Report No. 26144-AR Argentina The Health Sector in Argentina Current Situation and Options for Improvement July 21, 2003 Human Development Department Argentina, Chile, Paraguay, and Uruguay Country Managament Unit Latin America and the Caribbean Region Document of the World Bank CURRENCY EQUIVALENTS Currency Unit :The Argentine Peso EXCHANGE RATE July 21,2003 USD $l=ARS $2.78 WEIGHTS AND MEASURES: Metric System FISCAL YEAR: January 1-December 31 ABBREVIATIONS AND ACRONYMS AFIP Administracibn Federal de Ingresos Pu'blicos,Federal Public Income Administration ANMAT Administracibn Nacional de Medicamentos, Alimentos y Tecnologia, National Drug, Food and Technology Administration APE Administracio'nde Programas Especiales, Special Programs Administration ANSES Administracibn Nacional de la Seguridad Social, National Social Security Administration COFESA Consejo Federal de Salud, Federal Health Council FSR Fondo Solidario de Redistribucibn, Solidarity Redistribution Fund GDP Gross Domestic Product HIV/AIDS Human Immuno-deficiency Virus I Acquired Immuno-deficiency Syndrome HPA Hospital Pu'blico deAutogestibn, Autonomous Public Hospital HPGD Hospital Pu'blico de Gestibn Descentralizada, Public Hospital with Decentralized Management IMR Infant Mortality Rate INSSJyP Instituto Nacional de Seguridad Social de Jubilados y Pensionados, National Institute of Social Security for Retired Persons and Pensioners (or PAMI) MCI Maternal and Child Health Insurance MMR Maternal Mortality Rate MoE National Ministry of Economy MoH National Ministry of Health Obras Sociales Social Security Health Insurers OSN Obras sociales nacionales, National Social Security Health Insurers OSP Obras sociales provinciales, Provincial Social Security Health Insurers PMoH Provincial Ministry of Health PAHO Pan-AmericanHealth Organization PA1 Programa Ampliado de Inmunizaciones, Expanded Program of Immunizations PAMI Programa de Asistencia Mkdica Integral (or INSSJyP), Program of Integrated Medical Assistance PMO Plan Mkdico Obligatorio,Mandatory Health Benefits Package PRESSAL Proyecto de Desarrollo del Sector Salud en las Provincias, Project for the Development of the Health Sector in the Provinces PROFE Programa Federal de Salud, Federal Health Program SNSS Sistema Nacional de Seguro de Salud, National Health Insurance System sss Superintendencia de Sewicios de Salud, Superintendency of Health Services STI Sexually Transmitted Infection TB Tuberculosis TGN Tesoro General de la Nacio'n,National Treasury UBN Unsatisfied Basic Needs WHO World Health Organization YPLL Years of Potential Life Lost Vice President : David de Ferranti Country Director: Axel van Trotsenburg Sector Director: Ana Maria Arriagada Sector Manager : Evangeline Javier Country Sector Leader: Ariel Fiszbein Task Team Leader: Juan Pablo Uribe TABLE OF CONTENTS 2 EXECUTIVE SUMMARY ............................................................................................................. 5 ACKNOWLEDGEMENTS............................................................................................................. ABBREVIATIONS AND ACRONYMS........................................................................................ 4 INTRODUCTION......................................................................................................................... CHAPTER 1. 10 SECTOR ANALYSIS ................................................................................... 12 1.1. The HealthStatus of the ArgentinePopulation......................................................... 12 1.2. Access to HealthServices.......................................................................................... 15 1.3. Structure, FunctioningandChallengesofthe Argentine HealthSector.................... 19 1.4. Public Healthand NationalPrograms........................................................................ 34 CHAPTER 2. THE PASTAND FUTUREOF HEALTHREFORMSINARGENTINA...37 2.1. Reformsof the 1990sandLessonsLearned.............................................................. 37 2.2. EssentialPublic HealthFunctions............................................................................. 43 2.3. Mechanisms for Health-RelatedFederalArticulation............................................... 45 CHAPTER 3. OPTIONS FOR IMPROVING THE PERFORMANCE OF THE HEALTH SECTOR ....................................................................................................................... 46 3.1. Frameworkof Optionsto Improvethe HealthSector................................................ 46 3.2. Options at the ProvincialLevel................................................................................. 48 3.3. Options at the NationalLevel.................................................................................... 51 3.4. ComplementarySocialSecurityReforms.................................................................. 54 3.5. RegulatoryFrameworkand Sector Dialogue............................................................. 55 CONCLUSIONS........................................................................................................................... 57 59 ANNEX 11: HETEROGENEITYAMONG PROVINCES.......................................................... ANNEX I:PUBLIC SPENDINGONHEALTH......................................................................... 62 ANNEX 111: PRIVATE SPENDINGONHEALTH.................................................................... 65 ANNEX IV: MATERNAL AND CHILD HEALTHINSURANCE........................................... 68 ANNEX V: NATIONAL INSTITUTE FOR SOCIAL SERVICES FOR RETIRED PERSONS AND PENSIONERS- PAM1........................................................................................................ 70 ANNEX VI: THE FEDERALHEALTHPROGRAM(PROFE) ................................................. 73 REFERENCES.............................................................................................................................. 75 ACKNOWLEDGEMENTS This report was prepared by Juan Pablo Uribe (LCSHH, task team leader), Nicole Schwab (LCSHH), Isabella Anna Dane1 (LCSHH), Luis PCrez (Mendoza, Argentina) and Natalia Moncada (LCSHH). During the preparation of this document, the team benefited from valuable support from Ariel Fiszbein, Cristian Baeza, Alexandre Abrantes, Pablo Gottret, Daniel Dulitzky, Evangeline Javier, Fernando Lavadenz, Marcel0 Becerra, Maria Paula Giovagnoli and Ariadna Garcia-Prado. The Center for State and Society Studies (CEDES; Buenos Aires, Argentina) and the Center for Institutional Development Studies (CEDI; Buenos Aires, Argentina) contributed to the development of this paper through important sector studies and their planning and participation in various workshops. This paper also benefited immensely from the permanent availability and openness to dialogue and debate regarding options for health sector development in Argentina on the part of the Ministry of Health and the Superintendenceof Health Services, as well as different actors in the Health sector who decisively strengthened the report. The World Bank team thanks all participants for their valuable input. EXECUTIVESUMMARY Introduction Despite various reform efforts during the 1990s, the Argentine health sector still faces the challenge to improve its performance in responseto the expectations and needs of the population. The Argentine health sector presents serious structural flaws that result in interhntra provincial inequities (in terms of health status and access, as well as health service financing), high levels of fragmentation, inefficiency and a weak regulatory framework. The recent economic, political and social crisis exacerbated these problems, affecting the poorest sectors of the population most. Specifically, the crisis resulted in a sharp decrease in health insurance coverage and access to services and medications. Inturn, this ledto an increasein demand inthe public hospital network, often beyond the public hospitals' capacity and resource availability. The crisis also threatened the effectiveness of priority public health programs, and worsened the already precarious economic and financial situation of many insurers and service providers, thus increasing the levels of debt prevailing inthe sector. This document presents options for improving the performance of the Argentine health sector, especially in terms of increasing the health status of the poorest and most vulnerable populations. To this end, the document first analyzes the health sector, including the health status of the population, its access to health services, the structure and functioning of the sector and the public health programs. The document then reviews the lessons learned through recent reforms and highlightsthe central role of the provinces. The next section discusses a series of alternatives for improving the health sector, with a focus on the poor. The document ends with some brief conclusions. Through this document, the World Bank hopes to contribute to the debate and development of health sector policies in Argentina, especially at the current time when the need to improve the health sector's performance has become a priority on the political agenda. Chapter 1.Sector Analysis Health status of the population. Despite an advanced demographic and epidemiological transition, and the positive trends observed in national averages of key health status indicators, Argentina continues to display concerning health outcomes. Although Argentina's level of spendingon health i s high, and the supply of services is broad and sophisticated, there are marked differences in the health status of populations within and between different regions and provinces. Maternal and child health are of particular concern. The national averages of maternal and infant mortality remain very high in relation to the rates seen in neighboring countries with similar levels of development and lower health sector spending. There are large (and in some cases rising) differences between provinces interms of the risk factors for maternal andor infant death. The majority of these deaths are avoidable through timely prevention, diagnosis and treatment. For example, in 2000,60 percent of the more than 7,600 neonatal deaths could have been avoided through better prenatal care. Similarly, a significant percentage of maternal deaths could have been prevented through access to sexual and reproductive health services, antenatal care and skilled birth attendance. The persistence of these avoidable maternal and infant deaths highlights the needto carefully analyze the population's access to health services. Access to health services. In Argentina, access to health services largely depends on an individual's income level. The public hospital network i s the main source of health care for more than 45 percent of the population, particularly for those in the poorest income quintile. The richest quintile of the population usually receives health care from health social security or, more 5 often, from private insurers. Provinces where the population has limited health insurance coverage and depends mostly on the public hospital network tend to be those with the poorest health outcomes, less spending on health per capita and a greater proportion of the