|
Health Insurance In Mexico: Achieving Universal Coverage Through Structural Reform
Fairness in finance is an intrinsic and challenging goal of health systems. Mexico recently devised a structural reform that responds to this challenge. Through a new system of social protection in health that will offer public insurance to all citizens, the reform is expected to reduce catastrophic and out-of-pocket spending while promoting efficiency, more equitable resource distribution, and better-quality care. This paper analyzes the reform, focusing on financial features, expected benefits, and future challenges. It also highlights aspects of relevance for other countries that are striving to formulate and implement health policies to promote universal social protection and fair financing.
Achieving fair financing continues to challenge health systems in countries at all levels of economic development. Complex, differentiated health care institutions were developed in the twentieth century alongside technological breakthroughs, yet effective, fair, and sustainable methods to finance these systems are still lacking even in economically developed countries.1 In most developing countries, financial protection for health is segmented and fragmented. Mexico, a middle-income country characterized by social inequalities and a complex epidemiological transition, fits this description. There are large differences among Mexico’s thirty-two states (including the Federal District of Mexico City), in terms of both health needs and the contribution to health care, particularly for the uninsured. The health system must battle the diseases of underdevelopment, concentrated in the poorest states, and simultaneously meet the challenges and the upward pressure on health spending associated with chronic disease and aging in all parts of the country. The World Health Organization (WHO) 2000 health system performance assessment ranked Mexico overall at 51 out of 191 countries but at 144 on financial fairness.2 The poor performance on fairness of finance reflects the fact that more than half of Mexican households lack health insurance and therefore financial protection. To respond to this situation, Mexico recently devised a structural reform that seeks to extend protection to families not covered by conventional employment-based social insurance. This is expected to reduce economic barriers to timely care and catastrophic household spending. The Mexican reform of 2003 faces challenges that are rooted in the original design of the modern Mexican health system.3 The Ministry of Health was established in 1943. The Mexican Social Security Institute (Instituto Mexicano del Seguro Social, or IMSS) was created in the same year to attend to private-sector, formal, salaried workers and their families. In 1959 the Institute of Social Services and Security for Civil Servants (Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado, or ISSSTE) began to cover government employees and their families. The system was thus segmented—from its inception and through to the reform of 2003—between insured, formal, salaried employees and their families with the right to social security, and the rest of the population (the self-employed, the unemployed, nonsalaried and informal-sector workers, and those who do not work). All citizens other than salaried workers were excluded from formal social insurance schemes, and the health care needs of this "residual" group were attended to by the Ministry of Health. The benefit package was undefined and funded from a combination of federal funds and, to a lesser degree, state-level contributions and fees paid by families at the point of service. When the reform was passed in 2003, approximately 40 percent of the population was covered by the IMSS, 7 percent by ISSSTE, and no more than 2–3 percent by private health insurance. As a result, insurance coverage was regressive both among households and across states, there was an overreliance on out-of-pocket spending to finance the health system, and impoverishing health spending was common, particularly among families in the lowest income deciles.4 The reform addresses these issues by offering subsidized, publicly provided health insurance to the fifty million Mexicans who are not covered by social security and are concentrated among the poor. The reform was passed into law in April 2003, and the new insurance scheme, called the System for Social Protection in Health (SSPH), went into operation 1 January 2004 with the goal of achieving universal coverage by 2010. The Popular Health Insurance (PHI) is the operational program of the new system. The affiliation process runs from 2004 to 2010, so that 14.3 percent of the approximately eleven million families that make up the uninsured population will be included each year. Preference must be given to families from the lowest income deciles. Before the 2003 reform, the financial structure of the Mexican health system was marked by serious imbalances. In 2003 Mexico spent only 6.1 percent of gross domestic product (GDP) (approximately US$360 per capita) on health care. This proportion was below the Latin American average and was too low to address the challenges of the epidemiological transition (shift in the burden of disease to chronic, long-term illness and injury). Second, out-of-pocket spending accounted for more than half of total health spending and was above that of many Latin American countries including Brazil, Chile, Colombia, and Costa Rica. The distribution of public funds among population groups and states was also inefficient and inequitable. Although the uninsured accounted for almost half of the population, they received only a third of the federal funding for health. Further, there was a five-to-one difference in spending per capita across states in 2003, and the difference in state contributions was even more dramatic.5 Regressive insurance coverage worsened the situation. Although more than 60 percent of the richest quintile of the population was insured, the figure was approximately 10 percent for the poorest quintile. Further, in the poorest states, only one-fifth of households were insured. Each year between two and four million households either spent 30 percent or more of disposable income (total income less spending on food) on health or crossed the poverty line because of their health spending. Further, 85 percent of these households were uninsured, and a majority were from the poorest income deciles.6 As a source of financing for a health system, out-of-pocket payments tend to be inequitable, unjust, and inefficient.7 In Mexico the predominance of this form of payment is both a cause and a result of the imbalances discussed above. Reducing it is thus a target of the reform. This paper describes the key innovations and expected benefits of the Mexican reform. It focuses on analyzing design issues and the challenges and results of the initial stages of implementation, paying particular attention to financing.
