Dr. Daniel López Acuña Director Division of Health Systems and Services Development

1. CRITICAL ISSUES IN HEALTH SECTOR REFORM IN LAC: AN AGENDA FOR THE FUTURE Dr. Daniel López Acuña Director Division of Health Systems and Services Development Pan American Health Organization/Regional Office for the Americas of the World Health Organization

2. THE NATURE OF HEALTH SECTOR REFORM • Agenda for change in the organization and financing of the health sector operations and its institutional set up • Country specific (no magic bullet, no prescription) • Window of opportunity for health sector development • Axis of health systems development efforts

3. WHY HEALTH SECTOR REFORM IN THE REGION? • Opportunities exist to improve health status • Demographic and epidemiological changes make it necessary to reorient health care delivery models • Inequitable access to basic health services • Segmentation of the health care system • Inefficient allocation of scarce resources • Health Sector insufficiently financed in some countries • Lack of financial sustainability of sectoral operations

4. THE CONTEXT OF HEALTH SECTOR REFORM IN THE REGION OF THE AMERICAS • Macroeconomic reorganization • Redefinition of the role of the State • Democratization and evolution towards more pluralistic societies • Governance hindered by lack of sufficient improvements in social development • Reorientation of Public Expenditure • Modernization of public management

5. MAJOR COMPONENTS OF HEALTH SECTOR REFORM PROCESSES • Strengthening the steering role of health authorities • Extend coverage of health services • Target disadvantaged population groups • Redefine health care delivery models • Decentralization • Separation of functions of the health system (financing, insurance and services provision)

6. MAJOR COMPONENTS OF HEALTH SECTOR REFORM PROCESSES • Introduction of new forms of payment to health care providers • Diversification in number and nature of public and private health care providers • Redefinition of the benefits package of both social (public) and private insurance schemes • Rationalization of health expenditure • New modalities of health care financing

7. BACKGROUND • Special meeting on Health Sector Reform held in September 1995 in Washington D.C. as part of the Directing Council of PAHO/WHO jointly sponsored with IDB, World Bank, USAID, OAS, ECLAC, UNICEF, UNFPA and Health Canada

8. Equity Social Participation Effectiveness & Quality Categories Efficiency Financial Sustainability GUIDING PRINCIPLES OF HEALTH SECTOR REFORM

9. THE MANDATE • Item 17 of the Plan of Action of the First Summit of the Americas of Heads of State and Government (Miami 1994) called for: • advancing health sector reform efforts for attaining equitable access to basic health services, and • monitoring progress of health sector reforms in the countries of the Hemisphere asking PAHO/WHO to coordinate efforts to that end.

10. LAC HEALTH SECTOR REFORM INITIATIVE • Joint USAID and PAHO undertaking of 10.2 million dollars over a period of 5 years for developing regional support mechanisms to Health Sector Reform processes in the countries of the Americas. • Partnership of PAHO, PHR, DDM and FPMD for executing the activities of the initiative

11. FRAMEWORK FOR MONITORING AND EVALUATION OF HEALTH SECTOR REFORMS

12. Public Demand Transformations Description of National Processes System Organization Sectoral Financing Health Sector Reforms External Motivation Provision of Services Impact Evaluation Government Decision Compiled and harmonized data that allow for comparative analyses Monitoring of the Processes Evaluation of the Results HEALTH SECTOR REFORM ANALYSES

13. MEASURIG REFORM PROGRESS • Monitoring of the processes: • a) Dynamics • b) Contents • Evaluation of results

14. MEASURING REFORM PROGRESS • Dynamics • 1. Design • 2. Negotiation • 3. Implementation • 4. Evaluation

15. MEASURING REFORM PROGRESS • Contents • 1.Evolution of the legal framework of the health sector • 2. Degree of social protection in health • 3. Steering Role of Health Authority • 4. Separation of functions • 5. Redefinition of roles and decentralization • 6. Social participation and control

16. MEASURING REFORM PROGRESS • Contents (continued) • 7. Finance and expenditure flows • 8.Organization of services delivery • 9.Targeting of vulnerable groups • 10. Redefinition of health care delivery models • 11. Provider payment mechanisms • 12. Management and development of human resources • 13. Quality Improvement Programs

