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Question: Tambov, where we are meeting today, which has just been the venue of a State Council Presidium meeting devoted to medical insurance. How do you assess its results? To be honest, although many medical institutions have already adopted the insurance scheme, hospitals have not been very welcoming towards their patients, especially pensioners. In response to all their complaints they say: “We are short of money, you have to pay for your treatment”. Where do we go from here?

Vladimir Putin: We have met with the governors who are members of the Presidium of the State Council to discuss that particular issue. It is a very pressing problem that affects millions of people. The reason is clear: the healthcare system is the least reformed system. Although, as we have mentioned today, some positive changes are taking place, there are also many outstanding problems.

We must provide large sections of the population, especially the low-income strata, with free but high-quality service. This was the purpose for which the system of free medical insurance was created ten years ago. I agree with you that it is not effective enough. This is mainly due to the lack of funds in the system. Today we had a working meeting in the full sense of that word. We discussed the decisions on medical care of pensioners proposed by the Government. But the conversation covered the whole healthcare system and the prospects of reforming it.

At present we are ahead of the European Union in terms of the number of hospital beds. But we are far behind in terms of the quality of medical care. We have discussed what needs to be done to change the situation. First of all, the system must be able to pay its way. Of course, the government should give thought above all to people in the low-income bracket, and pensioners are in the front ranks of such people. They had given the best years of their lives to serving this country and they have no one to look to for help except the state. They are the most vulnerable social group.

So the first step in that respect will be to improve the medical care of pensioners. How do we go about it? It has been decided that the Pension Fund would disburse 1.5 billion roubles this year to improve the medical care of pensioners. But that is not the main thing. The main thing is that personal registration is better organized in the Pension Fund today than in any other organization. It will enable us to build up a system of personal registration of the medical services rendered. The idea is that in the future we could abandon budget financing of hospital beds or financing according to the size of the medical staff, but finance medical institutions on the basis of the quality and amount of medical services rendered.

To do that we will, on a trial basis, work together with the Pension Fund to improve medical services rendered to pensioners. The money will be transferred to this or that medical institution against information on the quantity and quality of services rendered to pensioners. The pilot scheme will be introduced in 10 regions of the Russian Federation, including the Black Soil area. Subsequently these principles will be introduced in the entire medical insurance, which will be jointly financed by the federal and regional budgets.

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Question: A particular concern is not only the wages, but also the growing prices, in particular energy prices. I work in Belgorod, but I was born in the Voronezh Region. Unfortunately, the capital of the Central Black Soil Region is providing a bad example. You can judge for yourself. In the Voronezh Region the cost of one kilowatt per hour of electricity is the highest in the Central Black Soil Region. But that is not all. The regional energy commission raised the tariffs again on March 1. Let me cite the figures. Electricity tariffs have grown by 13%. But the other figure is even more distressing: Gas rates have grown by 29%, almost a third. And this despite the fact that the Russian Government has put a cap of 20% on tariffs. So we see that regional commissions do not obey the Government. Tomorrow they may jack up prices in other regions, including Belgorod. Can the federal center do something to protect us from this plague, and restore order in the pricing of gas and electricity?

Vladimir Putin: It is true that the Regional Energy Commission does not directly report to the Federal Energy Commission. However, there is some connection, as I will tell you later.

As for rising tariffs, that is indeed an acute problem. I agree with the people who are angry about unjustified or untimely increases of these tariffs. They failed to raise tariffs in time, and then they had to raise them by 40, 60, or even 70%. The increases should have been made gradually over regular intervals to keep pace with the growing incomes of the population. The Government has decided that the price of electricity should not go up by more than 14% a year and of gas by more than 20%. As far as I know, the Voronezh Region is within the Government’s recommendations as regards electricity.

As for gas, we need to look into it. At the same time, you are probably aware that Gazprom sells gas inside the country below cost. It costs about 770 roubles to produce 1000 cubic meters, and Gazprom sells it at an average 550 roubles. So, if we want to develop the gas supply network, if we want to gasify our towns and villages, and people to be able to purchase gas at fairly low prices, there must be some shift towards export. Gazprom survives due to exports. I have said that gas inside the country is sold below cost, at 550 roubles per 1000 square meters, compared with $120 for export. As you see, there is a huge gap. It enables Gazprom to stay afloat. If we want to expand gasification we must, of course, adjust the prices. But without any doubt it should take place gradually, smoothly in proportion to the growing incomes. There is no other way.

