Like the saying “The crow froze its legs trying to imitate the goose”, we too have blindly followed foreigners under the banner of introducing “new systems” and in doing so, have pushed two of our country’s most vital sectors toward collapse. About three to four years ago, so-called performance-based financing—glossed over with appealing names and in essence little more than a mechanism for moneylending—was introduced into the healthcare and education systems. Over the years since, doctors, patients, teachers, and students alike have borne the brunt of its damaging consequences.
Today, the Health Insurance Fund has reached the point where it can no longer cover service reimbursements, falling into massive debt with its contracted hospitals, and by last autumn it had all but declared itself bankrupt. In the first half of this year, the situation worsened: patients have begun to face discrimination based on their medical history, as the fund deliberately pursues policies aimed at limiting the scope of care and services it will reimburse. This is the direct outcome of the General Department of Health Insurance, which oversees the fund’s finances, recklessly “scattering” state-allocated resources in recent years without proper studies, oversight, or accountability.
How it all began
The performance-based financing model was hastily introduced without proper feasibility studies or cost–benefit analysis. Bit by bit, it drained the Health Insurance Fund until it was left unable to meet its obligations. In 2021 and 2022, Mongolia officially shifted its healthcare financing model to a so-called “single purchaser” system. From then on, the department became the sole strategic purchaser of all medical services in the country.
To put it simply: before the reform, the financing of medical services was drawn from multiple sources—insurance reimbursements, state budget allocations, pharmaceutical subsidies, high-cost diagnostic and treatment programs, and, in some cases, charitable donations and international aid. However, under the revised package of laws adopted in those years, the financing of every type of healthcare service delivered to citizens was centralized under the General Department of Health Insurance and distributed to contracted hospitals and providers strictly based on performance. This arrangement is what has been termed the “single purchaser system”.
At the time, when the performance-based model was first introduced after years of discussions about financing reform, many doctors, staff members, and even researchers applauded the change. But today, they no longer do. Why? Because if this reform had been implemented with care, oversight, and sound management, the Health Insurance Fund would not now be on the verge of collapse. Instead, the entire population would have access to quality, timely, and cost-free medical services at every level—from family clinics to tertiary hospitals. Citizens would not be driven into financial hardship or poverty because of healthcare costs. Families would not be forced into desperation, begging for donations or selling their possessions to cover life-saving treatments.
Taxpayers left to carry hospitals’ debts
Since the transition to performance-based financing, the revenues and expenditures of the Health Insurance Fund have been out of balance. The financing authority has been unable to pay hospitals for the services it “purchased”, bringing us to the present crisis.
The National Audit Office, in its review of the fund’s 2023 consolidated financial statements and budget execution, uncovered serious violations. For example, while the fund’s revenue stood at 1.5 trillion MNT in 2022, its expenditures exceeded 1.8 trillion MNT. The same overspending occurred in 2023. Performance audits further revealed that by 2022–2023, the fund’s debt to hospitals had climbed to 218.3 billion MNT. In total, the audit identified financial discrepancies amounting to 250.4 billion MNT.
This debt has been festering and snowballing for the past three years, reaching 316.8 billion MNT in just the first half of this year. To settle these liabilities, the Health Insurance Fund’s budget for 2025 was set at a record high of 2.2 trillion MNT—the largest in its history. With this allocation, hospitals’ arrears were cleared at the end of last month. In other words, ordinary policyholders and taxpayers have been made to cover the debt in addition to paying their own premiums.
In principle, it should not have been the public who was penalized. Responsibility should have fallen on the General Department of Health Insurance, which mismanaged the fund so recklessly. By the standards of accountability, the leadership should already have resigned. Auditors revealed that the department had violated multiple provisions of the Law on Budget, the Law on Accounting, and the Law on Health Insurance. Yet instead of accepting responsibility, the department is now preoccupied with how to secure even more budget increases for the coming year.
