higher standard of living is likely to result in people demanding better care in their own country, and they will be willing and better able to afford it. An increasing number of foreign employees stationed in Mongolia for mining projects will expand the pool of potential customers who can pay for more expensive services. A local health insurance market could even develop.

Simple administrative reform, such as more advanced billing systems and procedures, will bring prices closer to costs – in some cases local hospitals charge too little for services that require expensive equipment, thereby reducing the incentive to invest. The presence of more foreign institutions, which are allowed to set up and operate under Mongolian law, will raise the bar and at the same time positively influence the market. International practices, procedures, culture and philosophies, particularly with regard to patient care, will transfer locally as a greater number of global medical groups are established. “We introduced many things,” Choi said of the Yonsei hospitals. “Now, many hospitals have developed.”

THE NEED FOR INVESTMENT: Most of all, it will be money that will enable the country’s medical system to develop. While the details are important, such as education, administration and culture, Mongolia’s health care system has been mostly held back by the lack of funds. The $120 per capita being spent in 2010 was significantly less than the $220 being spent in China, $179 in Thailand and the East Asia developing country average of $182.

Once mining begins to generate higher revenues for the country, these additional funds can be channelled to health care. After a point, the provision of medical services will become easier and cheaper. One professional gives the example of General Electric (GE), a major provider of high-tech medical equipment. Presently, the closest technician is in China; it does not make sense to station an engineer in Mongolia. However, once more hospitals are in possession of advanced equipment, GE may choose to have a service technician in Ulaanbaatar full-time, and that could significantly change the economics of investing in expensive medical devices.

OUTLOOK: Despite the sector’s weaknesses, it has a number of strengths that could help it over the long term. Mongolia has an extensive history of traditional medicine, and while much of the knowledge was eradicated during the socialist era, it is enjoying a revival. It could not only help bring a balance back to the medical field in terms of the relationship between doctor and patient, and help Mongolians deal with some of their ailments, it could also end up providing some growth for the sector.

Furthermore, while the training of medical professionals may not be up to current international standards, Mongolia does have many well-qualified and experienced doctors, and this will certainly be important going forward. “You are sometimes pleasantly surprised,” Shirley Palmer, the manager of clinics and operations at SOS Medica Mongolia, told OBG. “They do a great job, they have the technical knowledge.”