Objectives. The structural reform of 2003 aims at assuring that all people, independent of their labor-market or socioeconomic status, can exercise their social right to health care as recognized by the Mexican Constitution. The reform has four main objectives: (1) to generate a gradual, predictable, financially sustainable, and fiscally responsible mechanism to increase public spending in health so as to correct the existing disequilibria; (2) to stimulate greater allocational efficiency by protecting spending for public health interventions that are cost-effective but tend to be underfunded; (3) to protect families from excessive health spending by offering a collective mechanism that fairly manages the risks associated with paying for personal health services; and (4) to transform the incentives in the system by moving from supply-side to demand-side subsidies to promote quality, efficiency, and responsiveness to users. Organization of financing. The allocation of federal funds in the new health system is divided into four main components: the stewardship role of the Ministry of Health; community health services; noncatastrophic personal health services; and catastrophic, high-cost personal health services. The logic of the reform separates funding between personal and community health services by establishing a separate fund for the latter that is used exclusively to finance public health programs. This separation of funding is based on a public-goods theory and on lessons learned from previous reform experiences that have neglected community health services.8 Funding for personal health services is based on an insurance logic to deal with uncertainty. A new public insurance scheme (PHI) was devised to finance personal health services. For funding purposes, personal health services are divided between an essential package of primary- and secondary-level interventions in ambulatory settings and general hospitals, and a package of high-cost tertiary care financed through the Fund for Protection against Catastrophic Expenditures. The package of essential services is covered by funds administered at the state level, because these services are associated with low risk, high-probability health events. The package of catastrophic interventions is financed in a fund that aggregates risk at the national level, because low probability and high cost imply that the state risk pool is too small to finance these interventions. Further, on the supply side, the requirements for highly specialized interventions imply that it is efficient to aggregate services. The essential package includes ambulatory care at the primary level and outpatient consultation and hospitalization for the basic specialties at the secondary level. The number of covered interventions is being gradually expanded as funding increases, going from 91 interventions and 168 medications to 154 and 172.9 In addition to empowering consumers by explicitly informing them of their entitlements, this package of guaranteed services is a quality assurance tool, since every facility is accredited on the basis of having the required resources to provide the included interventions. The Fund for Protection against Catastrophic Expenditures covers a package of services that is being updated annually. This constitutes a priority-setting mechanism based on explicit, transparent criteria. The General Health Council is charged with defining the conditions and interventions covered by this fund, which include cancer, cardiovascular problems, cerebrovascular disease, severe injury, long-term rehabilitation, HIV/AIDS, neonatal intensive care, organ transplant, and dialysis.10 The criteria to select specific conditions and interventions are based on burden of disease, cost-effectiveness, and resource availability. Structure of financial contributions. PHI was designed so that its financial structure would be similar to the tripartite logic of the other major social insurers (IMSS and ISSSTE). Thus, there are three funding components for each of the three major population groups (previously uninsured families—PHI; private-sector workers and their families—IMSS; public-sector workers and their families—ISSSTE). The federal government’s fixed contribution (social quota) is equal for all families, which guarantees solidarity among the three population groups. In January 2004 the federal social quota was set at 15 percent of the mandatory minimum wage. This is equivalent to US$230 per year per affiliated family. The second source of funding is from the co-responsible contributor and guarantees solidarity within each population group and