Fabio Bertranou (1999) in his article in Health Policy gives a concise summary of attempted health insurance reforms in Latin America in the 1980s and 1990s. He looks at three cases: Chile’s reform in the 1980s and Argentina’s and Colombia’s reforms in the 1990s. He cites three major issues each nation faces:
- Does open enrollment in private insurance lead to efficient outcomes? Pure economist would generally say yes, but two problems make this unclear. First, consumers are unlikely to switch insurance providers if transaction costs are high and if they have to change doctors. Secondly, the insurance company may wish to ‘cream skim’ by attracting young, healthy applicants into their plan.
- What is the minimum benefit level insurers are required to have? A higher level of mandated coverage is more equitable, but reduces consumer choice.
- How much redistribution is desired?
Now let us take a brief look at the three reforms:
- Mandates a contribution which is 7% of wages.
- Citizens can choose either government provided health care (Fondo nacional de salud – FONASA) or private plans (Institutos de Salud Previsional – ISAPRE).
- Typically, the elderly use the FONASA since the exclusionary clauses often restrict their benefits in the ISAPRE. However, younger individuals with serious illnesses often choose the ISAPRE since there is a higher quality of care.
- 12% of gross wages are contributed to a centralized government fund (Fondo de Solidaridad y Garantia – FSG)
- Entidades Promotoras en Salud (EPS), which are private insurers such as HMOs, NGOs, cooperatives, etc.
- Colombia’s poor citizens receive vouchers to help them pay for the EPS. 30% of Colombia’s citizens receive these vouchers.
- Plan Obligatorio de Salud (POS) – This is the minimum standard health benefit package an EPS must offer.
- The major reform in Argentina was to gradually consolidate the inefficient Obras Sociales, non-profit institutions often run by unions. The consolidation will occur by allowing Argentinians to be able to choose any Obra Social they wish. In the short run, the Obras Sociales will receive loans to help them modernize their administration.
- Small, private Obras Sociales have been attracting members while the large, union run Obras Sociales have been losing members.
- Programa Minimo Obligatorio de atencion medica (PMO) mandates that all of the Obras Sociales have a minimum benefit package for all members.
- Many workers with higher earnings have left the Obras Sociales with relatively low average earnings.
- The government also hopes to increase redistribution within the health care system.
- Political: Chile instituted its reforms under a dictatorship which allowed a complete overhaul of the system. Colombia attempted to do this, but in a democracy, such sweeping reform is often opposed by vested interests. Argentina is taking a path of gradual reform.
- Colombia is the only case where there are demand-side subsidies for the poor.
- Argentina and Colombia have strict minimum benefit levels so most insurance plans compete on quality and not price. In Chile, insurance companies are able to compete on price and risk selection.
Original Article: Bertranou, Fabio (1999) “Are market-oriented helath insurance reforms possible in Latin America?: The cases of Argentina, Chile, and Colombia” Health Policy vol 47, p. 19-36.