CISS Health Systems and Insurance Report

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1 Conferencia Interamericana de Seguridad Social Inter-American Conference on Social Security March 2011 English Or. English CISS Health Systems and Insurance Report Health Reforms in the Americas For comments and suggestions please contact Gabriel Martínez at Nelly Aguilera at or María Quintana at 1

2 Abstract During the past years we have witnessed an important number of healthcare systems reforms in the continent, being more radical in Colombia, Dominican Republic, Mexico, Turks and Caicos Islands, United States and Uruguay. As part of its CISS Health System and Insurance Report (CISS 2008), the organization is issuing this document that describes in an ordered way the major reforms undertaken in the mentioned countries during the period In doing so, the document not only synthesizes the information available but also presents some lessons that can be useful for other countries. The analysis follows the theoretical background used in the main report (CISS 2008): the Emerging Paradigm (EP) developed by Chernichovsky (1995) and Chernichovsky (2002). The reason of our choice, among alternative conceptual frameworks, is that the EP can be viewed as a positive model that helps us understand how health systems actually work and also as a normative guide for policymaking (CISS 2008). The studied cases allow us to conclude that most countries, with the exception of Mexico and United States, are following in their reform many of the principles of the Emerging Paradigm. JEL Classification: I11, I18 2

3 I. Introduction Healthcare systems of the region have evolved dynamically in recent years. Almost every week we read in newspapers about efforts to achieve universal coverage, and to improve the organization, functioning and regulation. As part of its CISS (2008) Health System and Insurance Report, the organization is issuing this document that describes in an ordered way the major reforms undertaken in the countries of the Americas during the period In doing so, the document not only synthesizes the information available but also presents some lessons that can be useful for other countries. This document complements the main CISS Health System and Insurance Report, Analyzing Healthcare Systems of the Countries, focusing specially on countries where reforms took place. Indeed, for those not familiar with the financial rules and organizational design of the different healthcare systems we invite you to read that report in parallel to this one. An added value of the general report and of this update is that a consistent method is used to organize health system. Thus, this aims to be a constructive analysis and not simply a description of the reforms. Information in this report was gathered using public sources and documents provided by our members. We tried to incorporate as much information as possible. Nevertheless, availability of information is sometimes limited with regards to recent reforms. Thus, this is a work in advance and not a final statement on the treated cases. 1 The report is organized as follows. In the next section each of the recent experiences of the countries are studied. The analysis follows the theoretical background used in the main report: the Emerging Paradigm (EP) developed by Chernichovsky (1995) and Chernichovsky (2002). The reason of our choice, among alternative conceptual frameworks, is that the EP can be viewed as a positive model that helps us understand how health systems actually work and also as a normative guide for policymaking (CISS 2008). We use these two approaches along the report. The last section presents the conclusions. II Healthcare Reforms Six countries of the region have had health system reforms in the last five years: Colombia, Dominican Republic, Mexico, Turks and Caicos, United States, and Uruguay. Some of these countries reforms were radical, while in others there were changes on the already reformed systems. This is not to say that nothing is happening in the other countries; we know for example that in Peru there are important efforts to improve service. But this report documents those experiences where the rules governing entitlement and funding, pooling and allocation, organizational structure and stewardship were modified. 1 We thank Fernando Caamaño from SISARIL of Dominican Republic, and Juan Carlos Cortés from CODESS in Colombia for providing us information of their countries. 3

4 II.1 Colombia Since the reform in 1993, the Colombian healthcare system has been comprised by three regimes: i) the contribution-based regime for salaried workers, funded by workers contributions; ii) the subsidized regime which is funded by the salaried workers and the State; and, iii) the linked regime, which is not based on insurance principles and is supposed to disappear as the subsidized regime progresses. In 2007, Act 1,122 was approved; it modified several aspects of the system, especially those of governance. Moreover, in Colombia there have been an important number of cases adjudicated by the judiciary system that have influenced the design of the system. Entitlement and funding. The reform of 1993 was planned to be implemented gradually, reaching universal coverage by This target was not met, and in 2006 the coverage rate was 76% of the population. According to Guerrero (2008) the reasons for failure to reach universal coverage were structural informality in labor markets, fiscal restrictions, and the institutional and administrative hurdles. Act 1,122 set the new target equal to 100% coverage, in the subsidized regime, of the poorest population (those classified in levels 1, 2, and 3 of the SISBEN (the Colombian system to classify families by income level)) until Figure II.1.1 shows the number of affiliates in the last years. 30,000,000 Figure II.1.1 Number of Affiliates by Regime ( ) 25,000,000 20,000,000 15,000,000 10,000,000 Subsidized regime Contributive regime Special regimes Unaffiliated population 5,000, p Note: /p DANE projections. Source: Own elaboration. The Act also established that co-payments would be eliminated for the poorest population (those classified as stage 1 of SISBEN). and that the guaranteed package of benefits for the subsidized regime (POS-S) would increase. Indeed in the Acuerdo 08 dated December 29, 2009 published by the Comisión de Regulación en Salud (CRES), the 4

