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Health Care Reform Challenges & Pitfalls The Chilean Case Miami – April 2005 Rodrigo Castro Libertad y Desarrollo Health Care Reform Brief Overview Background All chileans with jobs pay at least 7% of their salary to health insurance providers.

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Health Care Reform

Challenges & Pitfalls

The Chilean Case

Miami – April 2005

Rodrigo Castro

Libertad y Desarrollo

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Health Care Reform

Brief Overview

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  • 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.

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  • 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.

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  • 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.

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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.

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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)

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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)

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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

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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.

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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

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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.

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    Designing Effective Media Strategies Position

    • 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.

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    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

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    • 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

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    Email: [email protected]

    Miami ~ April 2005

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    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

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    Mortality rates adjusted by years of schooling

    Source: Desafío a la Falta de Equidad OPS.

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    Infant Mortality by Counties

    Source: Desafío a la Falta de Equidad OPS.

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    Waiting Lists in Public Hospitals

    Source: Altura Management

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    Health Public Expenditure & Efficiency

    Source: Tokman and Rodriguez, 2000. ECLAC

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    The need to contain growth of health expenditure per capita

    Heath expenditure


    United States


    y = 0.0853x - 160.84



    = 0.7162




















    United Kingdom


    New Zealand








    Czech Republic



    Slovak Republic



















    Source: OECD

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    Costs by gender & age

    Source: Asociación de Isapres.

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    No Access to Poor. Insurees by quintile (2003)

    Source: Survey Casen 2003.