Unbiased Analysis of Today's Healthcare Issues

Colombia’s health insurance reform: Is managed competition for the poor working?

Written By: Jason Shafrin - Feb• 22•06

In 1993, Colombia enacted ‘la Ley 100’ (law 100) transformed the way in which the poor are able to access health care.  Previously, the poor could go to public hospitals and receive free or inexpensive care if the hospital would accept them  This was financed through higher prices for customers who were able to pay for medical procedures.  La Ley 100, gave local authorities the funds to finance a system of competitive private managed care organizations.  The local authorities would compensate the health insurance organizations with risk adjusted premiums for every individual covered.  Because Colombia mandated a strict benefit package (with an emphasis on primary and preventative care) for each insurance company to provide, competition in this sector was based mostly on quality and not on price. 

In their 2001 article in Health Policy and Planning, Beatriz Plaza, Ana Beatriz Barona and Norman Hearst examine the implementation of la Ley 100 and its effectiveness using anecdotal and statistical evidence.  The authors found that the percentage of Colombians covered by any type of insurance rose from 28% to 57% between 1992 and 1997.  In 1996, the Colombian government added catastrophic illness (such as AIDS, cancer, major trauma, cardiovascular disease, etc.) to the package covered by the managed care organizations. 

The authors cite three problems with the implementation of la Ley 100.  The first is a lack of institutional capacity.  Many hospitals did not have accounting procedures or satisfactory IT systems to administer this program.  Further, there was evidence of fraud.  Some managed care organizations would charge the local government for people to whom an insurance card was never issued.  Secondly, spreading information regarding la Ley 100 was a slow process.  While 94% of Bogata’s poor were enrolled in the program, smaller cities and rural areas experienced enrollment rates generally between 20% and 70%.  Finally, the implementation of the program was often delayed in many areas due to administrative problems.   

While this paper generally does a good job analyzing the administrative problems which occured during la Ley 100’s implementation, it does not thoroughly investigate the economic impact.  How costly is the program per person?  Is there a moral hazard problem?  What are the usage changes by the poor?  How has the quality of care changed?  What is the effect on the middle and upper classes who have to pay 12% of their wages in order to purchase their own insurance and to finance la Ley 100?

According to the CIA World Factbook updated 10 January 2006, Colombia ranked 113th in infant mortality, 116th in life expectancy out of 226 countries. 

Plaza, Beatriz; Barona, Ana Beatriz; Hearst, Norman; “Managed Compeition for the poor or poorly managed competition?  Lessons from the Colombia health reform experienceHealth Policy and Planning, No. 16 p. 44-51, 2001.

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