5 new packages of benefits in the contributive regime (POS) and the subsidized regime (POS-S) were updated. Thereafter the POS-S is closer to the POS and children 12 years old and younger are entitled to the POS even if their parents are affiliated to the subsidized regime (Sentencia 760). As part of the reform the contribution rate for the salaried workers increased from 12% to 12.5%. The new funds are going to be completely used to finance the subsidized regime. Although it was planned that the government would also contribute in a pari passu scheme, this was not possible, even though in 2007 the government budgeted roghly half of the value of the new funds and expected to increase this contribution annually in 1% in real terms. Finally, it was also established (Acts 344, 715, and 1,393) that more resources would be devoted to the subsidized regime, which will contribute to equalize the package of benefits in the contributive and subsidized regimes. Private funding, besides the one that goes directly to private service providers and indemnity insurance companies, continues to be used in conjunction to the mandatory regime through copayments. During the last years, the share of private funding in health has decreased, while the share of public spending has increased (see Figure II.1.2).Around 2010, approximately only 30% of health spending was private. Figure II.1.2 Healthcare Public and Private Expenditure 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 Subsidized regime Contributive regime Special regimes Unaffiliated population 5,000, p Source: Own elaboration based on information from WHO (2010). Pooling and allocation. As mentioned before, most of the new funds in the scheme are going to be allocated to the subsidized regime, and now the value of the POS and POS-S are converging, being equal for children under 12. Besides the changes in the 5

6 amount of resources, there have been only administrative changes in the way resources (the value of the POS or POS-S called Capitation Payment Unit, Unidad de Pago por Capitación, UPC) are allocated: to the municipalities first, and to the insurance companies (Empresas Aseguradora de Servicios de Salud, EPS) second. There has been a simplification in the contracts signed between the municipalities and EPS so resources can flow more rapidly. Organizational structure. The organizational structure does not change significantly as the EPS continue to manage health insurance for the contributory and subsidized regimes. The public agency Seguro Social is transformed into a new mixed EPS owned by the State and six cajas de compensación (family allowance funds). Stewardship. The Act passed in 2007 created the Regulatory Commission (Comisión de Regulación en Salud, CRES), which substituted the Consejo de Seguridad Social en Salud established in the reform of 1993 to regulate the system (including the contributive and the subsidized regimes). The CRES, which started functioning in 2009, is responsible of defining and updating the package of services, in defining the UPC paid to the EPS, and of regulating and proposing new regulations about key aspects of the system. On the other hand, the Superintendencia de Salud is the public entity in charge of inspection, surveillance, and control, i.e. defending users rights. II.2 Dominican Republic After the enactment of Act and Act in 2001 that drastically reformed the Dominican health system (see CISS 2008), authorities in the island have been working in the enactment of or modification to several secondary regulations 2 ; in the publication of administrative rules, and in the implementation of processes and systems needed in the new health system. Entitlement and funding. Affiliation to the new system has increased over the past years. Today, there are almost 4 million affiliates; approximately 1.5 million in the subsidized regime and 2.5 million in the contributive regime (see Figure II.2.1). This means that total coverage of the Seguro Familiar de Salud in both regimes subsidized and contributive passed from 22 to 39% between 2007 and June 2010 (CNSS). Coverage of salaried workers, those participating in the contributive regime, increased from 59 to 70% during the same period. Regulations issued in 2009 and included new interventions and a gradual increase in coverage of high-cost diseases and maximum level of complexity in the Basic Health Plan (Plan Básico de Salud). 2 The following Laws have been modified: 72-02, , , and Regulations and of SISRAIL. 6