population living inpoverty. There are significant barriers to accessinghealth services and medications, both for the uninsured as well as the insured populations. The primary barrier to access, in both cases, i s the lack of money to buy medications, or to pay the co-payments necessary to receive care; The second most common barrier to access is a lack of insurance coverage, followed by a lack of service availability. Due to the difficulties in accessing both health services and insurance, Argentina continues to report high levels of out-of-pocket spending on health care. As would be expected, this spending is regressiveandrepresentsclose to 9.4 percent of the poorest households' income. The current crisis worsened the access to health services, especially for the poorest, who have suffered a decrease in health insurance coverage three times greater that of the non-poor. Consequently, demand for some services has been displaced to the public assistance network. At the same time, the utilization of public health services decreased. From the end of 2001 to the middle of 2002, preventive health care for children dropped 38 percent in the general population and 57 percent in the poorest households. Similar patterns seem to be found in other maternal and child health services, apparently affecting the timeliness, quality and frequency of prenatal check-ups. Structure, Functioning and Challenges of the Health Sector. The current structure and functioning of the health sector does not guarantee effective access to quality health services for the entire population. The high level of fragmentation and complexity of the sector and its limited internal articulationmake it difficult to improve health outcomes. Inaddition, each of the large sub-systems that comprise the health sector (national and provincial social security insurers, public providers and private insurers)face serious challenges. Health sector financing i s complex. Private out-of-pocket spending i s the primary source of funding (43 percent of the total in the year 2000), followed by mandatory employee-employer contributions to national and provincial health social security (34 percent of the total), and public financing, primarily at the provincial level for the public assistance network (23 percent of the total). Despite the economic crisis, public health spending remained high, reflecting the national government's efforts to protect key national programs. However, this is not the case for social security spending, which dropped substantially between 2001 and 2002, as a result of the decrease inemployment and salary levels. Health services are provided through public and private providers, with significant variations between provinces. The management and financing of the public hospital network i s largely the responsibility of the provinces, with minimal national participation. However, contrary to what would be expected, the distribution of public supply of health services does not correspond to the proportion of the population without health insurance in each province. National social security insurers (OSN and PAMI) primarily contract with private providers for health services. In general, health services are concentrated in large urban centers and focus on highly specialized care. Under the current structure for financing and supplying services, the Argentine health sector faces three major challenges: (i) inequity, (ii)inefficiency, and (iii)weak regulatory framework. All a provinces share these challenges, albeit in different degrees and with significant differences between urban and rural areas. This results in a complex framework for articulating efforts and policies, as well as building consensus. 6 Inequity is reflected in the substantial differences between and within provinces in health status, spending per capita, access to services and level of financial protection. These disparities are the result of (i) public provision model that does not guarantee access to services for the poor and a uninsured; (ii) an organizational model for national and provincial social security insurers that constrains their expansion to cover unprotected sectors of the population and presents chronic internal inefficiencies and limited financial redistribution mechanisms; and (iii)persistence of regressive cross-subsidiesbetween public assistance and social security sub-sectors. Inefficiency in the health sector manifests itself in different ways, such as the rigidity and lack of performance incentives in the provision of public health services and the focus on high complexity care. Primary care generally accounts for less than 10 percent of provincial health budgets. Social security is highly fragmented with a growing numbers of intermediaries and chronic recurrent deficits despite multiple attempts to financially "rescue" certain insurers (Le. PAMI). In addition, recently launched reforms that would increase the efficiency of specific entities, such as the Special Programs Administration (APE), still need to be completed. Finally, there are gaps in the sector's regulatory framework and the compliance with existing regulations. The federal nature of the health sector and the complexity of its current structure largely account for these regulatory gaps. Priority issuesthat should be addressed include: (i) the role of the Superintendence of Health Services (SSS), (ii) quality assurance, and (iii) absence the of an effective forum for dialogue and consensus-building around healthpolicies. Public Health and National Programs. The recent crisis highlighted the need to evaluate nationalprograms that respond to collective health interests to avoid backtracking on health status achievements. The national government respondedto the crisis by maintaining adequatelevels of financing for priority programs, including maternal and child health, immunizations, provision of essential medications, infectious disease control and, more recently, sexual and reproductive health. The main challenges in public health involve the articulation of these programs within the complex federal structure, as well as overcoming the inertia in allocating and managing limited resources at the national level. Chapter 2. The Past and Future of HealthSector ReformsinArgentina Reforms of the 1990s and Lessons Learned. The reforms undertaken during the 1990s, especially those related to social security at the national level and the management of public hospitals, provide useful lessons for the future. A first lesson is that the central role of the provinces must be recognized in order to improve services for the poor. In practical terms, the provinces are the leaders of the health sector's response to the needs of low-income populations. Past experiences also highlight the health sector characteristics that determine reform outcomes, namely the sector's federal nature, its complex political economy and heterogeneity. Federalism in the Argentine health sector i s the framework within which the sector must progress. Within this framework, the dominant role of the provinces cannot be overlooked, as they control about 25 percent of health spending (includingpublic provincial and OSP spending) and more than 60 percent of the public provision of insurance and medical services. At the same time, the national government plays an important role in terms of stewardship and coordination, including the regulation and control of national social security insurers (OSN and PAMI), leadership of national public health programs and coordination of international sources of financial and technical assistance. However, despite the importance of national-provincial relations in the development of health sector policies and practices, there i s currently no forum to promote 7 dialogue and regularly and effectively coordinate activities. The main instrument for such a forum, the Federal HealthCouncil (COFESA), lacks the necessary legal, technical and functional attributes. The impulse given to COFESA during 2002 confirms the importance and current opportunity to advance in its restructuring. The complex political economy of the sector is another challenge that must be addressed. Reforms have high transaction costs. This may explain why Argentina has tended to prefer slow, gradual transformations. The apparent lack of transparency and in some cases, corruption, are possible derivations of the complex structure of the sector that lead to high costs and make it difficult to reach consensus. Finally, the Argentine health sector is very heterogeneous.This includes, for instance, differences among and within provinces in terms of epidemiological profile, regulatory frameworks, sector structure, institutional capacity and level of spending. Therefore, it i s not practical to think of rigid reforms implemented from the national level, or of the generalized application of certain models and instruments. Rather, any changes must be locally adapted. Essential Public Health Functions. The achievements and progress in the health sector, as well as its problems and gaps, reflect the effectiveness of the government's stewardship functions. To this end, it is important to examine the level of development of these functions (termed "essential public health functions") and to strengthen weak areas. At the national and provincial government levels, recent evaluations highlight the need to focus efforts on (a) planning and development of sector policies; (b) regulation and control; (c) quality assurance; and (d) social participation. Chapter 3. Optionsto Improve HealthSector Performance The primary challenge facing the health sector is to improve the health status of the population, especially the poorest and most vulnerable, thus reducing existing inequalities. To achieve this, all provinces have a central role to play in the introduction of changes to the current structure and functioning of the health sector. Although the challenge i s common for all provinces, the options for reform are diverse. However, it i s possible to identify some immediate alternatives that stand out for their viability and potentialto improve health sector articulation. Options at the Provincial Level. A number of interventions would help provinces improve their purchasing of health services for the poorest and align incentives with providers' performance. The development of "public provincial health insurance" schemes i s a key alternative, as it could strengthen the provincial government's purchasing function and target resources to the most needy (for example, the maternal and child population). A second complementary intervention i s the expansion of agreements or contracts linked to the performance of public providers. Another possibility is to increase the available public financing by eliminating regressive cross-subsidies in favor of third party payers. Broad collaboration between national and provincial authorities is. necessaryto successfully implement these alternatives. Options at the National Level. The national government can collaborate in a decisive way to facilitate provincial reforms. The national government's stewardship and leadership i s necessary for the definition, implementation and articulation of sector policies. The generation of national- provincial agreements on health