Universal Fiscal Policies, Financing and Health System: The Case of Uruguay

22/05/2018 - Daniel Olesker

As a 2010 PAHO/WHO report puts it, universal health coverage implies three dimensions:

  1. horizontal or population coverage: the proportion of the population that is covered;
  2. vertical coverage or financial protection: equitable access to health care regardless of ability to pay;
  3. depth of coverage: benefits or services to which the covered population has access.

Therefore, health coverage will be universal as long as it implies equity in coverage, access and use, and provided that it contributes to the financing of care according to its ability to pay. The premise is: “from each person according to their income to each person according to their needs”.

Adequate financing of universal access and coverage: The model of health as part of social security

Taking as a reference the previously developed premise, according to our definition, the most suitable mechanism for this goal is the accumulation and management of economic resources in a common public fund:

  1. The people contribute with a share of their income to provide health coverage to their families;
  2. The State contributes through its general income to cover those who do not have income or insufficient income, in order to compensate the difference between contributions and the costs of the system;
  3. Health operators receive resources according to the population that has received attention, in order to cover the probability of the costs of their care. The goal is to ensure that the financial risk of health care is borne by everyone and not just by people who get sick.

Thus, we have a sustainable financing mechanism where high-income individuals subsidize those with low income; those who use the system less subsidize those who use more. From an intergenerational perspective, it allows each group to finance each other in different moments of their lives.

The financing reform in Uruguay

The health reform in Uruguay defined a new financing model, with contributions from taxpayers, employers and a contribution from the State’s general budget, which nowadays accounts for roughly 25% of social security costs. As for the purchasing function of the social health insurance, a health fee is paid, which has per capita value that is adjusted to the risk of the person based on age and sex, as well as a target component that rewards the compliance with health goals established by the regulator. Another element was guaranteeing equal benefits through the Comprehensive Health Assistance Program (PIAS), which is a compulsory portfolio of benefits for all integral providers, serving the entire population of the country. Its scope is highly comprehensive (it is not a basic basket). The PIAS, as well as low frequency, high complexity and high cost treatments are financed through the National Resources Fund (FNR), which is also a fund for equitable distribution of the risk of care.

This could not be done at once, because of the high segmentation and fragmentation of the Uruguayan health system prior to the reform and the very low level of public health expenditure required a gradual assurance process. The definition of the stages was associated with the priorities of the social policy in general and within an agreed and steadily upward financing. The first stage covered the formal workers and their children; the second, the spouses; the third, professionals and self-employed; and the fourth, retirees and pensioners.

Whilst laying out these definitions, a health component and an integral priority were paramount. However, so was Political Economy, given the importance that society assigned to child care. It is noteworthy that in 2004 poverty affected 40% of the population (today it is 9%), but among children and adolescents it reached more than 60%.

A notable element of the reform has been the incorporation of social actors in the structure of the system, from the provision to the management of the health insurance.

In particular, users and system workers were incorporated, which also demanded a lot of work. In Uruguay, movements of users were dedicated almost exclusively to complaints of malpractice, and they were widely dispersed. It was not the case of unions due to the existence of a single and very strong organization: the Intersindical Workers’ Plenary – National Confederation of Labor (PIT-CNT).

The reform and its political support (and opposition)

The reform did not receive support from outside the governing party in its global version. Certain aspects of it did, though. However, it had important social support, which gave rise to what has been called the social coalition promoting the reform, which was made possible thanks to several factors, among which:

  • The collapse of the system prior to the reform;
  • a design that in the beginning generated advantages for all the actors;
  • a scheme of stages and growth of financing that made it sustainable.
  • Strong and legitimated leadership of health authorities.

Some of the main partners of this promoter coalition led by the government party and in particular its Health Ministry were the University of the Republic, non-medical unions and users. Medical unions and private providers also gave their support, though rather irregularly.

It is clear that as the process continued to advance (as well as the progress in the country’s global economic situation), the alliances have shown their limits, among other things because the continuity of social changes (strongly pushed until 2014) and today relatively stagnant) now faces situations of status quo and power.

Conclusions and debate topics

This experience and other, as found in several documents of the PAHO financing team, show that there are some factors that are common to the most successful experiences (PAHO highlights Canada, Cuba, Costa Rica, Uruguay):

  1. Increase in net financing, which implied an overall increase in public social and health expenditure with respect to GDP. Increase in the macroeconomic priority and the fiscal priority.
  2. Definition of a single and public centralized fund with contributions from taxpayers and payment adjusted to the risk.
  3. Important push for social participation in the elaboration, debates and control over health systems.
  4. Strong leadership of the health authority towards society and in the government coalition.
  5. Political coalitions that promote the reform with emphasis on society’s organizations.

The PAHO documents in which we have advanced in the typology of our health systems show an enormous heterogeneity in access, coverage and weight of public expenditure. That is why we must put this path into debate and promote it, particularly within societies with more fragile systems.

Daniel Olesker, former Health Minister of Uruguay