7 Figure II.2.1 Number of affiliates by regime, end of year 2,500,000 2,000,000 1,500,000 Subsidized scheme 1,000,000 Contributive scheme 500, Source: CNSS. Pooling and allocation. In Dominican Republic the social security treasury (Tesorería de la Seguridad Social, TSS) is the agency in charge of affiliation, collection, and allocation of funds. Pooling and allocation in the new system has not change significantly, with a single exception, in 2009 a regulation that waived debts from 2001 to 2009 by employers to the Dominican Social Security System (SDSS) was enacted. Organizational structure. The decentralized feature of the new health system plus the increase in coverage implied a higher number of providers (Prestadoras de Servicios de Salud, PSS), from 1,487 in 2008 to 1,912 in June Regarding the number of agencies that perform the OMCC, as of June 2010 there were 2 public Administradoras de Riesgos de Salud (ARS) and 25 private or self-managed. There is also one work risk insurer that is also a health insurer, the Instituto Dominicano de Seguros Sociales. Stewardship. The reform of 2001 envisioned three basic regulatory bodies: the Health Ministry (MISPAS) as the steward of the health sector, the Consejo Nacional de Seguridad Social (CNSS) as the regulatory body in the new health system, and the Superintendencia de Salud y Riesgos Laborales (SISARIL), the entity in charge of operating authorizations, supervising, auditing, and sanctioning the ARS and work risk insurers. II.3 Mexico 7

8 As was explained in CISS (2008), the federal government introduced in 2004 a new health insurance program (Seguro Popular) financed by general revenues to the population that was not affiliated to any social security plan. Originally it was expected to be the keystone to reach universal coverage meaning that all residents would be affiliated to an insurance scheme by 2010, authorities believe universal coverage will be reached by However, the introduction of the Seguro Popular does not imply the Mexican healthcare system is closer to the principles of the EP, in contrast to the cases of Colombia and Dominican Republic. Entitlement and funding. At present, a universal package of services guaranteed for affiliates of all health plans does not exist; each scheme provides its own package with different values (see Figure III.3.1) and is financed by its own sources, with the exception of a per capita transfer that the federal government contributes to all systems in equal terms. Nevertheless, public funding and its structure have changed over the last years and more importantly since the introduction of the Seguro Popular: first, there are more public resources allocated to healthcare, even in per capita terms (Figure II.3.2); second, healthcare spending financed by general revenues has taken an increasing share of public funds 4 ; third, with the introduction of the Seguro Popular, states are obliged to contribute to the system in equal terms, which means the share of the funds coming from this source has also increased. Private funds for health services are still increasing and represent the largest share of healthcare spending in Mexico, even with the rise in public funds. Moreover, private funding is practically not articulated to public funds. The Seguro Popular charges fees to families belonging to deciles five and higher of the income distribution (prior to 2009 the threshold was the third decile), but there are no regulations to mix insurance plans from private sources or from social security. In practice though, and without an appropriate regulation, patients mix private funds to complement public funds. For example, patients of public or social security hospitals have to buy medicines on their own, or some families use private services for primary care and resort to public hospitals in case of diseases associated to catastrophic expenditures, such as cancer. Patients running short of insurance money move from private to public hospitals, and physicians are often the actual operators of this process because it is very common in particular for specialists to work for a public and a private hospital. 4 As was explained in CISS (2007), the increase in public funds coming from general revenues started in 1997 with the reform to the IMSS. 8

9 Figure II.3.1 Per capita health spending of major health insurance schemes in Mexico $1, $1, $ USD $ $ $ $- PEMEX IMSS ISSSTE SPSS IMSS Oportunidades Source: Own elaboration based on information from IMSS 2008, ISSSTE 2008, Seguro Popular 2008, and IMSS Figure II.3.2 Healthcare spending of major health insurance schemes in Mexico (billion pesos of 2008) $400 $350 $300 $250 $200 $150 Social Security healthcare spending Non Soc ial Sec urity healthcare spending $100 $50 $ Source: Own elaboration with information from SINAIS (2008). Pooling and allocation. Currently, a pooling mechanism across different schemes does not exist. The introduction of the Seguro Popular did not change this feature. Regarding the allocation of funds of the non-social security systems, with the introduction of the Seguro Popular, the allocation of federal money to different states is more equal when measured on a per capita basis. Nevertheless, there is room for improvement: an important fraction of federal funds are still allocated to states based on historical budgets and not related to health service needs (Aguilera and Barraza- 9

