Neoliberal health reforms are imposed in each country depending on the current health system, the political position of the national government, the correlation of forces between legislators and the degree of opposition from citizens
Para leer en español clic aquí
This paper proposes the following theses: 1) The World Bank and the International Monetary Fund have been instrumental in the design and implementation of a global strategy which results in health reforms that benefit private investors in the insurance and healthcare business; and 2) The free-market oriented health model promoted by these institutions has had a negative impact on the health status of the population where it has been applied. After analyzing the common origin of the free market-based reforms backed by the international financial organizations, a short description of the healthcare reform process in Colombia, Tanzania, the Netherlands, and Spain is presented. The characteristics of Colombian health reform and its role in expanding health inequities are discussed in more detail.
“…public health ethics must look beyond health care per se to consider the structural conditions, and social and economic determinants that promote or inhibit the development of healthy societies”. (0)
Origin of free – market based healthcare reforms
The collapse of the former Soviet empire was interpreted by Western liberal democracies as the irreversible beginning of the global predominance of new forms of “free – trade” societies in which the role of the state tends to disappear and be replaced by the dynamic of the market forces (1). Within this approach, public health and centralized healthcare services provided by governments must be replaced by privatization and decentralization of health systems (2,3)
The global promotion of market-oriented health reforms initiated by the World Bank (WB) and the International Monetary Fund (IMF) through its structural adjustment policies reached its momentum with the publication of “Investing in Health” the World Development Report 1993 (4). In sum, this document recommends the reduction of governments’ role in the field of health to finance and deliver only two “…public health and essential clinical care packages…” (4): one package of very basic public health services and another package to provide limited clinical services for the poorest. The report is also a general call to privatization of the health systems, the introduction of “user fees”, and the creation of national insurance markets open to international competition by private insurance companies.
Other urgent recommendations from the multilateral organizations included: the transformation of health ministries which must abandon the responsibility of delivering health services for the general population in favor of becoming “modulators” and regulators of the new health system; the consequent rationalization or “lay off” of the state health workers who are now not necessary; and the decentralization of health funding and services to facilitate the participation of private companies in the new market created with the implementation of healthcare reform (5)
Promoters of the new free market-based healthcare systems justify them in the first place by emphasizing “consumer choice,” or the possibility that citizens can select the type of insurance and the health insurer. Consumers who can afford the often-hefty premiums will benefit from access to a wide scope of health packages offered by competing insurers. However, as Julian Tudor Hart predicted in his “inverse care law”, the most vulnerable populations (the poorest and most powerless who tend to be most in need of healthcare), will lose access to health care provided by the State (6). Consumer choice is an obligatory precondition for establishing and maintaining the new system of market competition and market-oriented reform. But what the millions of people living under the poverty line really need is not “consumer choice” but access to health services.
By the same token, the World Bank (7) and in general the defenders of neoliberal health reform, argue that increasing privatization of health services does not necessarily affect access to health care and that governments can introduce “public constraints” such as the definition of a mandatory and universal package of services and the prohibition of risk selection (the trend to enroll more low-risk than high risk individuals).
Several models of market competition have emerged during the last decades in the complex process of adapting the pre-neoliberal welfare states to the requirements of the new free-market oriented healthcare reforms. In reality all these models are variants of the same business scheme of private health. As stated in a 2003 issue of Managed Care Magazine with respect to managed competition, one of the main healthcare reform models recommended by the World Bank: “There’s more than one way to skin a cat, but all are not equally good. Is it time for another look at managed competition?” (8).
Although the general strategy and the principles are the same, the application of health free-market oriented policies to a particular country assumes distinct patterns depending on the preexistent structure of the health system, the political forces in control of the government and the level of resistance to health reform exerted by health workers and the general public.
By the end of the 20th century, most of Western European countries were implementing decentralization of financial and administrative responsibilities, consumer choice, and other market-oriented health policies. Similarly, many nations in Africa, Asia and Latin America have adopted neoliberal health reforms by recommendation of multilateral organizations (3,9). Even the more socialized health systems such as the one in Britain have been partially reformed to introduce elements of consumer driven healthcare (10).
Next, the cases of Colombia, Tanzania, The Netherlands, and Spain are discussed in order to illustrate the origin and impact of neoliberal health reforms.
