The Brazilian Health Reform and the Chalenge of Decentralization (The World Bank - February 19, 2004 )

1. The Brazilian Health Reform and the Chalenge of Decentralization(The World Bank - February 19, 2004) André Medici Health Specialist Interamerican Development Bank

2. How works health care before the 1988 Constitution? - 4 schemes • 1) Social Security: Formal labor market: workers and families (60% of the population), financed by payroll taxes; • 2) Public Sector: informal labor market and indigents (no coverage or under coverage) financed by general taxes; • 3) Private Health Plans: Additional coverage for 10% of the richest population (no mandatory, financed by firms or families); • 4) Out of Pocket Expenditures (complementary for all groups);

3. Reforming the old health system • Problems: • Segmented coverage: inequalities and lack of coverage for the poorest population groups; • Poor health outcomes; • insufficient financing and unfair distribution of the public funds. • Political Environment: • transition to democracy after 24 years of dictatorship; • strong social participation and political will: the goal was to implement a system based on the European welfare state. • Restrictions: • economic constraints to increase public health expenditures; • unstable macroeconomic context

4. The 1988 Constitution and the Unified Health System (Social Security + Public Sector) • New Universal Rights on Health Care • Universal health coverage by the public sector; • Integral coverage for all goods and health services (absence of basic packages and no risk management); • Equal access for all without costs and payments by the users. • Strategies • Financing based on general taxation (social security budget with specific sources tied to health); • Decentralization of health care to local levels (federal hospitals and ambulatory care units were transferred to States and Municipalities); • Increasing the public role on investment and public employment.

5. The 1988 Constitution and the Unified Health System (Social Security + Public Sector) • Strategies • Centralized management in each level of government (Federal, States, Municipalities); • Basic rules defined at national level (lack of administrative flexibility - the PAS case in Sao Paulo); • Lack of integration with Private Health Plans; • Social participation (establishment of health counsels in each government level composed by providers;employees and community representatives); • Strong corporatism of health related personnel. • Hospital centered system (low incentives to primary health care). • The system was driven by the supply side (no incentives related with demand side as capitation).

6. Restrictions in the early ninities • Restrictions • Strong fiscal imbalances creating financial restrictions to the SUS; • High inflation and economic instability • Political crises and constant changes of health ministries (average less than one year); • Low priority of social policy and social changes; • Consequences • Strong corporatism and permanent strikes in health related personnel; • The population and communities had no confidence in the system; • The rise of private health plans as an option for high income employees and middle class

7. The Reforms under the Fernando Henrique Cardoso Government (main achievements) • Strengthen of financial sustainability • Creation of the CPMF (tax related with financial transactions) to increase the economic support for federal expenditure in health; • Legislate that 10% of federal tax collection; and 15% of state and municipal tax collection have to be applied in health care; • Increase the federal sources transferred to states and municipalities; • Increase the autonomy of States and Municipalities • changes on the financial schemes (prospective payment to block grants); • decentralization of the audit system; • Movement toward the primary health care: • definition of a primary care basic package of services fully funded (PAB); • financial incentives for family doctors and community health agents;

8. Some outcomes • The SUS lead to better health indicators: • Life expectancy increase from 65 to 68 years from 1991 to 1999; • Infant mortality rates have been reduced from 50 to 29 per thousand among 1991 and 2000; • increase of institutional natal care; • decrease of malnutrition rates among children under 5; • increase immunization among children and pregnant women;

10. The relationship among health expenditures and outcomes in LAC countries • In 1997 Brasil performed the 8st higher health expenditure among 27 LAC countries. (US$ 428 per capita - 7,6% of GDP). • Even son, Brazil occupied the 22st position regarding average life years adjusted by discapacity (59,1 life years in good health). • Others federative countries in LAC, like Argentina (3th./5th.) and México (9th./7th.) performed better relationship among health expenditures and outcomes

11. Health Expenditure Distribution in Brazil • Brazilian Health Expenditures - 1997

12. Evolution of Health Public Expenditure • In 1980, the public expenditure in health was distributed as following: Federal Government (74%), States (18%) and Municipalities (8%); • In 1996 the public expenditure in health changed as following: Federal Government (53%); States (19%) and Municipalities (28%); • There is no data for all the 5,6 thousands of brazilian municipalities, but some evidence shows that municipalities is increasing their participation in the health expenditure in recent years given the recent brazilian government regulation

13. Federal Transfers for States and Municipalities • Federal transfers to states and municipalities represents almost 20% of the Pub lic Health Expenditure • In the early eighties, federal government drove sent most of the transfers sources to states. In the ninities, this trend was reverted. Most of federal sources now are transferred to municipalities; • In 1999 the transfers to States and Municipalites represented almost 36% of federal expenditures in health • In other hand, federal transfers represented 11% of state expenditure on health and 25% of the health municipal expenditure.