10 Llorèns 2010). In the social security schemes allocations are also based on historical budgets. Organizational structure. In Mexico, all institutions are vertically integrated from funding to provision, and all institutions function separately: people are not allowed to move from one scheme to another, much less to choose their health plan provider. Moreover, the function of organization and management of consumption is not well developed, either in the social security or in the publicly financed institutions. This means, among other things, that institutions do not hire care effciently from different providers, despite the fact that the Seguro Popular is allowed to hire care from other public or private institutions. Indeed, we can say the introduction of the Seguro Popular worsened the previous situation, since another vertical silo was incorporated to the system; locking the new financial flows to specific hospitals. As implied by the financing scheme, agencies are not allowed to offer different plans to different affiliates. The National Health Program (Secretaría de salud 2007) and other official documents established as goals the separation of functions (finance, organization of management and consumption and service provision), convergence (meaning that there would be some coordination in the supply of services), and a market of services. Unfortunately, advances in these strategies are near null (Aguilera 2010). In the private system, the reform of 1997 that established the figure of OMCC institutions has not had a major impact: the private insurance sector is very small (2% to 3% of all healthcare spending in the country) and most of it is composed by traditional indemnity insurers. As can be concluded, public providers do not compete among themselves since they do not sell services to OMCC institutions. Free competition among providers takes place only in the private sector. In conclusion, the system is highly fragmented and proposals to advance towards a National System have not progressed. Stewardship. By law, the stewardship function of the system lies in the Federal Ministry of Health and similar bodies at the state level, but this refers only to sanitary issues. In reality the Federal Ministry of Health has OMCC and provision responsibilities, whereas at the state level the local Ministries of Health are in charge of provision. Social security is regulated by the Federal government mainly through the budget, but operates with independence from the Ministry of Health. There is no agency in charge or regulating the system under the perspective of the EP. II.4 Turks and Caicos Island In 2009 the National Health Insurance Plan (NHIP) of Turks and Caicos Islands (TCI) was introduced (see the official webpage for all information). The scheme incorporates some elements of the EP, as will be discussed in the conclusions. 10

11 Entitlement and funding. Enrolment in the NHIP is mandatory for all those who are employed or reside permanently in the TCI. The package of benefits for the NHIP includes: i) all essential medical services, most of which are provided by the new healthcare facilities managed by Interhealth Canada on Grand Turk and Provo (private providers); and, ii) access to the primary care clinics which the government is upgrading and will continue to manage on the Outer Islands. The Government will continue with the provision of public health services directly such as immunizations and wellness programs. There will be no exclusions or waiting periods for pre-existing conditions; and no deductibles or co-insurance. Some co-payments though are sanctioned, especially in primary care and rehabilitation. Annual limits for out of pocket spending in copayments are set (see the list of benefits). There are two main sources of funding in the NHIP: i) payroll contributions of 5% split in equal terms by the employer and the employee; and, ii) government contributions, which are not specifically determined but will be at least half the cost of National Health, sufficient to guarantee public health interventions, primary care in the Outer Islands, and the service under the NHIP for indigents, prisoners, and formally unemployed. The premium for self-employed persons is proposed at $250 United States dollars per month. However, if self-employed believe that the premium would be less if incomes are reported, the system would allow self employed to show proof of income and be subject to a lower premium. Private spending is articulated with the NHIP. The NHIP will contract with private doctors who choose to be enrolled in the Plan. If the doctor joins the plan, NHIP will reimburse a specified amount to the patient, for care by the private doctor. Private doctors not enrolled in the plan continue to be paid by out of pocket spending or private insurers. Pooling and Allocation. All funds will be pooled in the National Health Insurance Board (NHIB). Since the NHIB will contract care directly with physicians and hospitals there is not an explicit allocation mechanism. It should be highlighted though that all members of the NHIB are entitled to the same NHIP. Organizational structure. Enrollment and collection of the premiums to the NHIP is performed by the National Insurance Board, which is the entity in charge of the pension systems, and member of the CISS. The newly created NHIB is the entity in charge of the funding and OMCC functions. In the beginning the NHIB will contract a private insurer in order to implement all operational and consumer service processes. First, second, and third level care will be delivered by private institutions. The Government will be responsible for primary care in Outer Islands. It is contemplated that if some treatment cannot be delivered in country, people can go to another country to receive it, paid by the NHIP. 11