Free-market based health reform in Colombia
Structured pluralism(11), a managed competition model directly derived from the World Bank proposal was the conceptual frame used for designing the Colombian market oriented health reform of 1993 or Law 100. The law established a new health system based on the principles of privatization, decentralization, and managed competition. The latter was implemented at the national level without having previously studied its feasibility(12).
Photo: Office of the Social Security Institute (ISS), Bogotá
The reform created two different regimes: Contributive (CR) for the population that can afford insurance premiums and Subsidized (SR) for the poor. Demand-based subsidies (transfers to citizens) were established, replacing the preexistent supply-based subsidies (direct transfers to public hospitals).
In addition, the salary contributions to the CR were raised from 4 to 12 percent (two thirds of which are paid by the employer while the employee pays the rest).
Also following the Bank recommendations, the Colombian reform established two types of organizations: a) Institutions in charge of financing and administrative management of insurers (this type of institutions is denominated EPS [Spanish initials] in the contributive regime or ARS [Spanish initials] in the subsided regime) and b) Institutions providing health services (IPS [Spanish initials]). Both types of companies can be publicly or privately owned but they must compete.
After the Law 100 was enacted, the public agency Social Security Institute (SSI) continued as the EPS with the largest number of affiliated (more than 10 million in 1995). Today, the SSI does not exist. A series of governmental decisions forced its disappearance: Arguing mismanagement, the government blocked new affiliations for 3 1/2 years; divided the institution in 7 separate regional organizations reducing substantially their funding; and decreed non-competitive payments that seriously limited its capacity to contract services delivery with IPSs (13). Finally, the administration of President Alvaro Uribe who acting as a member of the Colombian Congress had proposed the market-oriented health reform in 1993, ordered the termination of the SSI in January of 2007. The former SSI hospitals system, now in private hands operates under the name of “Nueva EPS”.
To avoid risk selection, the reform created an equalization fund (FOSYGA for its initials in Spanish) to pay insurer companies a risk adjustment premium compensating for age, gender, location, and number of dependents of their clients. However, by 1998, the State SSI was insuring 94 % of patients diagnosed with catastrophic diseases in the contributive regime. And in 2007, at the moment of the cancellation of its operating license, 43,500 out of the 3.2 million of SSI affiliated were persons with catastrophic diseases. This testifies to the fact that the reform’s objective of controlling adverse selection has not been attained (13).
One of the main goals of the Colombian reform was to provide universal health insurance by the year 2001. Despite a significant increase in health expenditures, that goal was not achieved and still has not come to fruition. A World Bank study on countries which have made “improvements in health care coverage” reports that in 1993 before the reform 25% of the Colombian population was covered with some type of health insurance. It also documents that in the same year approximately 50% of the population had access to services provided by the public network of hospitals, clinics and health centers and about 20% of the population was covered by the ISS. Only 11% of the population was covered by private insurance or paying out of pocket for healthcare (14). This data reveals that before the reform more than 80% of the population had easy access to health services. For the remaining 20%, as anyone who worked with the then existent National Health System can confirm, there was the possibility to receive some type of free or low-cost medical attention through emergency rooms or other healthcare services.
Law 100 not only did not reach the promised universal coverage by 2001 when the number of Colombians with some kind of health insurance had increased to just 53.76% but had the main result of expanding inequity in access to health services. By the same year of 2001, 38.5 % of the non-poor and 54% of the poor did not have any type of insurance (5, 15). And by 2004, only 26,760.101 people or 59.1% of the population was incorporated in the health system (30.5% in the contributive regime and 28.6% in the subsided regime) (16, 17).
Photo: Cesar Gaviria, president of Colombia, 1993 and Álvaro Uribe, proponent of the health reform in 1993
According to government sources the population covered by insurance increased from 25% in 1992 to 75% in 2006 (14). However, when looking at the benefits package, it becomes clear that inclusion in the subsidized Regime is not the same as having access to essential healthcare (13) and having insurance is not the same as health coverage (18).
Law 100 implied in the first place a radical change in the quantity and quality of healthcare services provided to the poor (in 2003, 64.3% of households were below the poverty line). After the reform, low income families have had access to a much more limited package of health services. The essential benefit package or “Plan Obligatorio de Salud for” the Subsidized Regime (POS-S) provides a restricted package so inferior compared to that of the contributive regime (POS–C) that the Colombian Constitutional Court recently issued the Sentence T 760 establishing a timetable for the unification of the two packages (19, 20).
