"Lessons on Health Reform From Latin America"

Nurses at a Nicaraguan hospital. (Photo: interplast / flickr)

El País:

One of the most contentious elements of the American health care debate right now is the proposal to create a public agency that would offer the uninsured - especially poor and low-income citizens - a nonprofit alternative to private insurance companies. President Obama has made it clear to the American people that those who already get their insurance through the private system can keep their coverage, and that their freedom of choice will be maintained in all cases at all times. But opponents of the proposed reforms - those who are fighting to defeat the president and don't care if (or actively desire that) the system remains as it is - have raised the specter of "socialized medicine": the "grave threat" of a giant state apparatus supported by intergovernmental fiscal transfers and placed in a position of competitive advantage against private insurers.

In his September 9 address before Congress, Obama asserted that a public health agency would be self-sufficient (it would not receive taxpayer subsidies), and he projected that while less than 5 percent of the insured population would enroll in the government plan, a public option would provide a critical means to stimulate competition and keep the private insurance companies "honest."

The intensity of this debate, and the degree of anxiety provoked by the alleged threat of a government takeover, is surprising to Spaniards, other Europeans, Canadians and Latin Americans, many of whom are covered by public health care or social insurance programs in which the government plays a predominant role in the administration of health care provisions and regulation of the increasingly marginal private sector. What's more, the much-feared public option under discussion in the United States would not even provide "direct" care to its members (i.e. government-owned equipment, staff and facilities), but rather would function as an intermediary between private providers who would be contracted under certain conditions.

The private industry and an unregulated free market bear a large brunt of the responsibility for the serious problems that now confront the American healthcare system: 45 million uninsured, frequent abuse of the insured, the highest - and increasing at a perilous pace - expenditures in the world, an extravagantly wasteful bureaucracy and massive fraud, all combined with health indicators that lag behind those of other developed nations. Not only do 15 percent of the American people find themselves without protection, but a large portion of those who already have insurance have very poor insurance: everyone is required to make copayments, many people are denied coverage due to pre-existing conditions, and many are discriminated against by insurance companies who practice risk selection. The insurance companies try to recruit the healthiest - often young and male - candidates to join their plans, while turning away or charging higher premiums for the chronically ill, the elderly and women of childbearing age, all so that the private providers can reduce their costs and increase their profits. For this reason, the health insurance industry is among the fastest-growing in the United States, and it has been among the least-affected by the global financial crisis.

In the context of this debate, it would benefit the United States to consider the example of Latin America, where all of the countries have enacted some form of health care reform, beginning with Chile under the reign of Pinochet in 1980 and spreading throughout the region in the following two decades. These initial reforms all shared certain core objectives: to dismantle state monopolies in the provision of health care, to create a favorable climate for the expansion of private insurers and to stimulate competition, all with the aim of increasing efficiency, reducing expenses, improving the quality of services and expanding coverage.

After nearly three decades of these corporate-friendly reforms, what have been the results? In most of the countries, coverage has not expanded. There are several notable exceptions: Colombia, Costa Rica, Chile, Mexico and the Dominican Republic, but the experiences of each of these countries is instructive. In Colombia, the official goal of reaching universal coverage by the year 2000 has yet to be realized. In Costa Rica, the government established a single-payer system before the wave of reforms swept the continent, and the private sector plays a very small role. In Chile, coverage under the private system, which reached a high of 26 percent in 1997, has steadily declined since, estimated at 16 percent in 2008, while coverage under their public system has climbed to 73 percent. In Mexico, the extension of health care has been achieved primarily through Popular Health Insurance, a public insurance program funded mainly by state and federal governments. And in the Dominican Republic, the increase in coverage was largely subsidized by the Treasury Department through an efficient, national public insurance program. The country with the largest private coverage in the region is Brazil, with 25 percent of the population insured, but 75 percent are covered through the Unified Health System, which is public.

Competition among private insurance companies does not function effectively or does not exist at all in several Latin American countries. There are only two private insurers in Peru, and the three largest companies in Chile account for 61 percent of the total coverage. Obama, incidentally, noted in his address before Congress that in Alabama one particular insurance company covers 90 percent of the total population in that state. Because of this, administrative costs are very high throughout the state. As demonstrated by statistics from three different countries, the administrative costs of private systems are consistently higher than those of public systems (18 percent versus one percent in Chile, for example), because the fragmentation of private insurers prevents them from taking advantage of economies of scale, and a large chunk of their corporate budgets goes toward profits and advertising, which are non-issues for a public program.

The example of Chile is particularly relevant, not only because it was a pioneer in reform efforts, but also because it established a paradigm that was followed by governments and private insurers (known as "ISAPRE's" in Chile), throughout the region. After the aforementioned privatization reforms were implemented by Pinochet in the 1980's, the Chilean system lacked regulation and supervision, and until the first Concertación (democratic governing coalition) established the Superintendence of ISAPRE's in 1991, the industry was plagued with abuses. Even after this reform effort, however, the ISAPRE's continued with their discriminatory practices: they charged higher premiums for women of childbearing age compared to men of the same age, they increased premiums as people got older, they refused to cover chronic or catastrophic illnesses, and they revised their contracts each year to jack up the price of premiums. The private system also focused on treating illnesses, and placed little or no emphasis on preventing them.

The ISAPREs attracted only a small group of wealthy business professionals and self-employed workers to their programs. As a result, Chile's public system (FONASA) was loaded with women, rural laborers, the poor, the elderly, the chronically ill, and even those who already had ISAPRE plans but decided to take advantage of the public system for costly and complex surgeries in order to avoid expensive copayments. In this manner, the public system essentially subsidized the private system and fed it its high profits.

Under the presidency of Ricardo Lagos, a set of reform laws were passed in 2004 and 2005 that made substantial improvements in the system, infusing it with greater equity and social solidarity. Thanks to the increase in government involvement, Chilean health-care programs - both the public program and the ISAPREs - now guarantee that people will receive coverage for all major illnesses. There will be a mandate for self-employed workers to find coverage by 2016, but those who cannot afford to buy into the system will be exempt from payment. The public program now offers free care to the poor and subsidies to low-income citizens. Age and gender discrimination have been reduced through the establishment of the Solidarity Compensation Fund, which transfers resources from young men to the elderly and women of childbearing age. The rise in cost of ISAPRE premiums is kept in check with government-imposed price caps. More and better attention has been given to primary care. The transfer of subsidies from the public system to the private system has been limited. And the Chilean government, in order to efficiently enact these policies, has strengthened its ability to regulate the system through the creation of a unified Superintendence of Health. With these regulations in place, the Chilean public health program has become more attractive to the populace than the private system, as evidenced by the gradual increase in coverage.

The lesson from Chile and Latin America is unambiguous: the United States should support, not fear, a public option and increased government regulation of the private corporations. This will help to expand coverage, reduce abuse and keep the insurers in check, leading to lower costs and better health and well-being for the American people.