12 Stewardship. The ministry of Health will continue to be the steward of the system, while the NHIB will be the entity in charge of supervising the new system, basically the providers. II.5 United States On March 23 rd, 2010, President Obama signed into law the Affordable Care Act (see the official webpage for all the information). The reform included changes in several aspects; although they will be introduced gradually, portions of the Law have already taken effect, while other changes will be implemented through year 2014 and beyond. In the next paragraphs we summarize the main aspects of the reform in the topics studied in this report. Entitlement and funding. The United States is comprised, in terms of funding, basically by three subsystems (see the CISS 2008): i) the private system, which mostly encompasses the employer based health insurance; ii) the social security for elderly, Medicare; and, iii) the healthcare insurance for the poor population, Medicaid and the Children Health Insurance Program (CHIP). The initiative included several changes in the entitlement and funding in all the systems. In Medicare the following changes are envisioned: Each senior reaching the gap (the total amount covered, approximately $2,840 USD) in prescription drug coverage will receive a $250 dollar rebate in 2010 and a 50% discount when buying Medicare Part D covered brand-name prescription drugs in 2011 for any expense above the mentioned amount. Over the next 10 years, seniors will receive additional savings on brand-name and generic drugs until the coverage gap is closed in In 2011 free preventive services, such as annual wellness visits and personalized prevention plans for seniors on Medicare, will be established. Moreover, a plan is set to equalize funding to beneficiaries beginning in 2010 across Medicare plans (Traditional Medicare, part A and B, and Medicare Advantage, part C). Regarding Medicaid, it is stated that Immediately, the federal government will introduce a matching funds scheme so that state governments can expand coverage. Starting in 2013, the law provides new funding to state Medicaid programs choosing to cover preventive programs at little or no cost. To compensate physicians for their increased workload, their remuneration will increase with federal funds. 12

13 Moreover, states will receive more funding for the CHIP, destined to those children not eligible for Medicaid. In 2014 Americans who earn less than 133% of the poverty level (approximately $14,000 for an individual and $29,000 for a family of four) will be eligible to enroll in Medicaid. States will receive 100% federal funding for the first three years to support this expanded coverage, phasing to 90% in subsequent years. In the private scheme several changes are implemented: In a first phase, starting immediately, small businesses will be offered tax credits to help them provide insurance benefits to their workers. In a second phase, starting in 2014, the credit is up to 50% the employer s contribution to provide health insurance for employees. There is also up to a 35% credit for small nonprofit organizations. In 2014 tax credits to help the middle class afford insurance will become available for those with income between 100% and 400% the poverty line, not eligible for other coverage. All new plans must cover certain preventive services such as mammograms and colonoscopies without charging a deductible, co-payment, or coinsurance. A new Pre-Existing Condition Insurance Plan will provide new coverage options to individuals who have been uninsured for at least 6 months due to a pre-existing condition. States have the option of running this new program in their state. If a state chooses not to do so, a plan will be established by the Department of Health and Human Services in that state. Moreover, new rules to prevent insurance companies from denying coverage to children under age 19 due to a pre-existing condition will be established. Starting 2014, the law implements strong reforms that prohibit insurance companies from refusing to sell coverage or renew policies because of an individual s pre-existing conditions. Also, in the individual and small group market it eliminates the ability to charge higher rates by insurance companies due to gender or health status. Finally, it makes it illegal for insurance companies to search for an error, or other technical mistake, on a customer s application and use this error to deny payment for services when he or she got sick. Young adults will be allowed to stay on their parents plan until they turn 26 years old (in the case of existing group health plans, this right does not apply if the young adult is offered insurance at work). To preserve employer coverage for early retirees until more affordable coverage is available through the new Exchanges by 2014 (as explained below), the new law creates a $5 billion program to provide needed financial help for 13

14 employment-based plans to continue to provide valuable coverage to people who retire between ages 55 and 65, as well as their spouses and dependents. In 2014 employees who are not offered a health insurance plan by their employers will be able to get an insurance plan in an Exchange; while those individuals who cannot afford the health insurance plan given by the employer, can take whatever funds their employer might have contributed to their insurance and use these resources to help purchase a more affordable plan in the new health insurance Exchanges. The law establishes that in 2014 most individuals will be required to obtain basic health insurance coverage or pay a fee to help offset the costs of caring for uninsured Americans, provided they can afford it. If affordable coverage is not available to an individual, he or she will be eligible for an exemption. Insurance companies will be prohibited from imposing lifetime dollar limits on essential benefits, like hospital stays. In the same line, the new law restricts the insurance companies use of annual dollar limits on the amount of insurance coverage a patient may receive. Moreover, the law includes more funding to primary care centers in underserved areas. Finally, it creates a voluntary long-term care insurance program (CLASS) to provide cash benefits to adults who become disabled. Pooling and allocation. No significant change envisaged. Organizational structure. The only significant change in organizational structure is that Exchanges where individuals and small businesses can buy affordable and qualified health benefit plans will be implemented. Exchanges will offer a choice of health plans that meet certain benefits and cost standards. Nevertheless, there are some functional changes envisioned: The Community Care Transitions Program will help high-risk Medicare beneficiaries who are hospitalized to avoid unnecessary readmissions by coordinating care and connecting patients to services in their communities (in 2011). The new Community First Choice Option allows States to offer home and community based services to disabled individuals through Medicaid rather than institutional care in nursing homes. The new law will institute a series of changes to standardize billing, requiring health plans to begin adopting and implementing rules for a secure, confidential, and electronic exchange of health information, this includes electronic health records. 14

