Health Care Reform Challenges & Pitfalls The Chilean Case Miami – April 2005 Rodrigo Castro Libertad y Desarrollo

1. Health Care Reform Challenges & Pitfalls The Chilean Case Miami – April 2005 Rodrigo Castro Libertad y Desarrollo http://www.lyd.org

2. Health Care Reform Brief Overview

3. Background • All chileans with jobs pay at least 7% of their salary to health insurance providers. • Since 1980s those who wish (20%) can pay this not to Fonasa, – public health insurance fund – but to private funds known as Isapres • offer swift access to well equipped private clinics, for a price • average contribution is 9% of (above-average) salaries. • even so, members pay out a similar amount on top of their contribution for off-plan items and prescription drugs. • Fonasa, which is topped up with a public subsidy, buys care at private clinics as well as public hospitals.

4. Background • Since 1990, governments have thrown three times more money at the public system, but without reforming. • Waiting lists are long (Table) • Public hospitals, which must offer free care to the poor, are overstreched, after years of past underinvestment, but they are also grossly inefficient (Chart). • On basic health indicators, Chile scores well (Table): • infant and maternal mortality are among the lowest in Latin America, • average life expectancy is almost 76 years, up from just over 60 years in the early 1970s. • due to better socio-economic conditions and preventive care.

5. Background • But the average conceals glaring inequality (Table) • infant mortality in a poor rural community of southern Chile is four times the national average and sixteen times that of a prosperous Santiago suburb. That mirrors our unequal income distribution. • The aim of health care reform has been to tackle the unfairness and ineffiencies that bermirch one of Latin America’s better health systems. • Since Aug 2002, children with cancer and adults with heart disease or kidney failure have the right to be treated within a specified time in Chile’s hospitals. • By 2007, another 26 diseases should have been added to this list.

6. Reform aims • Centres on the new minimum-care plan (AUGE) • offering guaranteed free or low-cost treatment for 56 ailments that between them are responsible for three-quarters of years of life lost because of premature death or disablement. • Set up Solidarity Fund within Isapre’s system • wage-earners will have to pay part of their contribution. • should limit opportunities for “cream skimming” in private health insurance and strengthen patients’ rights – would no longer be able to charge more either to elderly patients or women at fertile age, at least for the minimum plan. But,… (Chart) • These changes would direct resources where they are most needed, while encouraging patients to demand their rights.

7. Reform restraints • The reform is popular with the public –but not with health workers. • Doctors see standardised treatment as a first step towards managed care and therefore, as a threat to their incomes. • Public sector health workers worry that job security could be at risk. • The Isapres are wary, but see some advantages: • new system would give them a greater control over who provides treatment and • therefore over costs, without impinging on their freedom to offer top-up coverage. • Key to control the evolution of costs: granting more autonomy to hospitals and moving to more prospective and performance related types of funding. (Chart)

8. Reform restraints • The reform adds an extra $230 m to Chile’s total spending on health of $4.3 billion (or 6% of GDP), most of the extra money would come from the public purse. But, likely this reform will cost much more than that... • There is no enough technical capacity to: • design Treatment Protocols • train health workers and physicians • overcome bottlenecks • Reform does not develop a system of indicators to monitor improvements over time (e.g patient feedback measures, rate of childhood vaccination and mortality rates for key diseases)

10. Other Remarks • Main idea is correct • Set up guarantee with patient rights • Instrument aims to set up priorities • Focus on Primary Health Care, emphasis on promotion and prevention • Murphy & Topel’s methodology: • In USA if cancer mortality rate drops in 1%, benefits will be about 6% of GDP • In Chile if mortality rate drops from 5.3 to 5.1 per thousand, benefits will be about 3.5% of GDP • If mortality rate of diabetes mellitus drops in 10%, benefits will be 0.6 times AUGE’s cost

11. Other Remarks • Empower people • Move towards health subsidy portability (Chart) • Reform has to be gradually implemented. • Trade-off between: • cost containment and freedom to choose • technical & economic efficiency and equity • Enhance institutional policies • Better design of public choice issues involved in this Reform.

12. Libertad & Desarrollo’s role in the Chilean Health Care Reform

13. Where do we stand? From Public Opinion to Public Policy Position • Popularizing policy issues and trying to get them on the government agenda: • health public expenditure and its inefficiency • to tackle inequality and inefficiency as guided by best practices • Long waiting lists in public hospitals and lines in primary health care centers • Foster private sector participation: • Public franchising schemes in hospitals and primary care centers. • Financial reform • public subsidy portability • catastrophic insurance & medical savings accounts

14. Where do we stand? From Public Opinion to Public Policy Position • New management practices following the experience of Sweden, UK, Spain and Australia. • granting more autonomy to public hospitals • set up prospective/performance types of funding • develop indicators to monitor quality. • Conduits for translating public opinion into public policy • survey testing public expectations about new health plan. • survey testing hospitals and primary health care quality of service • Mobilizing civil society: • forging coalitions with strategic partners and business associations such as Medical Associations.

15. Designing Effective Media Strategies • Deciding which information to communicate to the media. • meetings with journalists on a regular basis • Vehicles for communication • Workshops and Round Tables (6 p/year) • Bi–monthly reports that cover main health reform issues • Bi–monthly op–ed • Frequently interviews by the press • Radio and TV programs (less frequently) • Working Papers (3 p/year) • International Seminar • Financial issues • Management of Hospitals and Primary Health Care Centers • Hearings.

16. Policy Windows: Influencing Legislative and Executive Bodies • Identifying "entry points" in the policy process • Public Budget discussion • Bills – helping as technical advisors to key congressmen. • Targeting and cultivating the institutions of policymaking • Monthly meetings with government technical officials • Backstopping for parliamentarians and arming them for debate, weekly meetings with: • Representatives • Senators • Political parties officers • Evaluating policy impact

17. Conclusions • Ideas can change the world: • “Facts per se can neither prove nor refute anything. Everything is decided by the interpretation and explanation of the facts, by the ideas and the theories”. Ludwig von Mises

18. Email: rcastro@lyd.org Miami ~ April 2005

19. Demographic and Health Indicators Note: (1) % GDP (2) per capita in US$ PPP (3) 1998, every 1000 live birth (4) birth by women Source: World Development Report 2000/2001

20. Mortality rates adjusted by years of schooling Source: Desafío a la Falta de Equidad OPS.

21. Infant Mortality by Counties Source: Desafío a la Falta de Equidad OPS.

22. Waiting Lists in Public Hospitals Source: Altura Management

23. Health Public Expenditure & Efficiency Source: Tokman and Rodriguez, 2000. ECLAC

24. The need to contain growth of health expenditure per capita Heath expenditure 5000 United States 4500 y = 0.0853x - 160.84 R 2 = 0.7162 4000 3500 3000 Switzerland Canada 2500 Germany Denmark Norway France Belgium Luxembourg Iceland Austria Netherlands Australia 2000 Italy Ireland United Kingdom Sweden New Zealand Japan Spain Finland 1500 Greece Portugal 1000 Czech Republic CHILE Hungary Slovak Republic Poland 500 Korea Mexico Turkey 0 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP Source: OECD

25. Costs by gender & age Source: Asociación de Isapres.

26. No Access to Poor. Insurees by quintile (2003) Source: Survey Casen 2003.