Market and State Failures in The Healthcare Model under The COVID-19 Pandemic

The health care market has special features associated with the production of both private and public goods, it has a special structure of competition and transactions. The business models of medical organizations are based on a two-level value proposition – organizations in the analyzed field work for their clients (the population of a territory) and simultaneously for the state, which plays a role of a customer of the public good. This leads to the mixture of the healthcare and insurance markets and, as a result, the development of specific monetization scheme in the field of medical services. The article focuses on market and institutional coordination mechanisms in the Russian healthcare market transformation in the context of the 2020-2022 pandemic. The research methodology is based on neo-institutional economics, theories of industrial markets and the public sector theory. The paper assesses the market failures of the healthcare system and institutional instruments that are designed to neutralize these failures. We also describe the general institutional context of the health care in Russia. The methods of the empirical part of the study are a survey and a narrative analysis. Our results are based on 584 interviews. The respondents assessed changes in the conditions for the provision of medical services in 2020-2022. It was found that the effectiveness of institutional coordination mechanisms in the context of the COVID-19 pandemic were reduced, this resulted in new failures of the state. We prove that a new model in the Russian Federation healthcare market has been created as a result of the pandemic. This model is characterized by a simultaneous strengthening of the role of the state in some market segments and private players in other segments, as well as a decrease in the efficiency of production of both private and public goods.