Mexico’s Health Reform: Universal Coverage, Equity and Quality

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International journalists are invited to attend a press briefing on Mexican health care reform with Mexican minister of health Dr. Julio Frenk in his Mexico City offices at 11:30 AM November 23rd. All journalists wishing to attend the briefing MUST confirm their attendance with Ian Larsen at ian@hoffmanpr.com or on (0)44-55-1807-6180. For US-based media, call Ian Larsen at 1-703-929-2099 or Marshall Hoffman at 1-703-820-2244.

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Mexico, a country with a GDP 24 percent of the United States, will provide health insurance for its 105 million citizens by 2010.

Universal coverage is key to an ambitious health reform package designed to fulfill Mexico’s constitutional guarantee “that health care should be provided based on need, to all citizens and residents irrespective of income, place of residence, ethnicity or employment status.”

The reform was passed into law in the spring of 2003 and the universal insurance plan, called the System for Social Protection in Health, began operation this year. In 2004, approximately 1.5 million Mexican families –6.45 million people— were enrolled in the program. By the end of the year, 31 of the 32 Mexican states will be active in the program. The program will continue to expand by about 14 percent, or an additional 700,000 families, each year until universal coverage is achieved in 2010.

Reform has introduced a new way of allocating health resources to the states, one aimed at correcting the imbalance in health spending between Mexico’s richest and poorest states, permitting poorer states to address their backlog of health problems, and at the same time providing an inducement for all states to improve the quality of care.

Prior to the country’s recent health care reforms, about half of Mexico’s population lacked access to health insurance and more than half the country’s health care costs were paid out-of-pocket. In addition, an estimated 3.5 million families were impoverished each year by the costs of catastrophic care.

Mexico’s reform is designed to correct both the lack of financial protection for so much of its population and a growing mismatch between the evolving health needs of the people and the health system. Over the past decades, Mexico has experienced a dramatic shift from infectious diseases, malnutrition and other conditions associated with poverty to diabetes, heart disease and problems more typical of an affluent and aging population.

The overarching goal of Mexico’s reform is to assure that “everyone is covered and treated in an equitable manner,” explains Dr. Julio Frenk, Mexico’s Health Minister and prime architect of the reform. “That’s the goal and what we are headed for,”

The reform assures that every household, including the poorest, will be protected from the risk of catastrophic expenses for health care. It also means that everyone is entitled to a basic package of health care services.

The Mexican reform is an example of the use of knowledge to drive policy, says Dr. Frenk. Research is essential not just for new drugs and vaccines and healthy lifestyles but to allow policy to be based on good evidence, not just the result of pressures and blind political processes.

The system creates a new paradigm in health care for Mexico. It adopts elements of health systems already in operation in Canada and many countries in Europe, although most countries with similar plans have significantly larger GDPs per capita than Mexico. Costa Rica is the only country with a similar plan and a lower GDP per capita than Mexico.

Mexico’s reform rests upon the three “pillars” of quality, equity and financial protection. Both are essential Dr. Frenk says. “You can have quality but not access, but if you provide access to services of poor quality, what is the use of removing financial barriers,” he asks.

A paper entitled “Fair Financing and Universal Social Protection: The Structural Reform of the Mexican Health Care System,” prepared by Dr. Frenk and his team for the International Conference on Innovations in Health Financing, describes the rationale and approach to Mexico’s reform.

Under this system, Mexico’s poorest families pay nothing but must participate in community health and education program. No family contributes more than five percent of after-tax income.

The reform strategy replaces” bureaucratic” budgeting that meets the demands of providers with what Dr. Frenk calls “democratic budgeting.” For the next seven years, he explains, the amount of federal money allocated to states will depend on the number of families who enroll. “This is a radical change in the way public moneys are allocated. It shifts power from providers to the users of services,” he explains.

The basic package of health services covered by the reform includes ambulatory care and hospitalization for internal medicine, surgical, obstetrics-gynecology, pediatric and geriatric services, as well as preventive annual exams and medicines for treatment, including treatment for chronic conditions. Initially, 105 interventions and 191 medicines are covered.

“This reform does not cover everything that is medically possible,” acknowledges Dr. Frenk, but, he says, health systems must set priorities. “Even the richest country can’t afford all of what’s medically possible or medically useful.”

By setting priorities and using cost effectiveness and social acceptability as criteria, Mexico’s defined benefit package “lets people know what they are entitled to in an explicit manner,” he continues. “As more money comes into the system, we can expand. The idea now is to cover everyone with the best interventions available.”

Eight percent of total funds in the health care system go into a nationwide risk pool for catastrophic services. These include treatment and care for cancers, heart disease, stroke, severe accidents, long-term rehabilitation, HIV-AIDS, neonatal intensive care, organ transplants and dialysis.

Covered services are subject to cost-effectiveness analysis and the availability of funds. A designated health board determines the diseases, treatments and medications to be covered. Many of these problems are expensive to treat, especially as new drugs and therapies are developed. “Yet we have an ethical imperative to make treatments available,” says Dr. Frenk.”

Mexico’s reform package also emphasizes prevention, with a separate fund established for public and community health programs. “Public health is neglected in many countries,” he believes. “It is not visible except when it fails. No one notices epidemics that are prevented by immunization.”

The reform also encompasses research and infrastructure needs. An ambitious master plan for investment in the health infrastructure is being implemented.

The health revolution that occurred in the second half of the 20th century increased life expectancy throughout the world more than at any time in human history. Diseases like smallpox were eradicated, new diseases like HIV/AIDS appeared, and the overall pattern of death and disease changed. Children who once died in childhood survived to experience risk factors for chronic disease as adults.