goals would be an excellent instrument for guidinghealth sector improvements. These goals could serve as the parameters for the national government to confer corresponding incentives. The national government could also lead complementary initiatives at the national level, such as the definition and establishment of an insurance for high cost, low incidence health events. Finally, by maintaining effective national public health programs, the 8 national government provides significant support for the health status of the population, especially the poorest and most vulnerable. The challenge lies in evaluating the current structure and functioning of these public health programs, improving their effectiveness (avoiding duplications in the provinces or with social security responsibilities), adding new initiatives in critical areas (for example, sexual and reproductive health and chronic diseases) and guaranteeing their financing. The performance of the national and provincial social security system also has a substantial influence over the entire health sector and the well being of the poorest (including those who are not direct social security insurance beneficiaries). This influence i s reflected in: (i)the shift in demand for services to the public hospital network, (ii) influence of social security insurers the over the sector's payment mechanisms, rates and practices, and (iii)the opportunity costs imposed by their recurrent financial crises. Therefore, it i s necessary to continue efforts aimed at improving the efficiency and equity of the system by ensuring compliance with existing regulations, improving financial redistribution schemes and finding a solution to PAMI's structural problems. Regulatory Framework and Sector Dialogue. A solid, transparent regulatory framework and a structuredforum for debate and consensus-building around sector policies complement the above setting within which the Argentine health sector can continue to progress. Reform of COFESA (which would allow the establishment of a forum for sectoral policy deliberation, decision- making and monitoring and control), deepening civil society participation in the debate and follow-up of sector policies, and the reform and strengthening of the SSS are three ways in which the regulatory framework and sector dialogue may be improved. Progress was achieved in this direction during 2000 through the Argentine Dialogue and an important reactivation of the COFESA. Chapter4. Conclusions The Argentine .healthsector faces the challenge of improving its performance and finding options for resolving its chronic problems of inequity, inefficiency and weak regulatory framework. These challengeshave become more pressing in light of the country's economic and social crisis. The main objective of all efforts to reform the health sector should be to improve the health status of the population, especially the poorest and most vulnerable. The federal nature of Argentina and its marked heterogeneity constitute the framework within which reforms must progress. Thus, the role of the provinces in health sector performance i s key. The national government i s responsible for guiding, coordinating, regulating and providing incentives for provincial efforts to improve health outcomes. This includes guaranteeing that other sub-sectors (i.e. social security insurers) contribute to health sector goals, and that there are effective instruments and forums to inspire better provincial coordination and articulation. There are concrete options to improve the Argentine health sector's response to the needs of the poorest and most vulnerable. Options that stand out include: (i)strengthening the provincial health insurance function (for instance, by developing provincial public health insurance schemes); (ii) improvingthe management of public providers by linkingfinancing to performance and avoiding cross-subsidies; (iii) ensuring the adequate functioning of the social security sub- system; and (iv) protecting and strengthening priority public health programs. The establishment of a solid framework for stewardship, regulation and sector dialogue will contribute to the advancement and sustainability of these reforms. 9 INTRODUCTION 1. During the 1990s, there were many efforts aimed at reforming the Argentine health sector. However, these efforts yielded few changes in the sector's structure and even less changes in its overall management. Compared with the rest of Latin America, the Argentine health sector exhibits some positive characteristics that were already manifest at the beginning of the last decade, namely: (i)an advanced level of epidemiological transition; (ii)high levels of achievement in the primary health indicators, as shown in national averages; (iii) an extensive supply of care, including sophisticated technological developments in the provision of highly specialized services; (iv) strong technical capacity; and (v) a high level of spending, as of the end of 2001. At the same time, serious challenges remain. These include (i)significant inequities between and within provinces in terms of resource allocation and the health status of the population; (ii)sectoral fragmentation; (iii)institutional inefficiency of service providers and insurers; and (iv) arelatively weak regulatory framework. 2. The economic, social and political crisis of 2001 exacerbated the chronic structural problems of the Argentine health sector. Of particular concem is the decrease in health insurance coverage and access to services and medication. The lowest income population was hit particularly hard and there was a corresponding increase in demand for public assistance services. In addition, the crisis threatened the effectiveness of priority national public health programs at the exact moment in which poverty indices generated greater epidemiological risks. Finally, this crisis highlighted the financial imbalances affecting the different health sector institutions. Levels of indebtedness increased, thus compromising payments to providers and the delivery of supplies and services. 3. The overlap between the effects of the crisis and the sector's chronic problems has made it clear that health sector performance urgently needs to be improved and progress made in its fundamental objective, namely to increase the health status of the population, especially the poorest and most vulnerable. To this end, the health sector should introduce sustainable and efficient reforms and instruments that will contribute to reducing current inequities in access to highquality health services and provide effective financial protection against the risks of disease and death. 4. This seems to be an opportune time to introduce reforms in the Argentine health sector. Due to the crisis, the need to improve the sector's response to the populations' health needs has become a priority in the political agenda. In addition, under the leadership of the Ministry of Health, there has been important recent progress in the identification, discussion and development of reform options 5. Within this context, this document presents options for improving the performance of the health sector and the health status of the Argentine population. These options follow from a detailed review of the characteristics of the health sector and its recent history, with particular emphasis on the poorest population sub-groups and the role of the provinces. Chapter One offers a description of the main characteristics of the health sector, including the health status of the population (especially the maternal and child sub-groups), access to health services, structure of the health sector, functioning and challenges in the financing and provision of services and public health programs. Chapter Two examines the reforms undertaken in the last decade and lessons learned, emphasizing the role of the provinces within the federal context. Chapter Three presents alternatives for improving the performance of the health sector, especially in terms of its capacity to respond to the needs of the poorest. Chapter Four summarizes the most relevant conclusions of this study. 10 6. The objective of this document i s to present an analysis and discussion of alternatives to improve the Argentine health sector. To prepare this analysis, various workshops were organized in Buenos Aires throughout 2002. These workshops addressed multiple health reform issues and served to encourage reflection upon sectoral policies. At the same time, various targeted studies were completed and servedas backgrounddocuments for the present analysis. 11 CHAPTER 1. SECTORANALYSIS 7. This chapter presents an analysis of the Argentine health sector. The first section describes the health status of the population with an emphasis on maternal and child health. The second section examines the access to health services and the respective impact of the recent economic and social crisis. The third section analyzes the structure and functioning of the health sector and discusses its main challenges: efficiency, equity and regulation. The final section describes the current status of the main national public health programs. 1.1. The HealthStatus of the Argentine Population 8. Until the crisis in 2001, Argentina boasted a high level of development and exhibited high indices of human development and overall health indicators. In2000, life expectancy at birthwas 74 years, which is greater than the Latin American average. The national infant mortality rate (IMR) was 16.6 deaths per 1,000 live births, almost half the rate reported twenty years ago. The maternal mortality rate (MMR)had been progressively falling to only 4.3 deaths per 10,000 live births. 9. However, the results reported do not reflect the sector's historically high levels of spending and supply of services. According to estimates from the National Ministry of Health (MoH), in 2000, Argentina spent about 8.5 percent of its gross domestic product (GDP) on health care, which would be equivalent to almost US$650 per citizen per year'. According to World Health Organization (WHO) data, only seventeen countries in the world reported higher levels of spending in relation to GDP. Argentina was also comparable to developed nations in terms of the number of physicians (29.4 per 10,000 inhabitants) and hospital beds (4.1 per 1,000 inhabitants). But despite the significant economic, human and infrastructure resourcesdedicated to health care in Argentina, other Latin American countries achieved greater health results with lower spending on health. 10. Like other countries in the region, Argentina is immersed in an epidemiological and demographic transition. The incidence and prevalence of chronic illnesses are on the rise, while rates of infectious diseases have decreased. In 2000, infectious diseases accounted for only 9 percent of years of potential life lost (YPLL), while tumors and cardiovascular diseases accounted for 27 percent of YPLL and trauma (accidents and violence) accounted for 21 percent of YPLL. 11. Chronic and degenerative diseases together with trauma account for the majority of Argentina's burden of disease, especially in large urban centers. Among these, cardiovascular disease, motor vehicle accidents and tobacco use (Argentina has the highest prevalence of smokers in the region) stand out. Proposals for confronting this component of the burden of disease are discussed in Chapter 3 in the context of strengthening national public health programs. 