17. MEASURING REFORM PROGRESS • Evaluation of results • 1. Equity • 2. Quality • 3. Efficiency • 4. Financial sustainability • 5. Social participation

18. SHORTCOMINGS OF THE REFORM PROCESSES • Driving motivations of reform have been centered on economic factors. • Equity considerations and public health concerns have been relegated to a secondary level. • Quality of care and redefinition of health care delivery models have been marginal. • The need of extending social protection in health has been insufficiently addressed

19. CRITICAL ISSUES IN HEALTH SECTOR REFORM PROCESSES IN LAC

20. MAJOR HEALTH SYSTEM PROBLEMSTO BE OVERCOMED • Lack of social protection in health is considerable • Regressive pattern and lack of rationality of the “out of pocket” expenditure in health • Inequitable access to health care • Inappropriate health care delivery models

21. KEY ISSUES • Strengthening the Steering Role of Health Authorities specially the discharge of the Essential Public Health Functions. • Extension of social protection in health. • Reorienting health systems and services with health promotion criteria for increasing the effectiveness of health interventions, promoting quality of care and improving public health practice.

22. I . SEGMENTATION AND SEPARATION OF FUNCTIONS

23. SEGMENTATION OFHEALTHCARE SYSTEMS MINISTRIES OF HEALTH SOCIAL SECURITY INSTITUTIONS PRIVATE SYSTEMS

24. EVOLUTION OF HEALTH CARE SYSTEMS FUNCTIONS FINANCING PURCHASING STEERING ROLE INSURANCE PROVISION

25. FUNCTIONS IN THE SEGMENTED SYSTEMS • Not all compartments carry out all functions • Functions tend to be mingled within each compartment • There is no institutional set up that mirrors the evolution of functions • Migration from one compartment to the other is very limited or non-existent

26. WHAT IS THE RATIONALE BEHIND THE SEPARATION OF FUNCTIONS? • End the segmentation of the health care system • Redefine institutions in light of the evolution of functions • Reduce inequities in the financing, access and utilization of services • Improve the discharge of essential public health functions

27. LESSONS LEARNED • The problem calls for solutions that combine social policy reengineering, health services delivery redesigning, health care financing reforms, and reorganization of the segmented health care systems. • There are investment and or transitional costs that ought to be taken into account given the existing constraints in resources and institutional organization

28. LESSONS LEARNED (continued) • A careful design of the “separation of functions” is necessary, so the primary goal becomes universal coverage rather than insurance and/or services providers market creation or expansion. • A single insurer seems to be more efficient than multiple insurers for pooling risks and avoiding adverse selection

29. LESSONS LEARNED (continued) • The segmented model has to be overhauled, and a “separation of functions” has to take place within a framework of solidarity, so the universal coverage can be attained.

30. II . EXPANSION OF SOCIAL PROTECTION IN HEALTH

31. Magnitude of the problem: Total population: 475 million 25% of the population lack permanent access to basic health services 120 million people are in this situation at the end of the Century Some figures of importance: Average per capita G.N.P. for LAC: 3289 U.S. Average National Health Expenditure as % of G.N.P.: 7.3% Average per capita N.H.E.: 240 U.S. THE CHALLENGE

32. Comparison of Per Capita Income, 1971-80 and 1991-95 (Inthousands of 1987 dollars) Source: IDB, “Latin America after a decade of reforms.”

33. 160 140 120 100 80 1980 1982 1984 1986 1988 1990 1992 1994 1996 Simple average Weighted by workforce Real Wages in Latin America, 1980-96 (Index 1987=100) Source: IDB, “Latin America after a decade of reforms,” (based on national data).

34. Unemployment, 1996 (Percent of labor force) 19.7 17.0 16.2 16.1 15.9 14.3 12.6 12.5 11.9 11.1 10.4 8.2 7.5 6.6 6.5 5.9 5.9 5.7 5.3 4.5 4.3 ARG NIC PAN BLZ COL PER CHL MEX CRI HND Regional average pop.-weighted Source: IDB, “Latin America after a decade of reforms.” Note: Figures are for 1996 if available, otherwise 1995.