redistribution among states. For IMSS, this is the private employer; for ISSSTE, it is a public employer. In the case of PHI, since there is no employer, co-responsibility is established between the federal and state governments in a solidarity scheme that recognizes the huge differences in level of development among states. The federal solidarity contribution is 1.5 times the social quota, on average, but is increased for poorer states at the expense of those that are wealthier. The state solidarity quota is the same in all of the states, set at half of the federal social quota, and the source of funding is state-level revenue. The third contribution is a prepayment from beneficiaries that is progressive and redistributes family income. In the case of IMSS and ISSSTE, the employee contribution is set as a progressive proportion of the wage and deducted from the payroll. The family contribution to PHI is progressive and designed to promote fairness in finance. The upper limit on the family contribution is 5 percent of disposable income, which is defined as total spending less spending on basic needs. Families in the two lowest income deciles do not contribute in monetary terms but are required to adhere to participation rules associated with health promotion. One contribution level is defined for each of the other income deciles. The assignment of funds by state, based on a formula that takes into account health needs and level of socioeconomic development (see below), provides solidarity and the additional funding that is required to cover the poorest families. Allocation of funding for personal health services. The allocation of funding from the reform is divided between federal and state levels. Based on actuarial calculations, the Fund for Protection against Catastrophic Expenditures receives 8 percent of the federal social quota plus the federal and state solidarity contributions. The remainder of the social quota and solidarity contributions are allocated to the states to fund the essential package of health services included in PHI. The family contribution is collected and maintained at the state level. The federal solidarity contribution is allocated to the states using a formula that considers a fixed component per family, a health needs–adjusted component, a component aimed at promoting additional state contributions, and a portion based on health system performance. The formula is designed to make up for historical imbalances and inequities; to respond to differential needs across population groups; to provide incentives for performance and affiliation; and to promote solidarity, universality, and financial justice. For the first few years, the formula is heavily weighted on affiliation to accommodate the transition phase of the reform. The weights and indicators used in the formula are updated annually. This funding model implies a radical change in incentives for state governments and providers. Funding for the states will be largely determined by affiliation to PHI. Thus, the reform provides a legal framework to break out of discretionary allocations and move toward a demand-driven funding model that enables the effective use of an expanded health budget. In the past, federally allocated state budgets in health were largely determined by historical inertia and the size of the health-sector payroll. Affiliation is voluntary, although states have the budgetary incentive to achieve universal coverage. Families who choose not to affiliate by 2010 will continue to receive health care through public providers but will have to continue to pay for services received at the point of delivery. The voluntary nature of the affiliation process is an essential feature of the reform that facilitates the process of replacing supply-side with demand-side subsidies so that money follows people. This process includes incentives for improving the quality and efficiency of health services delivery. To convince families to enroll, the states must provide higher-quality services than in the past. This process, combined with the focus during the first years on the poorest families, will help prevent problems of market failure such as adverse selection. Although the financial trigger is a demand-side subsidy, the additional funding mobilized by the reform is channeled to strengthen the supply side in line with the expansion in affiliation. This is changing the inertial aspects of historical budgets that were based mostly on payrolls. Specifically, the new funds cover drugs, equipment, extended hours at clinics, and improving or building facilities. Providers may be public or private.