Since hospitals—both state and private—are reimbursed based on performance, the focus has shifted from patients’ recovery to their registration numbers. Increasingly, unscrupulous hospitals are less interested in quality care than in “selling” claimed services to the Health Insurance Fund for profit. Worse still, collusion between hospital managers and officials with budget authority has led to widespread embezzlement and disregard for regulations. Some hospitals, emboldened by this system, have gone so far as to treat sick patients as mere tools for revenue, submitting inflated claims many times greater than the actual contract value—10 or even 20 times more is not uncommon.
Such perverse incentives have bled the fund dry, leaving policyholders as the ultimate losers—forced to pay out-of-pocket for services that should be covered. Meanwhile, the sector’s costs continue to skyrocket. Next year alone, healthcare expenditures are projected to rise 5.5 times. But the fund is not an inexhaustible chest of gold. Unlimited demand cannot be met with limited resources indefinitely. Researchers have repeatedly warned: unless the financing system is fundamentally reviewed, no matter how many times the budget is multiplied—even tenfold—the fund will remain incapable of sustaining reimbursements.
Shadow cast over education sector
When Mongolia introduced performance evaluation into the education sector in 2021, the intention sounded promising. Schools and teachers would be assessed on the quality of instruction, the effectiveness of institutional activities, and the academic achievements of their students. The stated aim was to determine teachers’ bonuses fairly, based on results rather than routine workload.
In theory, this aligns with global best practices—where teachers are rewarded not merely for hours logged but for demonstrable outcomes. Yet, in Mongolia, a noble idea once again faltered in execution. Overly complicated regulations, ill-designed mechanisms, and impractical methods have turned what was meant to inspire teachers into a system that frustrates, exhausts, and humiliates them.
The dysfunction is clear. The results of the 2024–2025 performance evaluation were announced only days ago, granting teachers in schools and kindergartens the right to claim bonuses for the previous academic year. To secure what often amounts to a token sum, entire institutions are subjected to “audits” that drag in students, staff, and even parents. Teachers lament the absurdity of being evaluated by parents and pupils—an arrangement that invites bias, silences honest criticism, and turns teaching into a popularity contest. In some cases, teachers have been forced into the indignity of pleading with parents to avoid deductions from their bonus.
Only half of teachers qualify for extra incentives
According to the Education Evaluation Center, 29,617 schoolteachers and 7,215 kindergarten teachers were evaluated in 2024–2025. Yet fewer than half—just 49 to 55 percent—qualified for bonuses. For many, this was less a reward than a cruel illusion of hope. Instead of recognizing teachers’ commitment, the system burdens them with endless paperwork, disrupts teaching with additional inspections, and places them under relentless pressure to “perform”.
The consequences run deeper than demoralization. Teachers who received poor ratings have been left disheartened, with some abandoning the profession altogether. A nationwide survey last year on Mongolia’s growing teacher shortage revealed an uncomfortable truth: while salaries remain low, it is the crushing workload, excessive bureaucracy, and the stress of performance evaluation that drive many to quit.
Far from being a tool for support and encouragement, performance evaluation has become a form of institutionalized punishment. Teachers at every level—especially in schools and kindergartens—continue to earn wages far below a livable standard. Thousands have already left the profession, leaving classrooms understaffed and children’s education at risk. Yet rather than confront the root problem with meaningful salary reforms, policymakers have clung to a superficial solution: dangling small, selective bonuses while refusing to raise salaries across the board.
This approach does not motivate—it divides. It rewards a fraction while alienating the rest. Worse, it disguises systemic neglect as reform. The result is a sector weakened not by teachers’ inability, but by a state unwilling to properly value their work.
Educational institutions and teachers’ organizations are increasingly outspoken: the current performance evaluation system must be scrapped. Instead, Mongolia needs across-the-board salary increases and a new framework for teacher appraisal—one that is rooted in international standards, respects the complexity of teaching, and provides fair recognition without bureaucratic harassment.
Until then, the so-called “performance evaluation” will remain less a measure of quality than a shadow over the profession—pushing teachers away from classrooms and leaving Mongolia’s children to pay the price.
