HEALTH FINANCING PROFILE - CHILE 88345 Chile’s socio-economic development over recent decades has been accompanied by improving average health outcomes. Life expectancy at birth has risen from 55 years in 1955 to 78 years in 2012 and the infant mortality rate has fallen from 120 per 1,000 live births in 1955 to fewer than 8 in 2012, making its progress notable among upper-middle income Latin American countries.1 Socio-economic development has brought almost-universal access to piped-in water (93% of house- holds) and improved sanitation facilities (96% of households).2,3 The demographic and epidemiological transitions continue to advance as the population ages and non-communicable diseases eclipse infec- tious disease.4 Chile, however, exhibits high levels of economic inequality which are paralleled by stratified health access and outcomes with far greater gains seen among high-income groups. Though the nation has officially targeted the indigent and low-income population for free health coverage for over 100 years, this health divide between high and low income groups has persisted. The government is addressing these equity issues with the “Universal Access with Explicit Guarantees” (AUGE) reform begun in 2005 which applies to all providers within the nation’s Social Health Insurance (SHI). Health Finance Snapshot Total Health Expenditures (THE) per capita (in USD at official exchange rate) have increased at an annualized rate of 9.3% from 2000 to 2011. However, THE as a share of gross domestic product (GDP) has fallen by 1.1 percentage points (from 8.4% to 7.3%) during that same period. Table 1. Health Finance Indicators: Chile 1995 2000 2003 2005 2007 2009 2011 Population (thousands) 14,395 15,398 15,919 16,267 16,598 16,929 17,268 Total health expenditure (THE, in million current US$) 4,767 5,953 5,335 8,024 11,261 13,244 18,555 THE as % of GDP 6 8 7 7 7 8 7 THE per capita at exchange rate 331 387 335 493 678 782 1075 General government expenditure on health (GGHE) as % of THE 38.5 43.7 39.3 40.0 42.6 47.6 47.0 Out of pocket expenditure as % of THE 38.8 36.5 40.2 40.7 39.4 35.8 37.2 Private insurance as % of THE 22.7 19.8 20.5 19.3 18.0 16.6 15.9 Source: WHO, Global Health Expenditure Database; National Health Accounts, Chile Figure 1. Total Expenditures on Health per capita, Chile 4Out of pocket spending (OOPS) makes up a sub- stantial portion of THE (Table 1, Figure 1). Total expenditure on health per capita 4These costs are point-of-service fees (i.e.: provider co-payments, medications, etc.) (at exchange rate) and do not include private insurance premi- ums. 4Within the private expenditure on health figures are health expenditures by private insurers within Social Health Insurance (Isapres) as well as private insurers not in- cluded in the SHI. The latter group accounts for a miniscule portion of THE, providing only supplemental insurance. Source: WHO, Global Health Expenditure Database; National Health Accounts, Chile Health Status and the Figure 2. Demographic Indicators. Chile Demographic Transition Though Chile’s health gains have typically been greater for wealthier segments of the population, increased usage of primary health services in re- cent years is expected to narrow the health gap between income groups. The advanced epidemi- ological and demographic transitions impact the nation’s health costs as an aging population utiliz- es more health services with fewer young, healthy workers contributing to the system. Demographic Transition 4 Birth and mortality rates are declining (figure 2) 4 Life expectancy is increasing Source: United Nations Statistics Division and the Instituto Nacional de Estadísticas, Chile. 4 The ‘bulge’ in the population pyramid is moving upward (figure 3) Table 2. International Comparisons, health indicators. 