Implementing the reform presents a series of challenges, yet progress after the first year is positive. Enrollment. To achieve the goal of affiliating all uninsured families by 2010, roughly 1.5 million families (about six million people) must be enrolled each year. This process is moving ahead. In 2003 almost 614,000 families were affiliated. The goal was surpassed in 2004 as 1,722,000 were covered, including reaffiliated and newly incorporated families. This figure corresponds to 13 percent of families without social security.11 Affiliation must continue to proceed as rapidly as in 2004 to achieve universal coverage by 2010. A behavioral indicator of satisfaction is families’ willingness to renew their yearly enrollment. The data on continuity of enrollment and coverage from the 2003 pilot phase and the noncontributory regime for the poorest two deciles are encouraging.12 A challenge for the future is to maintain this rate of reaffiliation as the reform proceeds to cover larger numbers of families and those that will be contributing financially. Expansion of coverage. Another positive result is that the new system is fully operational and gradually expanding coverage in all of the thirty-one Mexican states and the Federal District of Mexico City. By 2004 the state of Colima had affiliated all families without Social Security with PHI and has maintained universal coverage in 2005. Further, the states of Aguascalientes and Tabasco covered more than two-thirds of uninsured families in 2004, and four other states covered more than one-third.13 Aguascalientes declared universal coverage in 2005. Four more states are expected to achieve this target in 2005 and ten in 2006. Promotion of equity. It is important to note that as stipulated by law, the affiliation process has focused on the poorest families, who do not contribute financially. More than 90 percent of beneficiaries are in the poorest quintile of the income distribution. Further, an important result in promoting equity is that many of the affiliated families are headed by women.14 This is likely to reflect the overrepresentation of single mothers among nonsalaried workers. Public financing. Additional public funding is required for the reform to achieve universal coverage. Initial estimates suggest that total public spending should increase by about 1 percent of GDP to complete the reform in 2010.15 Again, initial results are encouraging; the reform has generated an increase in funding for the uninsured through the Ministry of Health and the states. To be able to accommodate the new entitlements, the authorized budget of the Ministry of Health (including state transfers) for 2005 increased by 55 percent in real terms over the 2002 pre-reform level, and 44 percent as compared with 2004. This has generated a gradual yet continuous trend of improvement in the distribution of public funding between the insured and the uninsured. In 2001, 33 percent of all public funds for health were allocated to the uninsured population and the rest to families with some form of social security. In 2004 the proportion spent on the uninsured and on families affiliated with PHI rose almost two percentage points, and the projected financial allocations over the coming years should further close the gap.16 The budgetary increase comes from improvements in taxation and reductions in other areas of the federal government. Additional resources to accelerate access to high-priority, high-cost interventions, such as childhood cancer, come from an earmarked contribution on cigarette sales that supplements the Fund for Protection against Catastrophic Expenditures. If universal coverage is to be achieved, this process of increasing investment in the health sector, and in particular in the population not covered by social security, must continue. The funding commitment is a particularly important issue in the face of the change of government that will take place at the end of 2006. Maintaining the pace of enrollment and improving the quality of care are keys to garnering policymakers’ and patients’ support, which will be necessary to cement the reform in the face of the political transition. Responsiveness to patients. Another set of challenges are related to converting the system to being more client-oriented and responsive. The population must have greater confidence in public services to be convinced to make a financial contribution and to reaffiliate. This is particularly important in the face of the rising expectations generated by the reform. Ongoing monitoring of patient satisfaction, affiliation, and reaffiliation as well as in-depth, regular surveys are being undertaken. Provider incentives and competition. An important ingredient for the reform is strengthening provider incentives and developing a more competitive environment on the supply side. Shifting the focus of incentives to the demand side, while also strengthening and making more competitive the supply side, constitutes a delicate balance. This is related to the portability of coverage, which in turn depends on establishing compensation mechanisms among states and providers and on improving service availability and quality, particularly in more remote regions. Measures to strengthen the system. To meet these challenges in the face of rapid organizational and systemic change, specific measures to strengthen the health care system include increasing the number of hospitals and clinics; building up human resources, particularly at the management level; and improving drug procurement. This work is part of a national program launched in 2001 to improve technical quality and interpersonal responsiveness throughout the system. The program includes accreditation of providers, and by law, only these providers will be able to participate in the new system. It also seeks to empower consumers to demand accountability through a bill of rights for users and a procedure for incorporating complaints and suggestions. Evidence and information are important tools for meeting the challenges of implementation. Rigorous analysis has been part of the reform since the design phase, and a comprehensive regime of monitoring and evaluation accompanies the implementation process. One example of this is the comparative analysis of performance indicators across states that have been published in annual reports since 2002.17 Publishing these data promotes institutional improvement, because they are used for the budgeting formula for states and as public reference points on system performance. Maintaining broad support. A final challenge is to involve the diversity of actors in the Mexican health system—including Congress, the IMSS, ISSSTE, the states, other government agencies, and the private sector—in the reform process. This is particularly important for the change of administration in 2006, as the reform must maintain a broad support base among policymakers and the population to assure continuity.