12. There are significant differences in the health status of the population in different regions and provinces in Argentina. Regions in the northeast and northwest, with the highest poverty levels, ' Tobar et al. (2002). Altemative estimates suggest that total health expenditures as a percentage of GDP were 9.14 percent in 2000, corresponding to US$723 per capita. The same source estimatesthat spendingdropped to US218 per capita in 2002. [CCtrangulo, with information from Ministerio de Econom'a. Presentaci6nrealizadaen Jomada Taller: Financiamientode la Salud en Argentina.COFESA, BuenosAires, 20033 12 have the worst health status especially in terms of maternal and child health and infectious diseases. Inthese provinces, infectious diseases account for 11 percent of YPLL, compared to only 8 percent in regions with higher income levels. Overall, the northern regions report a greater absolute number of YPLL and a burden of disease that i s greater than the national average (see Table 1). Table 1 Argentina. Years of Potential Life Lost (2000) Source: PAHO. Basic Indicators for Argentina (2001). 13. In Argentina, maternal and child health deserve special attention. The country's poor performance inthis area, both at the national and provincial level, has been of serious concern for a longtime. Although the IMR has decreasedby 50 percent in the last 20 years (from 33.2 deaths per 1,000 live births in 1980to 16.6 in 2000), it remains higher than other countries with a similar level of development and lower health spending per capita (Le. Chile, Uruguay and Costa Rica). Similarly, Argentina's MMR fell from 7 deaths per 10,000 live births in 1980 to 4.3 in 2001 but remained higher than rates observed in neighboring countries (see Chart 1). Infact, considering that between 1997 and 1998 the M M R had dropped as low 3.8 deaths per 10,000 live births, its rate of reduction appears to be at a standstill (and may even be on the rise again) in recent years. Chart 1 Argentina inthe regional context Health Spending per Capitavs. IMR and MMR ly 60 M e x I 0 200 400 600 800 Health spending per capita in 1998 (PPP US$) p G G i i E K 1 Source: UNDP HumanDevelopment Report2002 and PAHONHO Health Situationinthe Americas. Basic Indicators2001. 13 14. The differences in maternal and infant mortality rates between and within provinces are large and growing. These mortality rates are much higher for the poorest, especially those living in rural or marginalized urban areas2. In 1990, only three provinces (Catamarca, Chaco and Jujuy) reported IMRs that were double the rate in the best performing province, while in 2000, ten provinces doubled this rate. Today, although some provinces and the City of Buenos Aires have rates close to 10 deaths per 1,000 live births, other provinces (Corrientes, Formosa and Jujuy) have rates that are almost three times as high. Similarly, there are up to five-fold differences in maternal mortality between provinces (such as between Jujuy or Chaco and the City of Buenos Aires or Neuqu6n - see Chart 2). Chart2 MaternalandInfant Mortality Rates by Province B 35.0 25.0 g L 3 30.0 .m 20.0 P 8 8p -k P .3 15.0 8 .3 25.0 3 3 20.0 2 15.0 0 o_ 10.0 0 10.0 Ee: 5.0 5.0 z e: III+MMR IMR 1 Source: Office of HealthStatistics andInformation,NationalMinistry of Health, 2000-2001 15. Maternal and child health are of concern not only because of the high mortality rates and significant inequities, but also because of the potential impact the sector can have in this area. The majority of infant (both neonatal and post-neonatal) and maternal deaths in Argentina are avoidable through timely prevention interventions, diagnosis and treatment. The MoH estimates that out of 7,650 neonatal deaths that occurred in 2000 (representing two-thirds of all infant deaths in the country), 60 percent were preventable, primarily through betterprenatal care. At the same time, 44 percent of the almost 4,000 post-neonatal deaths could possibly have been avoided through timely prevention and treatment interventions. If Argentina could prevent half the infant deaths in one year, it would reach an IMR of less than 12 deaths per 1,000 live births. Reducing maternal mortality presents different challenges; abortion accounted for at least 29 percent of the approximately 300 maternal deaths that occurred during 2001. Other variables associated with * Forfurther analysis, see ReportNo. 22255-AR,World Bank: Argentina, RuralReproductiveHealth; June 2001. 14 increased maternal mortality rates are the rates of non-institutional births (Le. birth at home) and pregnancy in women under the age of twenty3. Both situations are found more commonly in the poorer provinces inthe north, especially in poor women and/or those living in rural areas. 16. In conclusion, increasing the health status of the maternal and child population, particularly in women and children living in poverty, should be a priority health policy in Argentina. The existence of a high proportion of preventable maternal and infant deaths suggests that many Argentines are not receiving timely and sufficient health care. To this end, it i s necessary to closely examine the current functioning of the health sector, improve its performance and strengthen its capacity to have a positive impact on the well-being of the poorest. This i s particularly important today when 74 percent of children in Argentina live in poverty and health insurance coverage and access to effective services and medications has dramatically been reduced4. 1.2. Access to Health Services 17. In Argentina, access to services largely depends on an individual's income level. An individual may obtain health care through three predominant schemes: (i)public services in hospitals and state-run ambulatory care centers; (ii)insurance, including mandatory health insurance under the social security system linkedto formal employment and "voluntary" private, or "pre-paid" insurance ("ppre-pagas"); and (iii)directly through out-of-pocket payments to private providers. Of the poorest 20 percent of the population, 77 percent access health services exclusively through the public health service network, while 20 percent use social security and 2 percent have private insurance. By contrast, among the richest quintile of the population, only 11 percent use the public hospital network, 66 percent use social security and 23 percent use private insurers. (See Chart 3) Chart3 Insurance coverage by income quintile 90 80 70 25 60 50 s 40 30 20 10 0 1 2 3 4 5 Income quintile t-Obras sociales and PAMI -Public sector Pre-paid insurance Source: Siempro, Conditions of Life Survey, September 2001. A high incidence of pregnancyand birthsin adolescents i s associated with low birth-weight and high infant mortality rates. For more informationon the effects of the crisis on the Argentine health sector, see the working document: "El sector salud Argentino en medio de la crisis", by N. Schwab and J.P. Uribe; World Bank, November 2002. 15 18. The public health service network primarily serves the poor and those without formal employment. Close to 45 percent of Argentines are served by State services, but there are significant differences between provinces. Provinces with a higher percentage of inhabitants without explicit health insurancecoverage (and thus under the responsibility of State care) tend to have the poorest health results, less resourcesper capita invested in the health sector and a greater incidence of unsatisfied basic needs (UBN). For example, the province of Corrientes has the highest IMR in Argentina (30.4 per 1,000 live births), its annual provincial health spending i s only $60 pesos per capita and 60 percent of its population lacks health insurance. By contrast, in NeuquCn where only 23 percent of the population lacks formal health insurance, per capita spending on health i s almost $300pesos and the IMR is one of the lowest inthe country (11.4per 1,000 live births). (See Chart 4). Chart 4: Infant mortality rate versus Percentage of Population without Health Insurance Per Province 30.4 Corrlent Jujuy Formosa TucumPn Misiones Chace Catamarc LaRioja III 2 SaltaSanJuan SanLuis Negro ~"'%fkaio LaPampa Chubut h e n o w Cordoba Mendoza SantaFe StigoEsl Neuquen TierraFu 9.4 CA B.A. .I6 .66 % of the Populationwithout insurance Coverage Source: Ministry of Health2000 and estimates from CEDI/ World Bank 2002 19. The above information suggests that populations with health insurance have greater access to health services. However, as will be discussed below, health insurance in Argentina also suffers from equity and efficiency challenges; the insureddo not have total financial coverage and may have to pay significant amounts out-of-pocket as "co-payments" to access certain services and medications. In each insurance scheme, these co-payments are equal for all the insured, independent of their income level. The level of co-payments imposed could thus be significant and represent a serious barrier to accessing health services for low-income beneficiaries. As a result, many of the insured may ultimately end up usingState hospitals. 20. The current crisis has increased the proportion of the population that depends on public hospitals. The poorest populations have been hit hardest: the loss in insurance coverage was three times greater in the poor than in the non-poor. InJune 2002,42 percent of the general population 16 and 61 percent of the poor reported that they depended exclusively upon public hospitals or out- of-pocket payments for health care.5 21. Access to health services and medications i s limited, not only for people depending upon the public network, but also for those with insurance coverage. A recent survey6 shows that of the households that neededhealth services between October 2001 and June 2002, 38 percent reported that at least one member of the household could not obtain medications when needed, 27 percent could not consult with a physician when they felt it was necessary and 33 percent could not access medical tests that were prescribed. The poorest 20 percent of households had the greatest difficulties in access to health care, but all income levels faced the same problem, especially in obtaining medication. (See Table 2). IncomeOuintile Of all households in need, the percentage that: 1 2 3 4 5 Total "Could not obtain necessary medication" 61 45 31 30 20 38 "Could not be seen by a physician when necessary" 39 34 21 22 13 21 "Could not access the medical tests indicated as necessary" 52 43 29 26 16 33 Source: World Bank Survey 2002 22. The primary reason for not being able to access health services i s the lack of money to purchase medications or to pay the co-payments necessary for medical consultations (see Table 3). While services within the public network are theoretically free for those without health insurance coverage, many provinces have established payment systems through cooperatives or foundations linked to public assistance centers. For many hospitals, these systems of "voluntary payments" cover an important part of the variable cost for care and are necessary for continued functioning of the facilities. Similarly, since insurance systems do not provide total financial coverage, it is not surprising that 66 percent of households cite lack of money as the most common reasonfor their lack of access to services and medications. 