4 The total fertility rate (TFR) has fallen from Upper Middle 2.6 in 1990 to 1.9 in 2012. Chile Income Country % Difference Average Epidemiological transition GNI per capita (year 2000 US$) 4,690.9 1,899.0 147% Prenatal service coverage 95.0 93.8 1.3% 4 Mortality from non-communicable (chronic) Contraceptive coverage 64.2 80.5 -20.3% illnesses has far surpassed infectious disease Skilled birth coverage 99.9 98.0 1.9% mortality (Figures 4 and 5) Sanitation 96 73 31.5% TB Success 72 86 -16.3% Infant Mortality Rate 7.7 16.5 -53.3% Figure 4. Mortality by Cause, 2008. Chile. <5 Mortality Rate 8.8 19.6 -55.2% Maternal Mortality Rate 25.0 53.2 -53% Life expectancy 88.9 72.8 22.3% THE % of GDP 8.0 6.1 30.2% GHE as % of THE 54.0 54.3 -.6% Physician Density 1.0 1.7 -39.3% Hospital Bed Density 2.1 3.7 -42.7% Source: Bitran, Ricardo. “Explicit Health Guarantees for Chileans: The AUGE Benefits Packa- ge”, World Bank UNICO Series, No. 21, 2013 Source: WHO, Global Burden of Disease Death Estimates (2011) Figure 5. Non-Communicable Disease Mortality. Chile. Figure 3. Population Pyramids of Chile Source: Population Division of the Department of Economic and Social Affairs of the Source: WHO, Global Burden of Disease Death Estimates (2011) United Nations Secretariat, World Population Prospects: The 2010 Revision. Health System Financing and Coverage Chile’s Social Health Insurance (SHI) has undergone a series of ensconced in the SHI (Isapres) has fostered marked health transformations since the establishment of the Welfare Statute inequities between high income individuals and low-income Board in 1886 culminating in the current National Health Fund or indigent populations. The Universal Access with Explicit (Fonasa). Setting it apart from many other SHI schemes in the Guarantees (AUGE) reform of 2005 has now established, for region, Chile’s system initially targeted the poor and reached the first time, a mandatory minimum benefits package, waiting nearly-universal coverage by the mid-20th century. However, time limits and copayment caps for all SHI insurers (public & a highly-profitable and selective private insurance system private). Figure 6. Timeline of Chile’s Social Health Insurance (SHI)5 National Health Fund (Fonasa) estab- lished as a large public insurer (replaced Welfare Statute Board National Employees Services Sermena) to cover workers and the poor; created to consolidate (Sermena) created to provide Allowed private insurers (Isapres) to local health care organi- health insurance to workers in participate in social health insurance. zations and facilities the formal sector 1886 1924 1942 1952 1981 2005 Creation of the Ministry of National Health Service created, mainly Universal Access with Ex- Hygiene, Assistance and Social serving workers and the poor and cov- plicit Guarantees (AUGE) Welfare & Mandatory Worker’s ering a significant portion of the nation reform. Insurance Chile’s SHI includes: Figure 7. Fonasa Beneficiaries 2011 4 The National Health Fund (Fonasa). The large public insurer which covers four groups (A through D) and combines all Fonasa benefi- ciaries in the same financial and risk pool. A: Indigent B: Very low income C: Lower-middle income D: Higher-middle income Source: Fonasa, Estadisticas Institucionales 4 Groups B, C and D make mandatory contributions to Fonasa through automatic payroll deductions (7% of earnings up to a maximum deduction of USD$140/month). They do not pay extra fees or premiums for AUGE. 4 Group A is completely covered by the State. 4 Private, for-profit insurers (Isapres) with small and fragmented risk and financial pools. Since 1981, private insurers have been allowed to participate in the nation’s SHI scheme provided they collect the same mandatory 7% payroll contribution paid by groups B,C and D (for Fonasa) plus an additional premium established by each Isapre. Isapres must also submit to government regulation of the SHI system. 4 With the AUGE reforms, Isapres may also now collect an additional AUGE premium which is determined by each insurer. Figure 8. SHI Beneficiaries, Chile, 2011. The AUGE benefits expansion is supported on the public financing side by a 1 percentage point increase in the value-added tax (from 18 to 19%) which is generally thought to be progressive in the benefits it finances5, tobacco taxes and customs revenues. Group A (indigent) beneficiaries represent over one-quarter of Chile’s pop- ulation though Chile’s official poverty is only 14.4%5 4 A 2010 investigation by Fonasa found that most of the 400,000 in- dividuals misclassified as Group A were independent and temporary workers who were not making contributions. 