15 In 2013 efforts will be implemented to pay for all intervention in each episode of care, bundled, instead of each of the providers. The measure is expected to coordinate care and improve quality. Starting in 2015, a new provision will tie physician payments to the quality of care they provide. Physicians will see their payments modified so that those who provide higher value care will receive higher payments than those who provide lower quality care. The new law provides incentives for physicians to join together to form Accountable Care Organizations. These groups allow doctors to better coordinate patient care and improve the quality, help prevent diseases and illnesses, and reduce unnecessary hospital admissions. Stewardship. Most of the changes in the new law have to do with consumer protection: The law provides consumers with a way to appeal coverage determinations or claims to their insurance company, and establishes an external review process. It provides an easy-to-use website where consumers can compare health insurance coverage options and pick the one that works best for them. A new $15 billion Prevention and Public Health Fund will be invested in prevention and public health programs that can help keep Americans healthy, from smoking cessation to combating obesity. The new law invests new resources and requires new screening procedures for healthcare providers to boost these efforts and reduce fraud and waste in Medicare, Medicaid, and CHIP. The law allows states that have, or plan to implement, measures that require insurance companies to justify their premium increases to be eligible for $250 million in new grants. Insurance companies with excessive or unjustified premium exchanges may not be able to participate in the new health insurance exchanges in The law establishes in 2011 a new Center for Medicare & Medicaid Innovation that will begin testing new ways of delivering care to patients. The Independent Payment Advisory Board will begin operations to develop and submit proposals to Congress and the President, aimed at extending the life of the Medicare Trust Fund. The Board is expected to focus on ways to target waste in the system and recommend ways to reduce costs, improve health outcomes for patients, and expand access to high-quality care. The new law generally requires that at least 85% of all premium dollars collected by insurance companies for large employer plans, are spent on healthcare 15

16 services and quality improvement. If insurance companies do not meet these goals, because their administrative costs are too high, they must provide rebates to consumers. The law establishes a hospital Value-Based Purchasing Program (VBP) in Traditional Medicare. This program offers financial incentives to hospitals to improve the quality of care. The law requires any ongoing or new federal health program to collect and report racial, ethnic, and language data. The Secretary of Health and Human Services will use this data to help identify and reduce disparities. II.6 Uruguay During 2005, Uruguay began a structural reform directed towards the health sector. This was consolidated in 2008, with the approval of the Uruguayan National Integrated Health System (Sistema Nacional Integrado de Salud del Uruguay, SNIS) through Act (see the Health System Profile of Uruguay 2009 published by the World Health Organization). Said act guarantees accessibility, quality, equity, and universality of the health services. The SNIS includes all institutions that were part of the old health system. Entitlement and funding. The new SNIS will integrate all previous social security beneficiaries in national agencies, the Banco de Previsión Social (BPS) for private sector workers and other agencies for public servants, and the uncovered population through a Seguro Nacional de Salud (SNS). Those not affiliated to social security can voluntary join the system paying a tariff. The first group to take part in the new system is the one composed by private sector employees insured by the BPS, the social security national agency. By the end of 2007, public sector workers were affiliated to the new system. 5 Afterwards, other groups were going to gradually join the new system (see figure II.6.1). The system entitles enrollees to the Comprehensive Health Care Plan (Plan Integral de Atención en Salud, PIAS), which is a set of services that providers must offer in order to be considered comprehensive and able to join the system as insurers. It includes the three levels of care, promotion, protection, early diagnosis, timely treatment, recovery, and rehabilitation activities. The State is responsible of ensuring public goods: public health actions such as immunizations and disease prevention campaigns. With the new system, the distribution of people affiliated to the different health institutions changed (see Table II.6.1). Post-reform there are more people covered by health insurance and the private sector, and less covered by the State, than in In the past, these workers were not affiliated to any social security institution; instead, they or their employers used to buy private insurance services. 16