In addition, there are 10 million disenfranchised Colombians not included in the subsidized regime who do not have access to any standard package of services or medicines. They are classified as “vinculados” or “attached” to the health system (13). This large population of “attached” have access only to the few public and underfunded hospitals that have survived the reform implementation. The public healthcare network existent before the reform has practically disappeared and most of the public hospitals that served disadvantaged populations are now closed for lack of government funding and support and because the application of Law 100 privileges the private EPSs and IPSs (21)
Dr. Roberto Esguerra, President of the “Association of Hospital and Clinics” in Colombia and a very prestigious physician known for his support of Law 100 recently declared:
“The (Colombian) health system collapsed …people are getting sick more often because there are not health prevention or promotion programs…since there is a structural crisis in the healthcare services, going to hospital emergency rooms is the only way people have of receiving opportune medical attention… so emergency services are in critical condition…Law 100 is good but giving the control of health policies and health promotion and prevention to the private sector was a mistake… The state must centralize health policies…we have to resuscitate the Ministry of Health” (22).
With respect to health expenditures which had increased considerably after the Law 100 was enacted, Rosa Rodriguez and Alberto Infante affiliated with the World Health Organization and the World Bank concluded that:
“Colombia’s health care reform has substantially increased the availability of financial resources to the sector. However, the means by which this has occurred has generated dissension; the system relies on the market intermediation of EPSs and ARSs, generating problems associated with high transaction costs, inefficient management and sluggishness in the flow of resources” (15).
The implementation of market-oriented reform in Colombia has been accompanied by a worsening of public health indicators. Vaccination coverage has decreased around 10% since 1995, reaching only 80% of the population in 2005 and in the States of Cauca, Vaupes, and Vichada, less than 60% of the population receives the required vaccines (23). Acosta-Ramirez et al, in a study with children under-6 years of age affiliated with ARSs in the subsidized regime found that after the reform:
“The low vaccination use and the relevant relationships to health care delivery systems characteristics show there are barriers in the healthcare system, which should be assessed and eliminated. Non-availability of regular healthcare and deficient information to the population are factors that can limit service utilization.” (24).
The maternal mortality ratio increased from 90 per 100000 live births in 1996 to 130 per 100000 live births in 2003 (that same year the maternal mortality ratio was only 5 per 100000 live births in Spain and 16 per 100000 in The Netherlands) (23, 25).
In: “Tuberculosis control and managed competition in Colombia” Arbelaez et al describe the multiple problems that emerged in TB control programs after Law 100 became into force. Among them:
“Vaccination barriers, decrease in passive case detection, barriers for studying uninsured contacts, delayed diagnosis, out of pocket payments for diagnostic tests for the uninsured, high proportion of incomplete treatment among poor uninsured and subsided patients, and suspension of patient’s follow up when his/her insurance expires” etc. (26).
By the same token, Kroeger, Ordonez, & Avinal, studied the impact of the market oriented reform on malaria control and concluded that strengths of the former health system such as national operational planning and program execution were lost with the decentralization of services and that:
“Malaria control had to be reinvented at a much larger scale than anticipated by the reformers caused by a whole of series of problems: complex financing of public health interventions in the new system, massive staff reductions, the difficulty of gaining access to district and state budgets…” (27)
In 1981, The World Bank and the International Monetary Fund began to “recommend” the implementation of neoliberal economic policies in Tanzania, one of the poorest countries in the world (per capita income in 2006 was US $ 350). A first agreement between these agencies and the Tanzanian government with the purpose to implement Structural Adjustments Programs (SAPs) in the country was signed in 1986 under the name of “Economic Recovery Programme”. This Adjustment Program was followed by the “Economic and Social Action Plan” and then by the “Priority Social Action Plan” in 1989. Currently and under the Bank’s and Fund’s supervision, Tanzania implements a “Poverty Reduction Strategy” PRSP (or MKUKUTA in Swahili) (28,29,30)
Lugalla , who has chronicled the history of SAPs and rigorously analyzed their impact on Tanzania’s population’s arrived to an unambiguous conclusion:
“…Now, more than a decade later, the living conditions of most Tanzanians have worsened. Real incomes of most households have declined sharply, malnutrition is rampant, food production has fallen relative to population, and social services have deteriorated both in quantity and quality”.(31)
In fact, life expectancy has dropped dramatically under the macroeconomic reforms imposed with SAPs and PRSP. While during the two decades immediately after the independence of Tanzania from the British (1965-1985) life expectancy increased from 44 years to 52 years; in the period 1985 – 2005 life expectancy reversed again from 52 years to 44 years (32). The HIV/AIDS epidemic in Tanzania and other Sub-Saharan countries should also be explained in the context of neoliberal globalization (33)
In 1993, the same year that Law 100 was enacted in Colombia, Tanzania’s government passed a health reform introducing managed competition, decentralization and privatization of health services including cost sharing, and user fees. Following the global recipe from the World Bank, this reform overturned a 1967 national health policy (the Arusha Declaration), which made free healthcare mandatory for all Tanzanian citizens as well as a 1980 law that had eliminated private healthcare services.