35. Impact of the informal sector 1996 versus 1990 70 65 60 55 50 45 40 35 Paraguay Bolivia Brazil Peru Mexico Colombia Honduras Argentina Ecuador Chile % share of urban employment in 1996 Venezuela Costa Rica Panama Uruguay 35 40 45 50 55 60 65 % share of urban employment in 1990 Source: International Labor Organization (ILO).

36. Poverty in Latin America, 1970-95 (Number of persons, in millions) 160 150 140 130 120 110 100 90 80 60 55 50 45 40 35 30 25 20 Percent of population 1970 1975 1980 1985 1990 1995 Proportion of poor Number of poor Source: IDB, “Latin America after a decade of reforms,” Londoño and Székely (1997).

37. Urban versus Rural Poverty Millions of poor Rural Urban Source: ECLAC, “Panorama Social 1997.”

38. Inequality in Latin America, 1970-95 (Gini coefficient) 57 56 55 54 53 52 51 50 24 22 20 18 16 14 1970 1975 1980 1985 1990 1995 Gini Ratio of incomes, richest/poorest quintiles Source: IDB, “Latin America after a decade of reforms,” Londoño and Székely (1997).

39. 60 55 50 45 40 35 30 25 20 Latin America (weighed) Latin America (simple) Africa USA, Can., Aus. East Asia South Asia Europe 7.0 7.5 8.0 8.5 9.0 9.5 10.0 Log per capita income Inequality by World Regions, 1990s (Gini coefficient) Source: IDB, “Latin America after a decade of reforms,” Londoño and Székely (1997), based on Deininger and Squire (1997).

40. COMPOSITION OF NHE BY SUBSECTOR IN LAC COUNTRIES

41. PUBLIC EXPENDITURE IN HEALTH AS % OF GNP

42. PUBLIC EXPENDITURE IN HEALTH AS % OF NHE

43. PER CAPITA PUBLIC EXPENDITURE IN HEALTH (in US Dollars)

44. Spending on Social Security, 1990-95 (In percent) NED BEL FRA SWE AUT FIN NOR ITA DNK SPA GRE CHE DEU IRE Public spending on soc. security (% of (% of GDP) CAN USA URY POR GBR JAP AUS ARG BRB DOM PAN CHL ICE COL SUR BRA PRY MEX PER BLZ BOL TTO BHS GTM VEN CRI JAM NIC HND GUY ECU HTI Percent of population 65 or older Source: IDB, “Latin America after a decade of reforms,” Londoño and Székely (1997).

45. PER CAPITA SPENDING BY PUBLIC INSTITUTIONS OF HEALTH CARE IN MEXICO 1995, National average = 100 Per capita spending Per capita spending 300 250 200 150 100 50 0 300 250 200 150 100 50 0 533.3 PEMEX IMSS-Solidaridad* IMSS* National average DDF No coverage 99.4 ISSSTE SSA 0 9.3 18.7 22.2 52.8 63.0 100 Percentage of population covered * As the administrative support of IMSS-Solidaridad is provided by IMSS, its cost is recorded in IMSS and excluded from IMSS-Solidaridad. Source: Ministry of Health

46. LESSONS LEARNED • It will be difficult to make progress without increasing the relatively low levels of public expenditure in health care. • There is a need for finding innovative mechanisms for expanding social insurance schemes that counterbalance the increase in poverty levels, the expanding informal sector and the low levels of taxation as % of the G.N.P.

47. LESSONS LEARNED (continued) • There is little room for extending social protection in health to the excluded at the expense of privates sources of financing • Neither the pure Bismarckian nor the pure Beveridgean models will work: there is a need of a third way that combines elements of both and apply them to the country specific institutional set up

48. LESSONS LEARNED (continued) • The solution to the problem is quite distant and more complex than the notion of a “basic package of interventions” defined with cost-effectiveness criteria.

49. III. Towards Universal Coverage of Health Care

50. A MODEL FOR ATTAINING UNIVERSAL COVERAGE (I) • Strengthening the steering role of Ministries of Health, emphasizing their regulatory role and giving proper attention and resources to the discharge of the essential public health functions corresponding to the exercise of the health authority of the State.