But can the Government establish some sort of order in this matter? It is hard to say, under the current legislation. Not everyone knows that consumers have the right to appeal to the Federal Energy Commission (FEC). No such complaints have been filed. People stage demonstrations, but they don’t know their rights. Evidently, the Government should have some leverage, the possibility to influence the Regional Energy Commissions if they make wrong decisions.

The United Russia party has come up with such an initiative, and I think in Stavropol they managed to bring tariffs down to a reasonable level. That is another issue we may consider.

Question: Pensions is still an acute issue. What will happen next? What is the difference between government pensions and contributory pensions? To put it simply, is it possible that pension money will be used to make illegal profits?

Vladimir Putin: The law tells you what will happen to pensions. Pensions will rise. Most recently, as you know, the insured part has been raised by 10.2% and the total pensions have been raised by 12.2%. Under the law the next adjustment for inflation, by about 6–7%, is to take place on August 1. This will apply to the whole pension, rather than its base part. I do not rule out that additional decisions will be made. But the August one is sure to take place.

So, pensions will grow by an average 265 roubles during the current year. As for the contributory system and concerns about possible abuses, people have a lot of fears about it, and they are not ungrounded. I am thinking of the negative experience of various financial pyramids and all sorts of machinations in the financial sphere. We have a lot of people who have suffered from fraud. Such fears are justified. As for the funded part of the pensions, the law and its application are quite satisfactory. This guarantees that people’s money will not be lost during the formation of the funded part. The Government guarantees that. It is another question that every concrete individual can deposit the funded part either into government or into private funds. Private funds will offer better terms. They are of course more risky, but the risk does not include losing the savings. The risk is in actually getting the effect from investing in a private insurance fund that the fund promises. The choice of every concrete citizen will determine whether or not he or she will get the promised interest. But, I repeat, only the profits are at risk, but not the actual savings.

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Question: People living in Central Russia have faced the rise of drug-related crime. Perhaps amendments should be introduced in the Criminal Code to introduce tougher punishments for drug dealers?

Vladimir Putin: Whenever we think about crime control, the first thing that comes to mind is, of course, to toughen punishment. But that is effective only up to a point. There comes a point beyond which harsher punishment does not produce the results we need. But in this area, I agree, we may consider tougher punishment. A draft law has been prepared which increases prison sentences for drug dealers from 15 to 20 years. At the same time, the victims of these drug dealers, that is, the drug addicts, need treatment, and they will be the targets of other measures.

You may know that a decision has been made to create a separate federal body to combat illegal spread of drugs and psychotropic substances. We are planning to concentrate financial and administrative resources there in order to make the government’s activities in this area more effective. We hope we will succeed.

Question: So far we have discussed social problems, but we should not forget about the war in Iraq, which is into its third week. We have closely followed the Russian position and especially your speech on the first day of the war. The Russian position was tough and it has since been vindicated. You only have to look at the harrowing pictures broadcast in the past two days showing civilians killed in air raids. It looks as if America is suffering not only a moral and political, but also a military defeat. What next?

Vladimir Putin: You have touched upon a very important problem, which is at the focus of world attention and undoubtedly affects the majority of countries, including our country. Russia has always consistently supported a peaceful solution of the problem of Iraq. I agree with you that the events of recent days and recent weeks, especially human deaths, confirm that Russia has taken the right stand.

At the same time I must say that for political and economic reasons Russia is not interested in the United States being defeated. We want the problem to be transferred to the UN. This is what we seek. The sooner that happens the better for all the parties involved in the conflict. I have spoken about it repeatedly and I haven’t said anything new just now. But events are indeed developing dramatically. The Russian Foreign Ministry will exert further efforts to bring the solution of the issue back to the UN Security Council.

Question: Forgive me my curiosity, but I can’t help asking you a personal question. At the end of the first year of your presidency you were asked how you felt and you replied that you had become a kinder man. It was recently three years since you became President. How do you feel today?

Vladimir Putin: I am accumulating useful information. I arrange it properly. I am more certain about the priorities of state development and the economic priorities. I think not only I, but all of us are becoming more pragmatic in choosing our goals and working towards achieving them. But, to paraphrase a famous adage, the more you do, the more you realize that you have still a lot to do. Overall, I cannot say that I am fully satisfied. But the primary tasks that I set for myself are being achieved. That gives me a sense of inner stability. But I repeat, there is a feeling that a great deal still needs to be done.