23. The second reason cited for not accessing health services differs between income quintiles; the poorest populations lack health insurance coverage, while the richer quintiles have problems related to obras sociales that do not provide or cover the necessary services. Difficulties inhealth service management (i.e. waiting lines, difficulties in making appointments, etc.) account for 15 percent of unmet needs and are an important reason why the poorest quintiles do not access health services. The 2001 ECDV shows similar results: 42 percent of the total population and 68 percent of the poor lacked health insurance. World Bank 2002. 17 Table 3. Reasonsfor lack of access to medications, physician consultation and medical testing Quintiles I ercentaee 1 1 1 2 1 3 1 4 1 5 I I TotalI sufficient funds (for dues, medical onsultation, treatment, transfers, etc.) 71 62 67 67 60 66 phe obra social does not provide I cover the I I , I v I" 22 29 27 18 he respondent lost hisI her obra social 15 linsurancecoverage I ,717 117 II 8 4 17 Y -" I I" Difficulties encountered in the service itself (appointment, waiting, others) 18 18 15 9 7 15 24. High levels of out-of-pocket spending for health care have been constant in Argentina, despite the existence of public providers and social insurance. Forty-three percent of the country's total health expenditures correspond to households' out-of-pocket spending, one third of which goes to the purchase of private insurance and two thirds to direct payments of health services and medication7. On average, households devote 7 percent of their budget to health care spending, with variations between income quintiles. Households in the poorest quintile devote 9.4 percent of their income to health care, while those in the highest income quintile spend only 5.2 percent on health care8.(See Annex IV for a detailed analysis of private spending on healthcare). 25. Because of the crisis, households saw their incomes shrink and thus had to modify their demand for health services accordingly. Compared to the end of 2001, by mid-2002 (i) 38 percent of households reported greater use of public health centers instead of private; (ii) 38 percent also reported that they take their children less frequently to preventive medical care; and (iii) percentofhouseholdsreportthattheyhavecanceledtheirhealthinsurance. Thefirsttwo 13 findings affect households of all income levels, as well as those in which the head of the household has health insurance coverage. This again illustrates these insurers' limited effectiveness in terms of financial protection and delivery of services. Yet again, all of these changes have been more intense in the poorest households where 57 percent reported that they take their children less frequently to preventive healthcare. 26. It can be expected that this deterioration in access to health services has affectedthe maternal and child population most, although consolidated evidence i s still lacking. The information system of the MoH's Maternal and Child Health and Nutrition Project (PROMIN) indicated that between July 2000 and September 2001, the coverage and quality of maternal and child services in health centers in urban areas with high indices of unsatisfied basic needs declined. Specifically, the coverage of care for pregnant women declined, pregnancies were detected later, the quality of prenatal care dropped (due to interruptions in the availability of critical supplies), and the percentage of children with sufficient medical care during their first year of life decreased. 'PIA-ISALUD, HealthSpendingin Argentina,Tobar, F. 2002. Maceira 2002, basedon EncuestaNacionalde Gastos de 10s Hogares,INDEC. 18 1.3. Structure, Functioningand Challenges of the Argentine Health Sector 27. The Argentine health sector tends towards the achievement of universal coverage for all citizens, in order to elevate the health status of the population. However, despite significant efforts, in its current arrangement, the health sector does not guarantee the entire population effective access to health services. Today, the health sector consists of three major sub-systems: (i)social security insurance, which covers about 52 percent of the population; (ii) private insurance, covering 9 percent of the population; and (iii)public providers (implicit state insurance), covering the remaining 39 percent '. Health-related social security includes national insurance providers (obras socialesnacionales-OSN)and the National Institute of Social Security for Retired Persons and Pensioners (INSSJP, or PAMI) under the jurisdiction of the national government. These institutions comprise the National System of Health Insurance (SNSS). At the provincial level, social security consists of individual provincial health insurers (obras socialesprovinciales - OSP). 28. The health sector in Argentina is highly fragmented with little or no internal articulation. This fragmentation is especially evident in the social security sub-systems. Although all of these sub-systems (obras sociales nacionales, PAMI, obras sociales provinciales and others) are financed through mandatory employee-employer contributions (and from pensioners), they do not share financial flows, neither do they allow for the transfer of beneficiaries (and contributions) between them, nor offer the same basic guarantees to their members. In addition, they are not subject to the same regulatory framework. To make matters worse, this fragmented health social security system, i s accompanied by: (i) a private insurance sector that is un-regulated and offers complementary, optional plans, primarily in the large urban centers, and (ii) programs for specific population groups, such as the Federal HealthProgram (PROFE) for non-contributingpensioners and their dependents (see Annex VII), and special programs for the armed services and police. Table 4 summarizes the different characteristics of each sub-system and highlights the existing degree of fragmentation and heterogeneity, in terms of financing, spending, coverage of services and regulatory framework. 'The statistics on coverage under different sub-systems are approximate, especially because of the recent effects o f the crisis. In this document (see Tables 4 and 5), the authors assume that the national social security insurers (obras sociales nacionales) cover 10.5 million beneficiaries and PAMI an additional 3.1 million, as reported to date in the beneficiary database registered in the SSS and ANSES (Decree 1400/01 and resolutions 274/02 y 144/02). However, according to the ECDV 2001 survey, 39 percent o f the population i s affiliated with national and provincial social security insurers (national and provincial obras sociales) and 6.8 percent with PAMI, which would correspond to a total o f 14.7 million beneficiaries (compared with a total of 19.1 million social security beneficiaries according to the previous figures.) The survey estimates that 8.9 percent are affiliated to mutual funds, 2 percent to private insurers, 0.8 percent have double affiliation and the remaining 42 percent is without health insurance coverage. These discrepancies will hopefully be resolved through a "clean-up" of the SNSS database and the integration of other beneficiary databases, both nationally and provincially. 19 Table 4. Structure of the Argentine Health Se o r Health Social Security Private Sector National Obras INSSJyP Provincial Obras Public Sector Pre-Paid / Mutual Sociales (PAMI) Sociales Funds Population Formal Pensionersand Provincialpublic Populationnot Voluntary members in Covered employees, retired people; employeesand coveredby pre-paidinsurance ~ initially by may elect to retiredpersons social security schemes or others branchof remain in their from provincial subsystems activity, now original OSN. funds (without with free choice freedomof choice) of obra social for +voluntary the beneficiary affiliates Numberof beneficiaries, % of the 10,500,000 3,060,000 5,100,000 population 29% 9% 14% 14,210,000 3,280,000 (maximum- (8% - 54%) (3% - 14%) (7% - 51%) (39%) (9%) minimum at provincial level) Number of 70 Pre-Paidinsurers insurance organizedinvarious entities 1 with 24 Chambers; Total No. 280 delegation inthe (1 in each estimatedbetween provinces province) 140and300; No. of MutualFundsis unknown Financing Employees:3% Employees:3% Varies by Fundsfrom Direct payment from Employers: 6% Employers:2% + co-payments + pensioners: province: provincesand memberslbeneficiaries Employees:3%- TGN through (with co-paysand 3%-6% + support 5% provincial co- deductibles) from Employers:4%- participation TGN + co-payments +6%co-payments andnational programs Avg. monthly spendingin2000 $29 per $52per $33 per (maximumand beneficiary beneficiary beneficiary $22 per $68 per beneficiary minimumat ($13- $47) ($55'-$81) ($15- $229) capita* provinciallevel) Theoretical Mandatory ~ More than the No minimum No minimum PMO, as a minimum Service coverage HealthBenefits Mandatory healthbenefits healthbenefits Package(PMO), HealthBenefits package package as a minimum Package (PMO) Provisionof Privateand Privateand Mix of privateand Provincial and Their own facilities + services Publicproviders public providers; public providers municipal those contracted with 2 of their own public the private sector+ clinics hospitals public providers Regulation Superintendence Underthe SSS, Self-regulating No extemal No extemalregulatory of Health but with little entitieswith no regulatory control Services(SSS) real regulation extemalregulatory control control *Note: "public sector spendingper capita" i s estimatedas: the total nationalpublic spending, including provincial and municipalspending (but subtracting spendingon public goods -if these would be consideredper capita spending would be higher), dividedby the total populationnot coveredby explicit healthinsurance. Source: Informationfrom the SSS, MoH, andCEDI (2002) for coverage of OSN/ OSP andPAMIby province, INDEC census for populationdata, andTobar F. (2001) for healthspendingby insurer/ subsector. 20 Financing 29. Between 1995 and 2000, total health spending in Argentina reached a peak of $24,192 pesos or $653 pesos per capita per year. As previously mentioned, the greatest share of this spending (43 percent) comes from households' out-of-pocket expenditures. Social security, financed through mandatory employee-employer contributions, accounts for the next greatest share of spending (34 percent). In2000, this amounted to US$8,243 million (or 2.9 percent of GDP), 16 percent of which came from OSNs, 9 percent from PAM1and another 9 percent from OSPs. Finally, the public sector, financed by general tax revenue, accounts for 23 percent of total health expenditures, primarily in its role as provincial service provider (See Table 5). These national averages, however, hide significant differences between provinces. Table 5. Argentina. Health Spending by Agency (2000) Source: PIA - ISALUD, HealthSpendingin Argentina, Tobar, F. 2002. 