14. Brazilian Public Health Expenditure by Sources and Uses Uses of Public Expenditure by Level of Government Sources of Public Expenditure by Level of Government

15. Public Health Expenditure and GDPpercapita by State Per Capita Health Expenditure x GDP per capita 1996 (US$) • This graphic shows the total percapita health expenditures by states (including federal expenditure) • Health expenditures are in someway directly co-related with the state percapita GDP • Even then, some poor states presented higher health percapita expenditures than other rich states. • In some way, the federal level expends too much in some rich states, as Federal District and some poor states of the North Region.

16. Does the federal government own a redistributive role on health expenditure? Federal Health Expenditure per capita x GDP per capita in the States: 1996 (US$) • Federal Health Expenditure don’t have a clear redistributive behavior • The graphic shows that there is no trend • It was expected that federal health expenditure need to be bigger in poorest states then in richest states, but it is not happing

17. Regional Innequalities Regarding Health Expenditures onStates and Municipalities Regional (State and Municipal) Percapita Health Expenditure x State Percapita GDP 1996 (US$) • State and Municipal Percapita Health Expenditure is closer correlated with Percapita GDP than Federal Health Expenditure • Rich States and Municipalities trend to present bigger levels of percapita health expenditures

18. Infant Mortality Rates x Percapita Public Health Expenditures in Brazilian States Infant Mortality Rates x Percapita Public Health Expenditures - 1996 (US$) • There is a inverse correlation between infant mortality rates and percapita public health expenditure • But the related data is weak to explain a strong correlation. Many states expend more than others to achieve worse results in the reduction of infant mortality. • Infant mortality is closer correlated with general life conditions than health expenditures.

19. Correlation between infant mortality and GDP percapita in Brazilian States Infant Mortality Rates x Percapita GDP at state level - 1996 (US$) • This inverse correlation is stronger. Infant mortality depends more on the state income level

20. Correlations among infant mortality rates and quality of Health Information Systems Correlation between infant mortality rate and known information about death causes Correlation between death with known death causes and Percapita Public Health Expenditure

21. Best Practices to Improve Equity, Efficiency and Sustainability of Public Health Policies • Use the epidemiological evidence as the rule to plan public health sector needs; • Separate the roles of financing, organization and provision of services; • Use supply subsides just in the case when exist restrictions in the supply of health facilities and use demand subsides when there is a multiplicity of organizers and providers in a regulated competitive environment; • Target the public subside for people without means to pay and use fees and co-payments to recovery costs and moderate the demand of people with sources to pay for health services; • Use public subside to finance a package of cost effective services covering the epidemiological, demographic and socioeconomic health profile of the population without means to pay; • Use, complementary, public subside to finance a package of high costs or risks that could not be supported by the population or private health insurance.

22. Main achievements of the SUS • Increase the capability of States and Municipalities to manage health systems; • Increase the fiscal compromise of States and Municipalities with health systems; • Use of block grants to transfer sources from central to local government levels: • Compromises with promotion, prevention and primary care and better definition regards the use of high complexity and hospitals; • Better integration among central, regional and local level on the use of public health facilities; • High quality of the health information • Increase of social participation

23. Problems that still remain • High superposition on tasks performance among government levels; • The system is financed by supply side and not by demand side; • Federal funds are distributed without considering epidemiological needs and financial shortness of states and municipalities. • Few flexibility to use public funds to contract private management solutions for health care; • Lack of coordination between the SUS and the private plans. Users of private plans are also users of SUS generating a public subside for private sector and rich families; • There is no external audit system. The audit is done by the public sector and do not manage interest conflicts; • There is no opinion polls about consumers satisfaction and few evidence about the system performance for the population; • The health workers corporatism is over represented in the social participation mechanisms;

24. The political economy of the SUS • The SUS need to be understood as a political movement against the militar dictatorship. The SUS has roots on the academy, on the medical and health professional unions and in the public sector; • The 1988 Constitution incorporate several of these positions. Some of the SUS principles conflicts with the eficiency and equity needs of the health system; • To face these interests, health reforms in Brazil had been slowly driven. • The main problem is to revert municipalization in regionalization, with a mayor role of the states

25. Some solutions to improve the SUSin a health federalism framework • Integrate the SUS with the Private Health Plans (the creation of ANS) • Use of equity formulas to distribute federal sources among states and municipalities. These formulas need to pay attention to epidemiological needs, fiscal capability of each state and adequate incentives; • Increase the management flexibility of the SUS. Use diversified models of public and private management to search for better efficiency on the sources allocation; • Use the public subside for the poorest population and increase the possibility to cost recovery for the people who has capability to pay. • Increase the use of demand driven payment mechanisms to providers; • Use financial incentives based in outcomes, not in processes