17 Figure II.6.1 Stages of incorporation into the social health protection (2010) Source: MSP With the new Note: BPC= Base de Prestaciones y Contribuciones. Source: MSP (2010). Table II.6.1 Percentage of the population with health entitlements, 2005 and 2008 Periods Health System (Total) State Private sector Health insurance Uninsured December December Source: MSP (2010). The SNS is funded through the National Health Fund (FONASA) according to the following rules: Workers whose monthly salary exceeds 2.5 Benefits and Contributions Basis (Base de Prestaciones y Contribuciones, BPC) 6 and with dependant children younger than 18 years of age or disabled, pay 6%. Workers whose monthly salary exceeds 2.5 BPC and without dependant children, pay 4.5%. Workers whose monthly salary does not exceed 2.5 BPC, regardless of the presence of children, pay 3%. Employers contribute with 5% the payroll. Civil servants and other state dependents incorporated into the SNS, who paid 3% their salaries, now pay an additional 3% if they have dependent children younger than age 18 or disabled, or 1% if they do not have dependent children. 6 According to the Ministry of Labor and Social Security (see Decree 41/009), the BPC value is fixed, from January 1st 2009, on $1,944 Uruguayan pesos (approximately $93 United States Dollars). 17

18 Public and private sector employees covered by the SNS, pay an extra 2% to entitle their spouses or concubines to comprehensive healthcare through SNIS providers. State budget transfers. The National Resources Fund, which acts as a fund for catastrophic diseases, receives a fixed fee from those who have coverage in the private sector (IAMC) and from those insured under the social security regime through FONASA. The amount received from those with public coverage, the payment is made for medical act. Pooling and allocation. FONASA was established through Law in May This Fund captures all the different social security and State contributions and since all affiliates are entitled to the same package (including high, medium, or low complexity), pooling of resources across previously segmented schemes (private workers, public servants, and so on) is achieved. FONASA administers the risk associated to health interventions, paying insurers an amount per capita adjusted by age and sex. The capita adjusted, that FONASA pays to institutions, finances the PIAS. Organizational structure. The reform has created new institutions and institutional arrangements. The funding and allocation functions are performed by FONASA, which is managed by the BPS and the National Resources Fund. There is a variety of arrangements regarding the OMCC and provision functions. For example, the BPS acts as the insurer and direct provider, however, it can also contract services with independent providers, mostly IAMC institutions. Most IAMC are vertically integrated but can also contract care with independent providers. In July 2007, the Health Services Administration of the State (Administración de Servicios de Salud del Estado, ASSE) was created as a decentralized agency. This public institution of health services acts as insurer (OMCC) and provider. Stewardship. The legal framework is defined by Act which regulates the private sector and Act that created the SNIS. The MSP is the country s main authority in charge of planning, regulating, and conducting the health policy. JUNASA is a decentralized organism responsible for managing the Health Insurance and the system. It is comprised by several representatives: two from the MSP, one from the Ministry of Economy and Finance, one from the BPS, one from the Comprehensive Health Providers, one of the workers, and finally one of the users. V. Conclusions We have reviewed five cases of countries where reforms have been implemented in the last five years. We can see reforms have focused in: i) extending coverage, especially for those otherwise uncovered; and, ii) extending coverage mainly through an insurance mechanism. These two characteristics are according to the financing principles of the EP: i) funding according to financial possibilities and not medical necessities; and ii) 18