30. The level of national public spending on health was maintained throughout the recent economic and social crisis thanks to an effort on the part of the national government to protect the financing of priority public health programs (see Table 6). Public spending on health remained relatively constant in real terms between 2000 and 2001, and later began to rise. As a result, estimates for 2003 public health expenditures suggest these will be greater, in real terms, than in 2000 (see Annex I).contrast, data from seven of the major provinces suggest that between In 2001 and 2002, provincial public spending on health decreased. Similarly, spending by social security insurers has been falling since 2001. This decrease in social security spending on health, both nationally and provincially, i s the result of lower rates of formal employment and its impact on the obrus sociules, combined with an overall decrease in salary levels. However, as a result of regulatory measures introduced by the national government (see below) real social security spendingin2003 is expected to recover its previous levels. 21 Table 6: Argentina. National Health Spending (Inmillions oi Iesos, 2001) Sector 2000 2001 2002'2' 2003'3' Public Sector") 4,420 4,440 National Government 508 462 479 553 Transfers 95 ~ 69 ~ ~ Provincial Government 3,817 3,909 7 Provinces 2,474 1,634 Health Social Security 8,802 8,599 National Health Social Security 6,603 6,363 5,620 5,658 PAM1 2,521 2,389 1,726 1,482 National Obras Sociales (OSN) 4,082 3,974 3,894 4,I75 Provincial Obras Sociales (OSP 2.198 2,236 OSP0f7provinces'~' 1,634 840 Source:NationalOffice of Public Spending,consolidated- Ministry of Economy 2003 (1) This does not includemunicipalspending; (2) Preliminary;(3) Projectionsbasedon estimatedinflation rates. Under-estimationin real terms i s expected; (4) includesconsolidatedspendingfor the City of Buenos Aires, Buenos Aires, Cordoba, Chubut, NeuquCn, Rio Negro and San Juan. Provision of Services 31. Provision of health services in Argentina depends upon the provincial public sector and the private sector, with significant differences between provinces interms of the relative participation of each (see Table 7). Fifty-six percent of hospital facilities and 43 percent of hospital beds in the country are run by the private sector, which operates primarily under contract with the SNSS and private insurers. There are more than 13,000 ambulatory centers, of which 55 percent are private. Public service provision is, in theory, free for all, and i s essentially a provincial responsibility financed by provincial taxes and resources obtained from non-earmarked transfers from the central government (under co-participation agreements). Twenty-eight percent of hospitals and 41 percent of hospital beds are under the responsibility of the provincial public sector. Participation of the national and municipal levels in the provision of public services is minimal, except in provinces such as Buenos Aires, Cdrdoba and Santa Fe, where decentralization has advanced more10 . 32. At the same time, the obrus sociales and PAMIdirectly own very few facilities". The OSPs provide most of their services through private providers and, less frequently, through their own public assistance network. In terms of diagnostic support and laboratory work, there i s a substantial over-supply in areas with greater population concentration, with widespread predominance of private providers. On the other hand, many rural and semi-rural areas lack minimal diagnostic and laboratory services. '"In the provinceof Buenos Aires, municipalitiesplay an importantrole in the supply of services, accountingfor 21.5 percent of all available hospital beds (41 percent of public sector beds and 69 percent of physician consultationsin public establishments). Another exampleis Cbrdoba, which has an extensive municipalprimary healthcare network. l1The few hospital beds owned by OSNs are concentrated in the city and province of Buenos Aires and the two specialty hospitals runby PAMIare inthe city of Rosario(in the provinceof Santa Fe). 22 Table 7. Distribution of Beds and Hospital Facilities Private vs. Public Provincial Sectors - Argentina (2000) Public Provincial Jurisdiction Total Total Private Sector S P Facilities Beds k facilit, % beds % facilit, % beds II )r INationwide 17,845 153,065 56 43 1 28 41 Federal Capital 1,666 21,944 91 45 3 37 Buenos Aires 4,896 51,517 56 45 3 27 Catamarca 380 1,470 30 37 67 62 C6rdoba 1,763 17,718 53 48 36 44 Corrientes 387 3,525 56 36 37 62 Chaco 519 3,537 62 56 38 44 Chubut 248 2,148 50 48 49 47 Entre Rios 604 6,75 1 40 31 47 65 Formosa 271 1,680 24 41 76 59 Jujuy 394 2,823 37 40 63 60 L a Pampa 206 1,179 52 30 48 70 L a Rioja 281 1,260 27 42 73 58 Mendoza 676 4,142 45 34 39 57 Misiones 617 3,125 51 51 47 49 Neuquen 248 1,660 41 30 58 65 Rio Negro 315 1,930 48 39 51 61 Salta 598 3,805 45 33 54 64 San Juan 301 1,742 40 17 58 71 San Luis 236 1,218 27 34 72 66 Santa Cruz 105 1,041 45 46 42 55 Santa Fe 1,869 11,011 72 48 11 22 Stgo. del Estero 526 3.033 35 30 62 70 Tucuman 702 4.520 60 41 35 59 Tierra del Fuego 37 286 54 17 27 74 I Source: C1 )I basedon data from the 2000 I- spital Census andINDEC. 2002, 33. The current distribution of public provision of services does not directly correlate to the proportion of the population without health insurance coverage. Ifthe public sector were to focus on the poorest and uninsured, we would expect to see a positive correlation between the percentage of the population lacking health insurance in each province and the supply of public hospital beds. However, inArgentina this correlation i s negative; the proportion of available beds inthe public provincial sector does not increase when the proportion of inhabitants without health insurance increases I*. 34. Public provision of health services vanes substantially from province to province. In most provinces, there i s a high concentration of health care facilities in densely populated urban areas, and few service providers in marginal urban and rural areas. This is because of the public network's historical emphasis on hospitals, rather than on outlying centers for health promotion, protection and primary care. In addition, in some regions, there are few effective systems for '*Source:CEDI 2002. 23 identifying patients in remote rural areas, and serious weaknesses in referral and counter-referral mechanisms. Challengesfor the Argentine Health System 35. Under the current arrangements for financing and service provision, the Argentine health sector faces three serious challenges: inequity, inefficiency and regulatory weakness. Inequities in the system are found in (i)the current model for public service provision, which does not guarantee timely access to quality health services, especially for the poorest; (ii)health social security, which has a limited capacity to extend coverage to the unemployed and suffers from persistent institutional weakness (evident in the inadequate financial protection and variable service provision to its beneficiaries) and the absence of effective mechanisms for the internal redistribution of resources; and (iii)the persistence of regressive cross-subsidies from public hospitals towards social security insurers. 36. Another challenge for the health sector is inefficiency. The public provision of services i s inefficient because of its rigid organization, absence of performance-linked incentives, poor accountability, and the lack of mechanisms for flexible responses to variable demand. In social security, inefficiency arises from fragmentation, the dispersion of the beneficiary population among hundreds of insurers, many intermediaries that lead to high administrative costs, the persistence of substantial financial imbalances that lead to chronic deficits, and the existence of organizational units that still need to strengthen their efficiency and scope (for example, the Administration of Special Programs (APE), which is responsible for high complexity illnesses within the SNSS). 37. Finally, the health sector suffers from significant regulatory gaps and a weak enforcement of current regulations. This is reflected in frequent accusations of the sector's lack of transparency, marked disparities inminimal service quality guarantees, frequent unsuccessful regulatory actions and rising inter-jurisdictional conflicts and complaints (i.e., especially in the case of patients with costly, complex illnesses who are treated in health centers outside their home province). Each of these challenges is discussedbelow. Inequity 38. Public provision of services varies greatly in coverage and quality. Public provision depends upon the financing available in each province, resulting in significant variations in the quality and extent of the care provided. Within the public network, there is no defined package of services provided because it i s assumed that all services are delivered to all those who demand them. However, in practice, each health care center offers the services that can be delivered given the available resources. Overall, public provision of services i s based on spontaneous demand and emergencies; it i s rare to find services that plan their provision of care. As a result, there i s no guaranteeof access to health services for the poorest population. 39. On the other hand, the current organizational model of the social security system, which i s based on formal employment, does not permit the expansion of coverage to unprotectedsectors of the population. Inaddition, social security financing i s pro-cyclical, with severe drops in times of economic crises and no accumulated reserves. Currently, social security health insurers cover a limited and decreasing portion of the population, estimated between 46 and 52 per~ent'~.This l3The World Bank's "Survey of the 2002 Crisis" reportsthat health insurance coverage (including OSN, PAMI, OSP and the population with double-coverage) fell from 46.5 percent before October 2001 to 43 percent in June 2002, 24 percentage has fallen in the past two years due to the economic crisis. Similarly, social security coverage varies substantially between provinces; in the northeast about 40 percent of the population i s covered, whereas in regions with more formal economies, social security coverage for health reaches 80 percent of the pop~lation'~. 40. The distribution of total public health spending (including social security and the governmental public sector) is slightly regressive, despite the fact that spending on care in public facilities i s progressive. This i s due to the greater relative share of social security spending on health (obrus sociules and PAMI), which is skewed toward the richest sectors of the pop~lation'~. In1997thetotalpublic healthspendinginArgentinawas$315 pesospercapitafor thepoorest20 percent of population and $400per capita for the richest 20 percent (See Chart 5). Chart 5. Distributiw Impct ofHealthSpending(1997) 500 1 Poorest 2 3 4 Richest 20% Income quintile 20% Publichealthcare Healthinsurance Source: Ministry of Economy,based on ENGH 96/97. 