Chilean Health Reform Challenges

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Chilean Health Reform
Challenges PitfallsMay 22 2008
Rodrigo Castro Libertad Desarrollo www.lyd.org
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Outline
Main Issues

• How is Chilean health status?
• How is Chilean health system?
• Why does AUGE arise?
• What does AUGE mean?
• How much does AUGE cost?
• Will it be worth it?
• What are the main challenges in our health care
  system?

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Expenditure
Public Health Expenditure (mill US2004)
How much to spend?
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Expenditure
International Benchmarking
How much to spend?
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
Italy
2000
Ireland
United Kingdom
Sweden
Japan
New Zealand
Spain
Finland
1500
Greece
Portugal
Czech Republic
1000
CHILE
Hungary
Slovak Republic
Poland
500
Korea
Mexico
Turkey
0
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
GDP
Fuente OECD
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Expenditure
Public Private Per capita expenditure
How much to spend?
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How is Chiles health status ?
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Health Status
Basic Health Stats

• On basic health indicators, Chile scores well.
• 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.
• These achievements are mainly due to investments
  in public goods such as child health control,
  sanitation, water and sewage investments, etc.

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Health Status
Statistics
Infant Mortality
General Mortality
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Health Status
Demographic Indicators
Statistics
Source INE (1) Average number of babies born to
women during their reproductive years
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Health Status
Statistics
Main death causes
Source INE
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Health Status
International Comparison
Statistics
Notes (1) GDP (2) in USD PPP (3) 1998, each
100.000 NB Source World Development Report
2000/2001
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Health System
Organization

• 2 systems
• Poorly linked
• Population is segmented by risk and income
• Centralism
• Historical public policies
• Big public sector, was design in the 1950s
• Inercy
• There is no leaderships
• Interest groups have important power

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Health System
Organization
Dual Insurance Scheme
D per capita income
Public Sector
Health risk
Private Sector
D fiscal transfers
Income
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Health System
Organization
Insurance Price Scheme
FONASA
price
FONASA
price
ISAPRE
ISAPRE
risk
income
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Health System
Organization
Public Sector Organization
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Health System
Organization
Financing Scheme
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Health System
Organization

• Poorly management performance due to wrong
  incentives
• Financing does not follow good management
  practices.
• Human Resources policy is poorly defined.
• There is no competition between public hospitals.
• Unfair competition against private sector
  (Chart).
• Public hospitals which must offer free care to
  the poor, are overstretched and grossly
  inefficient Details.
• Since 1990 it has thrown three times more money
  with low productivity (Chart).

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Health System
Public Health System Productivity
Management
Source Rodríguez Tokman, 2000
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Health System
Unfair Competition
Subsidy due to fiscal aid
Assumption household of three persons
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Health System
Management
Hospitals Efficiency in Chile

• Overall level of technical inefficiency in the 4
  groups of hospitals is in the range 30 to 94
• This is a combined inefficiency due to operation
  at non-optimal scale (inappropriate hospital
  size) and pure technical inefficiency
• It implies that on average hospitals use about 30
  to 94 more resources than what is required for
  the given output level.
• Then if the inefficient hospitals were to operate
  as efficiently as their peers on the frontier
  (benchmark) efficiency gains in terms of
  reduction in current expenditure would amount to
  US107 millions.

Source Working Paper N83
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Health System
Private Insurance

• Poor with no access (Chart).
• Different rules of the game law does not
  support integration and competition.
• Information and coverage problems health plans
  aim to ambulatory care and does not cover high
  cost treatments.
• Health cost increase due to information
  assymetries between users-physicians-insurer, new
  diseases.
• Discrimination by age/gender/diseases (Chart)

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Health System
No Access to Poor
Insurees by quintile (2003)
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Health System
Costs by Gender and Age
Risk Selection by gender/ age/illness
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Health System
Whats the problem?

• Policy experts believe that current health system
  wont be able to face with reasonable sucess the
  future sanitary challenges.

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Why does AUGE arise?
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AUGEs Philosophy
Causes

• Political issues
• Average conceals glaring inequality
• Population low satisfaction

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AUGEs Philosophy
Political issues

• Improve health for all, lowering life lost
  because of premature mortality or disability
  (DALYS) as well as, lowering health inequalities,
  improving health conditions of riskier groups
• Sanitary Goals 2000-2010

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AUGEs Philosophy
Infant Mortality in local governments
Inequality Gap
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AUGEs Philosophy
Infant Mortality by mothers years of schooling
Health Inequality
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AUGEs Philosophy
Mortality rates adjusted by years of schooling
Inequality Gap
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That mirrors our unequal income distribution
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AUGEs Philosophy
Income Inequality
Ratio 20/20 increase from 9 to 14 times
between 1970-03
Source Data 1970-1980, U of Chile. Data 90-2003,
Household Survey, CASEN
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AUGEs Philosophy
Public Opinion about their health condition order
by income quintiles
Low Satisfaction
Source CASEN 2000
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AUGEs Philosophy
Low Satisfaction
Public Hospitals long waiting lists
Source Altura Management
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AUGEs Philosophy
Low satisfaction
Public Hospital Waiting Lists
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AUGEs Philosophy
Low Satisfaction
Patients in waiting list and weeks
Source Altura Management
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AUGEs Philosophy
4 Challenges

• Demographic changes
• Inequalities gaps
• Population expectations
• Solve pending problems and enhance sanitary
  achievements

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AUGEs Philosophy
Why do we need to guarantee?