The neoliberal reformers established a private health insurance program and user fees in a country where less than 10% of the population work in the formal economy and receive a regular salary and built most of the private clinics in urban areas where they were not needed (34).
The decentralization process increased bureaucratization and lack of funding in detriment to the provision of healthcare services. Furthermore, due to the disruption of the former national health information system, illnesses of local incidence (trypanosomiasis and filariasis for example) were not registered (9).
As in Colombia, critical health indicators such as maternal mortality have not improved with the implementation of the reform in Tanzania. Evaluating the situation in the health sector, the most recent report from the Ministry of Planning, Economy and Empowerment states:
“DHS data show that maternal mortality situation has not changed in Tanzania. The estimated maternal mortality rate from 2004 data is in fact higher than that from the 1999 TRCHS data (i.e. 578 and 529 respectively). However, given that maternal mortality estimates are subject to large sampling errors, the difference between the two figures is not statistically significant. Overall, there is little change in the proportion of births attended by skilled health personnel (41 per cent in 1999 and 46 per cent in 2004), and births taking place in health facilities (44 per cent in 1999 and 47 per cent in 2004)” (35).
Free – market health reform in the Netherlands
The introduction of managed competition in the Netherlands health system was proposed in the 1980s but a comprehensive free – market oriented health reform came into force only in January of 2006. It took 25 years to progressively overcome, in a process of “policy learning” and building political support, the resistance to replace a system in which the State was responsible for providing for healthcare services of most of the Dutch population.
Photo: Jan-Kees Helderman; Associate Professor, Management Research Institute, Radboud University Nijmegen, The Netherlands
Helderman et al (36), divide the history of neoliberal health reform in this country in three periods: a) 1988–1994 when the proponents of market oriented reform launched an unsuccessful but vigorous movement b) 1994–2000 when the new government restored the preponderance of State health programs but allowed the
preparation of the conditions for a system of managed competition and c) 2001 to present when the plan for a market oriented reform was retaken and a conservative government was elected. The authors correctly predicted that the reform would be approved in this period (their study was published in 2005 before the new reform was enacted).
The 1987 Dekker Committee proposal explicitly recommended managed competition as the core principle for a reform of the Dutch healthcare system. The mechanisms proposed were the same of any free – market oriented reform (37): differentiation between a mandatory essential package as well as voluntary packages of supplementary benefits; consumer choice and market competition among private and public insurers; and the establishment of a fund to control risk selection. These reforms were only partially approved but the government elected in 1994 reversed them and limited the role of market competition (37,38).
By 2005, the Dutch health system was a mix of public or “Ziekefonds”, still covering 70% of population and private or “particulier”, health insurance funds covering the other 30%. The tradition of consensus building in health policy making among unions, health professionals, insurers, and patients was a strong component of health policy; and the Ministry of Health, Welfare and Sports (VWS) exerted very strong supply controls. In a 1999 survey, 73.2% of the Dutch population expressed their satisfaction with the healthcare system, mainly because of the well-developed scheme of primary healthcare.
The centre – right government elected in 2003 revived the Dekker proposal and promoted a healthcare reform based on the principles of managed competition. Arguing the inevitability of free – markets in healthcare, the necessity of containing expenditure, and advertising the advantages of consumer choice and of avoiding waiting lists; the reformers obtained the required political support for approving a new healthcare system which came into effect in 2006 (37,39).