19 allocation according to a per capita risk adjusted mechanism. There is one issue that has not been accomplished (with the exception of TCI): the pooling of resources from social security and government budgets. This is important because perfect equity cannot be achieved. It should be recognized though that in Colombia there are some steps in this direction. Out of the five countries analyzed, four of them (Colombia, Dominican Republic, TCI, and United States) have opted to pursue (or maintain) a decentralized approach: i) separation of functions; and ii) mix of public and private OMCC institutions and provision. Only in Mexico the vertically integrated institutions are preserved, even when the separation of functions is one of the National Health Program s goals (Aguilera 2010). In general we can conclude that in Colombia, Dominican Republic, and TCI important steps toward the EP have been taken. An interesting case of a country outside the American Continent that has taken important steps towards the model is the Netherlands (read Box I). Box I The New National Health System of the Netherlands In 2006 the Healthcare system was reformed comprehensively. Before the reform was implemented, the system, despite almost universal coverage, suffered from a number of maladies, symptomatic of a long process of incremental change: a. A rigid two-tier system of private health insurance (PHI) for the rich and social health insurance (SHI) for the rest, which exacerbated health inequalities. b. A muddled risk-equalization scheme to address the problem of cream skimming in the PHI market, which fell afoul of EU law. c. Strong supply-side controls on public provided care, resulting in rationing through waiting lists and a lack of patient-focus. d. An inefficient and complicated bureaucracy, exacerbating rising costs. e. Employer dependence. With employers paying a large proportion of health insurance costs, health insurance revenues were tightly linked to the economy s performance. The 2006 Dutch Health Care Act (ZvW) scrapped the division between SHI and PHI, creating a unified competitive health insurance market, which aims to harness the advantages of competition while maintaining a principle of solidarity: Entitlement and funding. All individuals are now required to purchase a basic package of health insurance, with the voluntary option to purchase supplementary insurance for care not covered in the basic package. Failing to do so implies a fine of 130% the premium. Insurers are obliged to insure any person. There are two sources of funding: i) private out of pocket (50%), with tax credits for low income individuals and free for children under 18, which are called nominal premiums; and, ii) tax revenues for the remaining 50% (employers are required to withhold 6.5% of every employee s taxable income for health insurance (up to a maximum of 30,015). Self-employed and pensioners pay an average of 4.4%. Pooling and allocation. All funds, nominal premiums, and income related funds are pooled in the Health Insurance Fund (CVZ). All funds are redistributed to equalize financial risks borne by insurers. Elements used in the calculation are age, sex, region, employability, disability, and prevalence of chronic conditions among others. Organizational structure. The CVZ is the entity in charge of pooling and allocation. Insurers collect the nominal premiums while, through the tax system the income-based funds are collected. Private insurers perform the OMCC function. Each patient can select its private insurer: as of January 1 st affiliates can select a new insurer, 19

20 which posted their new premiums on November 15 of the previous year. All persons are required to register with a GP, which are mostly physicians and act as gatekeepers of the system. More than 90% of Dutch hospitals are owned and managed on a private notfor-profit basis, with specialists being self-employed. However, the government has traditionally regulated hospital budgets and doctors fees very closely by setting down fixed charges that insurers are able to pay hospitals. Stewardship. The CVZ defines the package, its value, and the capita allocated to the insurers. The Dutch Healthcare Authority (NZa) is the supervisory body for all the healthcare markets in the Netherlands. The NZa supervises both healthcare providers and insurers. The Ministry of Health, Welfare and Sports is basically in charge of public health interventions. Finally the Netherlands Competition Authority oversees competition issues in all industries, including health insurance and provision. Sources: Daley and Gubb (2007) and Van Gameren (2010). 20

21 VI. References Aguilera, Nelly. Gasto público en salud en México en el marco de la cobertura universal (mimeo). Aguilera, Nelly and Mariana Barraza Lloréns. Descentralización Financiera de Salud. Un Análisis del Ramo 33 (Preliminary title). Forthcoming CONEVAL and El Colegio de México, Chernichovsky, Dov. Health System Reform in Industrialized Economies: an Emerging Paradigm. The Milbank Quarterly 73 No. 3: Pluralism, Public Choice, and the State in the Emerging Paradigm in Health Systems. The Milbank Quarterly 80 No. 1: CISS (Conferencia Interamericana de Seguridad Social). Inter-American Conference on Social Security. CISS 2008 Health Systems and Insurance Report. Mimeo, Mexico: CISS, (mimeo). Available on line at: Consejo Nacional de Seguridad Social (CNSS). Number of affiliates by regime. Dominican Republic, Daley, Claire and James Gubb. Health Reform in the Netherlands. Civitas, (mimeo). Departamento Administrativo Nacional de Estadística (DANE). Number of affiliates by regime projections, statistics. Colombia, Guerrero, Ramiro. Financiación de la Afiliación Universal a la Seguridad Social en Salud: Lecciones Aprendidas de Colombia. Bienestar y Política Social 4 No. 2: Instituto Mexicano del Seguro Social (IMSS). Mexico, Mexico, Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (ISSSTE). Mexico, Ministerio de Salud Pública (MSP). La Construcción del Sistema Integrado de Salud, Uruguay: OPS, Secretaría de Salud. National Health Program Mexico,

22 Seguro Popular. Mexico, Sistema Nacional de Información en Salud (SINAIS). Mexico, Van Gameren, Edwin. Health Insurance Reform: Experiences from the Netherlands (mimeo). World Health Organization (WHO). National health accounts,

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