• Because people need to know what to expect from
  health system and what they should do if their
  expectations are not fulfill.
• It points out a world wide issue health care is
  getting more expensive and current health care
  system is not able to insurance everything to
  everyone.

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AUGEs Philosophy
What kind of guarantee?

• Ideal total coverage
• Reality set up priorities, direct resources
  where they are most needed, while encouraging
  patients to demand their rights.
• How do we define it?
• Technical criteria
• National Sanitary Goals
• Financial criteria and
• Social and political criteria

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What does AUGE mean?
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AUGE
Definition

• Sanitary instrument which enhance equity and aims
  to achieve sanitary and social protection goals
• Set up health guaranteed plan

• EXPLICIT GUARANTEE
• Access
• Opportunity
• Quality
• Financial protection

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AUGE
Components

• Collective
• Collective and individual actions
• Prevention and promotion
• Individuals
• Current ailments offered by FONASA (Public Health
  Insurance Fund)
• Priorities with maximum or intermediate guarantee

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AUGE
How does it work?

• Ailments set up
• MINSAL has to define ailments every 3 years.
• Advise by Consultive Council
• Approve by joined Supreme Decree of MoH and MoF

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AUGE
How does it work?

• FONASA and ISAPRES would have to offer to their
  beneficiaries
• Guarantee will enhance insurees rights.

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AUGE
What does include?

• Minimum Health Care Plan will offer 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 or
  disablement.

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AUGE
However,....
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How much does it cost?
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Health Care Financing
Cost estimation

• Government says the reform will add an extra USD
  230m to Chiles total spending on health of USD
  4.3billion (or 6of GDP). Most extra money would
  come from the public purse.
• But, likely this reform will cost much more than
  that...

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Health Care Financing
Some bad news

• Is not the only reform that needs financial aid

Rema, no más... Mira que tenemos que pagar el
Chile Solidario, el Auge, las compensaciones por
la baja de aranceles, la descontaminación de
Santiago, las aguas lluvia, la crisis de la
educación, el hoyo de la salud, la compra de
tierras para los mapuches, el Miramar, las
víctimas de los DD.HH., las obras para celebrar
el bicentenario, la plata de los partidos
políticos, las deudas de los municipios, los...
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Health Care Financing
What does it include ?

• AUGE - Pilot
• Heart diseases
• Kidney failure
• Infant cance
• Pain treatment
• Uterous cancer

US Millions 1.84 5.38 0.61 0.61 0.92 Total
9.36
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Health Care Financing
Resources

• Where do we get these resources?

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Health Care Financing
Solidarity in health care

• Solidarity in health care is rather limited in
  the current Chilean health care system. Money
  does not follow health needs.
• Also, private insurers are not really forced to
  compete on quality and efficiency of health care,
  but rather compete on risk selection
  (cream-skimming) which is a waste of resources.

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Health Care Financing
Risk Compensation Fund

• With the introduction of a guaranteed health
  benefit package, the universal premium for which
  will be compensated by the Joint Compensation
  Fund (including a demand subsidy), a contribution
  to more equity and solidarity in health care
  financing and towards more efficiency and quality
  in health care delivery will be achieved.

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Will it be worth it?
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Remarks
Main Highlights

• 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 Topels 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 AUGEs cost

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Remarks
However,

• Financial restriction (estimated cost of this
  plan is over USD 300 million, around ½ of GDP).
  
• 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 income.

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Remarks
However,

• There is no enough technical capacity to
• Design Treatment Protocols
• Training health workers and physicians
• Bottlenecks
• Key to control the evolution of costs granting
  more autonomy to hospitals and moving to more
  prospective and performance related types of
  funding.

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Remarks
However,

• Reform should limit opportunities for cream
  skimming in private health insurance and
  strengthen patients rights.
• 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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Remarks
Proposal

• The current discussion should focus on how
  benefit package will be design, health care
  organize and how this reform will be implemented
  gradually instead of benefit package coverage.

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Concluding RemarksWhat are the main challenges
in our health care system?
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Ideal Health Care System
Main Issues

• Focus on people
• Equity in financing and access
• Efficiency health care
• Accountable
• Empowerment

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Ideal Health Care System
Challenges

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

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Chilean Health Reform
Challenges PitfallsMay 22 2008
Rodrigo Castro Libertad Desarrollo www.lyd.org