There are no substantial differences in the Dutch reform with respect to the general scheme of consumer choice healthcare model. Every citizen must contribute with 6.5 % of his/her income to subscribe to a basic package (defined by law) with the option to buy additional supplementary plans. The premium is the same for the mandatory essential plan regardless of health status, age, or gender and there is a public fund to compensate insurers and in theory avoid risk selection. The mixed system of health care financing was abolished by the 2006 reform and “Ziekefonds” and “particulier” funds do not exist anymore. As compensation a low-income person can apply for a partial tax allowance to pay for his/her premium.
The current Spanish National health System was created in 1986. The system which is financed with taxes replaced the preexistent social security system; it provides almost universal coverage (99.5%) and free health services for all inhabitants of the Spanish territory despite their socioeconomic status.
During the 1990s and especially after 1996, when the right Popular Party won the elections, some measures aimed at introducing market competition have been implemented. In particular, important tax deductions were granted to employers who purchased insurance to cover their employees. Also, health coverage associated with sick leave and healthcare provided in case of work accidents and labor diseases were transferred to mutual funds created by company owners (40). Currently, 10% of the population purchases voluntary private insurance.
Photo: Virgen del Rocío University Hospital,Seville, Spain
The other transformation in line with market-oriented reforms that was adopted during the second administration of the Popular Party (2000-2004) is the decentralization process that translated the power from the central government to the Autonomous Communities.
Autonomous Communities such as Catalonia are already discussing the possibility of reforming the health system at least partially (41).
The experience in countries where a similar decentralization has been implemented shows that in a relative sort period of time, market-oriented health care measures can be introduced by regional governments. In Switzerland for example, where Cantons have autonomy, the negative impact of health reform on citizens’ pockets has been considerable (42).
Because of almost universal coverage, the tax funded scheme, and the level of satisfaction with the quality of health services, there is a general public opposition to market-oriented reforms in Spain. However, in its March 21, 2006 report, the International Monetary Fund Mission in Spain states:
“Broad-based structural reforms: eliminating rigidities that raise domestic costs, stunt innovation, and restrain competition is essential to creating a more competitive Spain. Here we see three main priorities: concluding the social dialogue with clear liberalizing steps in the labor market; undertaking competition-enhancing product and services market reforms; and launching overdue pension and healthcare reforms” (43).
A systematic pursuit of free – market oriented health reforms has taken place around the world since the 1980s. Promoted by the World Bank and the International Monetary Fund, radical reforms have been introduced in Third World countries as well as in industrialized nations. The strategy implemented by the Breton Woods institutions is twofold: 1) introducing small reforms in the health sector directly through the programs of macroeconomic adjustment – denominated “Little R”-; and 2) introducing complete and fundamental health reforms when political conditions are favorable -denominated “Big R”- (44).
In poor countries with governments tied to and by the interests of transnational capital such as Colombia and Tanzania, health reforms were approved in a very short period of time; in industrialized countries with a strong tradition of welfare state such as Holland, the approval and implementation of market oriented reform has taken decades of patient work and “policy learning” by World Bank’s officers and their pupils. There are nations such as Spain still reluctant to accept the intervention of market forces in the field of healthcare but these countries confront the pressure of multilateral institutions and of the health reform plans recommended by them.
The cases of Colombia and Tanzania illustrate how negative the impact of free – market reforms can be. The case of the Netherlands, an industrialized country with high levels of education and a history of a health system with universal coverage and good quality healthcare services, will serve to test the improvements in health promised by the reformers with the introduction of an unnecessary system of financial intermediation that benefits the private health industry. Spain will be a point of reference to confirm whether or not (as predicted by advocates of the transnational companies involved in the health business), the future of global health implies the continued extension of free – market oriented healthcare systems; or if the resistance of the affected populations will stop the neoliberal commoditization and globalization of healthcare.
A decade ago, Sen and Koivusalo explained the impact of health reforms in developing countries in the following terms:
“It supports a re-emergence of colonial structures of health care which encourage an affluent minority sufficiently privileged to be engaged in international exchange with separate arrangements for private care, while the majority of the population remain marginalized or suffer economic hardship if they seek any health care other than the essential packages available in the public sector”. (45)
Today, as the experience in Colombia confirms, there is no “essential package” in the health models imposed by the Breton Woods institutions that minimally protect the health of the poor. In consequence, the only alternative is the total reversal of the regressive health reforms based on the free-market approach.
Citación: Useche, Bernardo. (2008). From public health to private health: A global perspective of health reform in Colombia. Palimpsestvs. Journal of the Faculty of Human Sciences – National University of Colombia. 6. 123-131. Spain versión.