4 As of mid-2012 these workers were to be re-classified and make the Source: Fonasa, Estadisticas Institucionales mandatory 7% payroll contribution to Fonasa or join an Isapre. With the AUGE reform of 2005, a list of 56 (later growing to 69) priority health condi- tions was identified for legally-enforceable universal access to prevention, diagnosis Legal Guarantees for all and treatment (for Fonasa and Isapres beneficiaries) based on4: SHI Beneficiaries via AUGE 4 Magnitude as measured by epidemiological indicators such as incidence, prevalence, 4 Prevention and diagnosis for 69 DALY and mortality; defined priority health conditions 4 Treatment Effectiveness whereby treatments considered from medium to high on a pre-defined defined scale of effectiveness were chosen for coverage guarantees; 4 Establishment of explicit treat- ment protocols for the priority 4 Health System Capacity in terms of service provision feasibility for all geographic conditions territories and for populations from all socio-economic strata; 4 Cost was considered as cost per case and total cost per condition; 4 Maximum wait times at health fa- cilities defined and adopted 4 Social Consensus involving surveying the population on their attitudes and opinions to counteract the ability of special interest groups to steer the health system reform 4 Limits on out-of-pocket expenses process. for healthcare implemented Figure 9. Contributions and Coverage in Chile’s SHI. Primary health services Mandatory contribution Additional Premiums AUGE health services Other medical and dental (non-AUGE) Fonasa Group A 100% covered with public 100% covered with public None providers providers Group B 100% covered with public Varying Co-payments with None 100% covered with public providers public providers / Covered Group C providers / Covered at 50- 7% up to a maximum con- at 50-75% for private 75% for private providers Group D tribution of US$140/month providers Isapres Private premium + AUGE 100% covered with public Varies by health plan Varies by health plan premium providers Source: Fonasa, Health Plan Coverage. http://www.fonasa.cl/ Challenges and Future Agenda have dropped following the AUGE reforms.5 Both AUGE and non-AUGE spending by Fonasa has increased by 35% from 2005 The AUGE reforms have greatly increased equity in access to through 2009 as beneficiaries have begun to learn about and care, particularly for the poorest individuals and households. demand their newly guaranteed health services. Going for- 95% of the AUGE services delivered from 2005 through 2012 ward, lawmakers are focusing on Fonasa’s sustainability as well have gone to Fonasa beneficiaries. In a 2009 government as regulating the Isapres to limit rampant price discrimination analysis, mortality from some cancers, diabetes (type 1 and (based on age and gender), inadequate risk pooling and ‘cherry 2), hypertension, child epilepsy and HIV/AIDS were found to picking’ of young and healthy beneficiaries.5 Figure 10. Future agenda for Chile’s SHI Sustainability • MOF has set a maximum actuarial cost of AUGE per bene- References ficiary • This maximum cost must be balanced with the new legal guarantees for a growing list of services and health condi- 1 World Health Organization. Global tions Health Observatory, Interagency estimates. 2 WHO / UNICEF. “Estimates for the use of Improved Accountability • Improvements needed in the national health information Drinking-Water Sources”, Joint Monitoring Programme for Water system (SIGGES) which is meant to track AUGE’s perfor- Supply and Sanitation, Chile. March 2012. mance 3 WHO / UNICEF. “Estimates for the use of Improved Sanitation Facilities”, Joint Enforcement • Introduction of a system to identify and track temporary Monitoring Programme for Water Supply and Sanitation, Chile. March 2012. of Contribu- and independent workers to ensure that they are making 4 Missoni,Eduardo and Solimano Giorgio. “Towards Universal Health Coverage: the tions & Proper payroll contributions to either Fonasa or an Isapre Chilean experience”, World Health Report, Background Paper, No. 4, 2010. Enrollment • Transfer of appropriate workers from Group A (indigent) to 5 Bitran, Ricardo. “Explicit Health Guarantees for Chileans: The AUGE Benefits Group B in Fonasa Package”, World Bank Universal Health Coverage Studies Series (UNICO), No. 21, 2013. Regulation of • Rein in ‘cherry-picking’ of young and healthy beneficiaries Isapres • End price discrimination for women (who often pay 2-3 times what men pay in premiums during the female repro- This profile was prepared by Dr. Deena Class, Eleonora Cavagnero, A. Sunil Rajku- ductive years) mar and Katharina Ferl with inputs from Mukesh Chawla and Michele Gragnolati. • End unconstitutional premium hikes with age