As a typical middle-income country, Mexico experienced a huge shift in its disease profile from conditions associated with poverty to the more costly ailments seen in industrialized countries with aging populations, reports Frenk. Today the most prevalent diseases in Mexico include

diabetes, heart disease, cancer, mental illness and addiction, diseases that don’t necessarily kill but do produce tremendous expense and disability.

The shift has not been even. Many countries in transition still have a backlog of traditional health problems associated with poverty. Consequently, a number of countries—Mexico among them—must deal with a double burden of disease, those diseases that are remnants of poverty and those more typical of developed countries.

Rapid social, economic, educational, demographic and political changes have transformed the country. Mexico, no longer among the world’s poorer nations, had become the world’s ninth largest economy.

This change had significant impact on the health care system. A more informed and educated population demanded greater choice among providers of health care and expects more of the system. The array of new and expensive drugs, diagnostic capabilities, treatments, vaccines and other innovative and technological advances of modern medicine, increased expectations and helped place unprecedented financial and social pressures on the system.

“In health we are victims of our own success,” says Dr. Frenk. “Diseases are more expensive to treat but once we have a solution, there is a huge ethical and political imperative to make it available,” says Dr. Frenk.

By 2000, the challenges and changes confronting Mexico’s health system reached the troubling proportions that triggered reform.

Life expectancy at birth had increased from 40 years in 1943 –when Mexico’s first health reform began providing insurance coverage for salaried workers—to 75 years by 2000. Statistics documented the dramatic shift in the burden of disease, with the proportion of deaths from non-communicable diseases increasing from 44 to 73 percent and deaths from accidents from 6 to 13 percent.

“That motivated us to realize this huge change had happened in our country,” explains Dr. Frenk. “We have gone from being worried about malnutrition to worrying about obesity and lack of exercise.”

The existing health system was not up to the challenge, Dr. Frenk says. “That health suit was tailored for the Mexico of 1943,” he observes. “Mexico changed and grew but is still wearing a suit that was tailor-made 60 years ago. We needed a new suit for health for a different country.”

Also, Mexico’s health care expenditures failed to reflect the changing realities. Prior to reform, Mexico spent 5.8 percent of GDP on health care, or about $357 US per capita, according to figures in the paper prepared by Dr. Frenk and his team. In comparison, that spending level is far less than the approximately 14 percent of GDP, or about $4,500 per person in 2000, spent on health care in the United States and even is less than the 6.9 percent average spent on health care throughout Latin America.

Considering the new dynamics, the system was seriously under funded. Yet reform is not simply asking for more money. Rather, the objective of the Mexican reforms, says Frenk, is not to spend the most per capita on health care, but rather to commit resources most efficiently and with the most significant results.

Over the seven years of reform, planners expect to add another one percent of GDP to the health budget, which would keep total expenditures below 7 percent. “That’s not an outrageous or unwieldy amount of money,” he says, and cites “convincing evidence of huge returns on health investments. The main point is we see health as an investment, not an expenditure.”

The reform also responds to global and national studies that identified a lack of financial protection as a major problem for health systems in many countries.

The landmark World Health Organization 2000 report entitled “Health Systems: Improving Performance,” provided added incentive as well as a framework for change. Dr. Frenk chaired the group of international health experts who wrote the report.

The WHO report documented that, even though Mexico ranked 51st out of 191 countries on overall health system performance, it ranked only 144 on financial fairness.

Mexico’s poor performance was attributed to the fact that more than half of Mexican families had no access to health insurance. That half included the self-employed, trades people, the unemployed and those who did not work. Only salaried workers and their families had access to insurance.

Further analysis showed that two thirds of the country’s wealthiest families had health insurance, but only one in ten of the poorest had such insurance.

Using techniques such as burden of disease and cost-effectiveness analysis developed at the international level, health researchers in Mexico discovered that more than half, 55 percent, of health care in the country was paid for out-of-pocket, a finding that shattered the belief that government subsidized most health care for the uninsured.

Researchers also discovered that even insured patients often turned to private practitioners and paid for their own care to avoid long waits and what they considered poor quality care.

Other evidence documented the debilitating impact of catastrophic care. Every year between two and four million Mexican families were impoverished after spending 30 percent or more of disposable income—defined as total income minus food—on catastrophic care. Some 85 percent of those families had no insurance.

“Such figures provide convincing evidence of the financial burden of health care for families and show the link between health expenditures and poverty,” says Dr. Frenk.

A team of economists and health researchers from Mexico, WHO and other international organizations, foreign universities and Mexico’s ministry of health developed the reform package. A pilot program started in 2000 involved 625,000 families in 24 of Mexico’s 31 states. Based on the success of the pilot, the approach to universal health coverage gained support from a majority of legislators from all parties.

Since state budgets will no longer be based on the previous year’s budget plus inflation, the change requires new managerial and accounting systems. It also provides an incentive to both states and to the providers they hire to improve quality. A new certification program for hospitals is also geared to improving quality.
Dr. Frenk believes Mexico’s reform holds lessons for other countries. One is the need for solid analysis and an evidence base for health policy. Evidence helped generate popular support for reform and was used to inform the public about the unrecognized problem of catastrophic expenditures.

Another is the need to recognize and deal with the magnitude of change in the last half of the 20th century when life expectancy doubled throughout the world.

“These forces are present everywhere,” Dr. Frenk believes. “Nations need to respond with innovations. Traditional responses to problems facing health systems are not going to work in the 21st century.”

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