The reform of the Mexican health care system is designed to gradually correct major financial disequilibria. The source of health finance is shifted toward publicly organized prepayment, and the distribution of financing between the insured and the uninsured, and among the states, is balanced. To accomplish this, funding for public health services is protected and separated from funding for personal health services. Health care at the tertiary level is covered by a national fund to aggregate risks. The package of covered services is based on explicit criteria of cost-effectiveness and social acceptability. The allocation of funds to the states is based on a redistributive formula to transform budgeting from an inertial, bureaucratic supply-side logic to a performance-based, demand-side subsidy. The reform presents a series of challenges that are being met as part of the implementation and others that are evolving with the extension of coverage and changes in the policy climate. Meeting these challenges is producing knowledge on the management of the health reform process. Future research will make use of the data being collected as part of the implementation to better assess outcomes. Relevance to other countries. The Mexican reform experience is relevant to other countries in at least three senses. First, the reliance on out-of-pocket spending, inequality in the distribution of health contributions, and catastrophic and impoverishing spending on health are issues that confront many countries, particularly middle-income economies. The reorganization of financing in the Mexican health reform seeks to respond to these issues, and this experience will be useful to other countries. The reform builds on earlier and ongoing experiences in other Latin American countries such as Chile and Colombia, where the expansion of insurance coverage was a driving force, and for these countries the Mexican experience may be particularly informative. Second, the Mexican reform was designed and is being implemented subject to budgetary restrictions so that incentives, efficiency, consumer satisfaction, and accountability aspects are especially important.18 Again, these lessons are of relevance, since improving health systems typically occurs in a context of resource scarcity. Finally, the reform has stressed the role of health in the process of economic transition and thus provides lessons on how to position the health sector in the context of economic development and in the minds of economic policy-makers. International evidence base. Perfecting evidence as a global public good implies promoting its use for national policy formulation, as well as intensifying the use of national analysis in developing international evidence. The Mexican experience constitutes an example of how global, knowledge-based public goods such as conceptual frameworks (for example, the WHO Framework on Health System Performance), standardized methods (for example, the household income and expenditure surveys), and analytical tools (for example, national health accounts) can be applied in the context of national policy making.19 National evidence thus contributes to global literatures on health-sector reform, finance and financial fairness, and system performance assessment.20
Felicia Knaul (knaul{at}attglobal.net) is general coordinator for modernization of education in the Ministry of Public Education, Mexico, and principal economist at the Mexican Health Foundation, both in Mexico City. Julio Frenk is minister of health of Mexico. The design, development, and implementation of the reform described in this paper are the result of the work of a team at the Ministry of Health of Mexico. The authors also thank Octavio Gómez, Eduardo González, Héctor Hernández, Miguel Angel Lezana, Renato Iturriaga, Adolfo Martínez, Enrique Ruelas, Carlos Santos, and Roberto Tapia for helpful comments; and Héctor Arreola, Sebastián González, and Oscar Méndez for excellent research assistance and contributions. Some of the analytical work for this paper was undertaken by Felicia Knaul at the Mexican Health Foundation with support from the Projecton Health and Competitiveness; WHO; the Population Aging Research Center at the University of Pennsylvania through NIH/NIA Grantno. P30AG12836; and the National Council for Science and Technology of Mexico. The authors take full responsibility for the contents of this paper.
This article has been cited by other articles:
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Top
The Reform: Social Protection...
Implementation Phase: Results...