41. Inequities in public health spending are mainly due to the organizational structure of social security. Obrus are divided by occupational areas, each with a distinct average income, and each insurer controls the majority of its members' funds. This results in a substantial concentration of resources in very few OSNs. At the end of 2002, 160OSNs (covering 86 percent of the system's affiliates) reported an average income per affiliate below that established by the SNSS ($31pesos per person per month) to guarantee the mandatory health benefits package (PMO) (See Chart 6). This explains the emergence of co-payments, as well as the difficulties that the poor encounter when trying to access care, irrespective of whether they are covered by an insurance policy or not. reflecting the increase in unemploymentand informal employment caused by the crisis. The ECDV estimatesthat in 2001 health social security covered 46.6 percent of Argentine citizens. This estimate does not correspond to the total population estimated on the basis of the SNSS beneficiary database (from the SSS) and that of the OSPs, due to different sourcesof information andthe absenceof a consolidatedbeneficiarydatabase that would includethe OSPs. l4CEDI 2002. l5Health insurance spending is understoodas the spending of obrus sociales (national and provincial) and PAMI on medicalservices and administrativecosts. Source: "The Distributive Impact of Argentina's Social Policy"; Ministry of Economy, Buenos fires, July 2002, basedon data from the National Survey of HouseholdSpending(1996-1997). 25 Chart6. Distribution of Beneficiaries by Average OSN Income - 30% 25% 's .E 20% SCn 82 a m s2 5 15% a, 10% a alm 5% 0% 0-10 10-15 15-20 20-25 25-30 30-40 40-50 50-60 60-70 70+ Per BeneficiaryAverage Monthly Incomeof OSNs (in current pesos- Dec.2002) Source: Superintendenceof HealthInsurance, 2002 42. Inequity in the health insurance system i s also evident at the regional level, where there are substantial differences intotal spending per beneficiary. Inthe case of OSNs, regional differences range from a monthly spending per beneficiary of $13 pesos in Tucumin to $47 pesos in Formosa. Inthe case of OSPs, the level of spending i s related to the level of development of the province (measured by GDP per capita). While OSPs in Tucumin and Jujuy spend $15 pesos per month per beneficiary, the OSP in Tierra del Fuego spends $229 pesosper month per beneficiary. In PAMI, differences in spending per beneficiary between provinces is not as great as in the obrus sociules, but still exists, ranging from $44 to $81pesos per beneficiary per month. 43. Financial redistribution and compensation mechanisms within the health social security framework are insufficient to correct the existing inequities. There i s no mechanism for compensation or solidarity between the OSNs and PAMI, despite the fact that they both are part of the SNSS, and even less between these two and the OSPs. Furthermore, there i s no solidarity mechanism between health social security and the uninsured. The only existing mechanism for financial redistribution operates within the OSN-the Solidarity Redistribution Fund (FSR). Until early 2003, the FSR guaranteed each OSN a minimum of $47 pesos per month per workedmember (irrespective of the number of dependant beneficiaries inthe worker's family). It benefits from a relatively favorable financial situation, thanks to recent legislation that increased OSN contributions to the FSR16. However, until recently, redistributions among OSNs were based on the number of workedmembers, rather than on the total number of beneficiaries". Thus, OSNs with smaller family sizes and greater salary bases benefited more1*. Another 16 The March 2002 DNU raised OSN contributions to the FSR from 10 percent to 15 percent (for contributionsbelow $1,000 pesos) and from 15 to 20 percent (for higher contributions). This resulted in a 67 percent increase in the average monthly earnings of the FSR in the second semester of 2002 and reversed the drop in annual income that the FSR hadexperiencedsince 1997. "Asofthecompletionofthisstudy(June2003), thenationalgovernmenthadexpeditedadecreethatmodifiesthe FSR's compensation mechanismto guaranteea minimum of $20 pesos per month per membedworker,and $15 pesos per dependantbeneficiary. The average ratio of beneficiariesto each membedworkervaries depending on the source of information. According to the OSNdatabase, there are about 1.2 beneficiariesper membedworker, with differencesfor different job categories; ANSES reports the ratio i s 0.7; the SNSS 1997beneficiarydatabase reports 1.53; and a study carriedout by Maceira et al. in 2002 reports andaverage ratio of 2.1 (1.6 insmall obrus and 2.4 in large obrus). 26 limitation of the FSR is that it does not include workers whose monthly income i s less than $240 pesos (classified in Argentina as corresponding to 3 "MOPRES"). In July 2002, there were 480,000 of these low-income workers, accounting for 4 percent of all OSN beneficiaries. Overall, these low-income workers (often with unstable employment) have coverage that i s proportional to their contributions, but with no complementary contributions from the FSR; they are not guaranteed the minimum health benefits package, and do not have automatic family coverage. 44. The lack of solidarity in the social security scheme for the uninsuredpopulation is aggravated by a regressive cross-subsidy from public hospitals to social security insurers. This cross-subsidy arises as a result of the low level of payments by obrus and PAMIfor services rendered by public hospitals to their insured beneficiaries. It is estimated that between 20 and 40 percent of the population that uses public hospitals has some form of coverage through an obru social or private ins~rance'~.For the most part, insuredpatients from rural areas chose public hospitals (due to the lack of other service providers), and so do insured patients with little purchasing power (due to their inability to finance the out-of-pocket co-payments often requiredby private providers). 45. Public hospitals recover costs from social security through two different mechanisms: (i) direct contracts with insurers or (ii) automatic repayment mechanism that functions through an the SSS (when there is no existing contract or no compliance with existing contracts). No consolidated information is available to estimate the total use of direct contracts with insurers. However, estimates based on data from Cdrdoba and Mendoza suggest that this mechanism accounts for about $35 million pesos per year (or $2.6 pesos per member, per year) reimbursed from the insurers to the public hospitals. As for the automatic repayment mechanismthrough the SSS, the total amount invoiced by the public hospitals has not increased since 2000; meanwhile, the percentage of bills that were rejected by the SSS has increased. In some cases, there were errors or abuses in charging. Overall, out of a total of $77.7 million pesos charged by hospitals in 2002, the SSS approved the repayment of $23,4 million, which corresponds to only 30 percent of what was requested (or $1.65 pesos per social security affiliate, per year). 46. In summary, the reimbursements that public hospitals receive from social security continue to be very low in the face of overall levels of subsidization from the former to the latter. Even if the hospitals were reimbursed for 100 percent of what they charge through the two current mechanisms, this would only represent 3.5 percent of the budget of provincial public hospitals. Considering the number of insured patients who use public hospitals, this percentage i s still very low and suggests that there i s a low level of billing of services. This low cost recovery threatens the provincial public health budget and ultimately the overall capacity of the public health network to respond to the needs of the poor.20 47. A more effective cost-recovery policy would free-up resources to improve service delivery in public provincial hospitals and ensure better targeting toward the poorest, uninsured populations. Such a policy would also make more apparent the urgent need to restructure and/or liquidate certain obrus sociules to increase the overall efficiency of the social security system. If the public l9According to the World Bank's 2002 Survey of the Crisis, of the heads of households who reported that some member of the householdreceived care in a public hospital between October 2001 and June 2002, 27 percent had insurancecoverage, of which 16 percent were covered by an OSN or OSP, 9 percent were affiliated with PAMI and 2 percenthadprivateinsurance (pre-paidor MutualFund). 2oThe lack of articulation with workers' risk protection systems and motor vehicle accident insurance i s an additional source of unclaimedfunds for provincial public hospitals, which meritsfurther analysis. 27 health network recovered the real cost of services provided to social security beneficiaries, this would cost PAMIand OSNs about $85 million pesos per month, which represents more than 20 percent of the total monthly income of the SNSS (without counting the income through the FSR)~'. 48. Why do public hospitals recover such a low percentageof costs from social security insurers? There are many factors that account for this phenomena and overcoming them will entail joint efforts at many different levels. They include: (i)difficulties in identifying beneficiaries due to the absence of a consolidated and up-to-date database of national and provincial social security members (the national database has recently been completed and will need to be made widely available and periodically updated); (ii)difficulties in the billing process and highly complex formal requirements; (iii) inconsistencies in the price-list and service classifications recognized by the national-level; (iv) low management capacity in public hospitals; (v) lack of incentives for public hospitals to recover costs and increase efficiency; and (vi) lack of determination to support this policy. This lack of determination is evidenced at the provincial level by the low number of public hospitals that have attempted to recover costs through the SSS. Eighty percent of the total approved billing corresponds to only 73 hospitals, out of the 261 that regularly use the system. But there are 1,300 facilities in the national registry of decentralized public hospitals that would be eligible for usingthis reimbursement mechanism. InefJiciency 49. Inefficiency within the health sector results in part from an inadequate allocation of resources throughout the network of public providers. Public spending i s concentrated in institutions delivering high complexity care; only 10 percent of total public health spending i s assigned to primary care, again with substantial variations between provinces. In addition, the percentage of spending on personnel is large and inflexible, generally accounting for over 60 percent of a province's health budget and close to 80 percent of hospital budgets. But human resource financing i s not tied to performance or other incentives. For the most part, budgets are allocated historically, independently from the quality or quantity of services provided. 50. Compounding the above, the public health network's management and care models present serious weaknesses that threaten efficiency. These weaknesses include: (i) limited management tools, e.g. lack of information on production costs; (ii)low levels of autonomy, govemance and accountability**; (iii) rigid human resources management framework with minimal coverage and low capacity to adapt to variable demands; and (iv) a service delivery model based on spontaneous demand, with little proactive effort. Despite efforts to introduce improvements in those related to self-managed, or decentralized public hospitals - see Box 3) and did not succeed these areas, previous reforms were not completely implemented, had limited impact (especially in improvingpublic hospitalmanagement. 51. The high levels of fragmentation of the health insurance sub-systems, compromise its efficiency. There i s a large group of insurers whose number of beneficiaries i s too low to This calculation i s based on data from the 1997 Social Development Survey (Siempro 2001), which shows that approximately20 percent of obras sociales and PAMI members receivedcare in public hospitals. Using the estimated PMO amount of $30.8 pesos per month for 20 percent of PAMI and OSN members (excluding the OSPs because of their use of public services), the amount of spending is estimatedat $84.5 million pesos per month. 22A study underway, supported by the World Bank, finds that levels of development in decentralization, govemance and accountability in a select sample of high complexity public hospitals in three provinces is poor overall, and very unequal. 28 guarantee an adequate risk pool. Of the 268 OSNs included in the national SSS registry, the 10 largest account for 55 percent of beneficiaries, while 134 OSNs report less than 10,000 beneficiaries each, 44 of which have less than 1,000 beneficiaries (See Charts 7 and 8). This situation has remained relatively stable in the last decade, despite occasional crises in many OSNs and the national government's multiple efforts to restructure, dissolve or merge them. The OSPs are very heterogeneous in terms of their size, economic and financial status, services provided and legal framework. They cover a relatively greater share of the population in the poorer provinces. Finally, despite the fact that PAM1i s the largest single insurer in Argentina, its role i s less important than that of the OSPs at the provincial level, except in the province and city of Buenos Aires. Chart 7 Distributionof OSNs by Size 2002 5 40 n =5 30 20 10 0 1-299 300-999 1,000- 5,000- 10,000- 20,000- 50,000- 100,000- 500,000+ 4,999 9,999 19,999 49,999 99,999 499,999 Size of OSN (No. of Beneficiaries) ~~~~~~ ~~ ~~~~ Source: Superintendenceof HealthInsurance, 2002 Chart 8 Distribution of Beneficiariosby Size of OSN (2002) 40% 35% 30% 25% 2 -2 20% 5 E $ g15% 10% 5% 0% 1-299 300-999 1,000- 5,000- 10,000- 20,000- 50,000- 100,000- 500,000+ 4,999 9,999 19,999 49,999 99,999 499,999 Size of OSN (No. of Beneficiaries) Source: Superintendenceof HealthInsurance, 2002 52. In addition to its fragmentation, the health social security system suffers from a high degree of intermediation. The main health insurers do not recur to vertical integration, but deliver the majority of their services through third parties who are typically from the private sector and to 29 whom they transfer the associatedrisks. Inpractice, this i s frequently done through capitated sub- contracts with intermediate levels who, in turn, contract with direct service providers. These intermediaries take the form of "management companies" or "service networks". This practice of using intermediaries operates within a context of weak regulation, sub-standard information systems and scarce accountability. As a consequence, administrative costs rise, the quality and opportunity of services is compromised and transparency levels diminish. 53. Due to structural problems and inefficient spending, the three social security sub-systems suffer from chronic financial imbalances. Between 1995 and 2001, PAMI required "extraordinary" support from the national treasury in the order of US$1,700 million. Even with this substantial investment, PAMIfailed to reach a stable financial equilibrium(See Chart IO). In fact, PAMI's debt has now accumulated to almost $2 billion pesos, which explains its cutbacks in service provision. The OSNs have accumulated a total debt in service provision close to one billion pesos, despite recent restructuring programs. In fact, 52 obrus sociules were subjected to crisis proceedings due to serious non-compliance with financial, legal and/or service provision regulations; 38 of these obrus appeared before the courts, due to their argued impossibility of paying their debts. The OSPs are in a similar situation. These chronic financial problems have had a serious impact on the level of debt in the private provider sector and strongly impacted the quality of services provided. 54. Growing levels of unemployment associated with the current economic crisis aggravate the sector's chronic financial imbalances. Unemployment leads to a decrease in the resources available to insurers through mandatory employee-employer contributions. As a reflection of this, in the past two years, the direct income from the OSNs (without consideringincome through the FSR) has fallen by almost 20 percent, from an average of $235 million pesos per month in the first semester of 2000 to $190 million pesos per month in the first semester of 2002 (See Chart 9). PAMI's income reductionhas been even more serious, dropping by close to 40 percent in the last months of 2001 and beginningof 2002, to a level of $170 million pesos per month (see Chart 10). Inboth cases, the decrease in financing was largely due to a decrease in private employment. In the case of OSNs, this was accompanied by a similar reduction in the number of beneficiaries; this was not the case for PAMI. The financial situation faced by provincial insurers is also grim, with few exceptions. The OSPs' income i s subject to the imbalances and irregular availability of finances from each provincial government (which plays a dual-role of contributor and collector of the funds for its OSP). Various OSPs have seen their resources shrink due to salary cuts of provincial state employees, without subsequent reductions intheir number of beneficiaries. Chart 9 Chart 10 I I OSNs'DirectCollections PAMI ` I 2000-2002 Revenues and Expenditures 1991-2001 1,600 j1 I T 500 I h 450 3,500 ; %I 1,400 1,200 400 1,000 350 300 `P pg3,000 250 ~ I 3 .P 800 200 l `3 3 400600 150 11 I P* 200 100 50 1,000 I --e Revenues 1 1 ) +Expenditures 30 Source: World Bank, based on SSS information Source: World Bank, 2002 55. The problems faced by the Administration of Special Programs (APE) exacerbate the above panorama. Until 2001, the APE spent more than 50 percent of its resources (between $35 and $88 million pesos per year) on discretionary institutional subsidies. These subsidies took the form of support to obrus sociules to overcome imbalances in their flow of funds or to finance institutional strengthening and investment in fixed assets. The recent elimination of these subsidies23represents a significant achievement, but the APE still suffers from structural problems regardingthe definition of the list of interventions it should finance and the mechanisms to do so. The majority of APE spending does not go to interventions of high complexity and low prevalence, and the current reimbursement mechanism for high cost diseases does not account for a transfer of risks to insurers or health care providers. This explains the growing pressures on APE and its incapacity to control costs. To date, the APE faces an accumulated debt of more than $200 million pesos. 56. Under the current circumstances, health social security insurers cannot guarantee a basic benefits package for their beneficiaries. The SSS estimates that the cost of providing the PMO established by the national government (and obligatory for OSNs and pre-paid private insurers) is close to $30.8 pesos per month, per benefi~iary~~.On average, the spending of the three health social security sub-systems i s greater than this, at $36 pesos per month, per beneficiary: $30 pesos in the OSNs, $35 pesos in the OSPs and $59 pesos in PAMI 25. However, the SSS found that in January 2002, 62 percent of the OSNs in metropolitan Buenos Aires bound by law to comply with the PMO could not do so (this percentage later dropped to current levels of 12 percent). In other regions of the country, the level of non-compliance with laws requiring provision of the PMO was apparently greater than 80 percent. These results corroborate recent studies that found that 26 percent of health social security members could not access medications, physicians or necessary medical tests when necessary. This situation also explains why, in 1999, 10 percent of obrus sociales beneficiaries and 18 percent of those insured through PAMI had additional health insurance coverage. 57. In the past years, efforts have been made to improve performance and stimulate competitiveness inthe SNSS by restructuringobrus sociales and letting beneficiaries choose their obra of affiliation. This free choice of obru i s currently in force, although only among SNSS entities and by OSN type (Sindical vs. "de Direccio'n de Empresu"). Members still may not transfer to private or provincial insurers26. According to SSS statistics, from 1997 (when this option became available) until the beginningof 2003, between 10 and 12 percent of members had chosen to change their insurance provider within the SNSS. This topic deserves more attention, especially given the low rate of transfers (less than 3 percent, annually) and the possible process of risk selection (or "cream-skimming"). Both are quite likely given the low availability of information for beneficiaries of these systems and the fact that the insurance premiums are not risk-adjusted. 23Through the APE Resolution077/02 of March 22,2002 24Estimatebasedon 2001PAHO/SSS study. 25Nevertheless,an analysis of disaggregated costs shows that for almost half of all provinces, the OSN/OSP spending per beneficiary i s not high enough to cover the estimatedcost of the PMO. This is linked to the disparitiesin spending per beneficiary betweenprovinces (See Annex 111).Spendingis linked to levelsof provincial development and installed capacityrather than to actual health care needs. 26The province of Salta is an exception; through an agreement, it was delegated the responsibility to cover retired persons previouslycoveredunderthe INSSJyP. 31 58. In the past two years, the national government has taken measures to relieve the precarious financial situation of the SNSS and PAMI. However, on their own, these efforts do not ensure the sustainable elimination of recurrent deficits. This is because they are solely targeted at improving income, without solving the underlying structural problems in management, spending and, most importantly, service provision. The March 2002 increase in mandatory contributions to the OSNs from 5 percent to 6 percent27halted the drop in income, but was not sufficient for the SNSS to recover its 2000 level of income. The impact in terms of funds available per beneficiary deserves further analysis. Regarding PAMI, a new law approved by the National Congress in the second half o f 2002*' increased employers' contributions from 1.5 to 2 percent29and determined that the debt PAMI accumulated on June 30, 2002 (approximately $1,550 million pesos) would be canceled through the National Treasury and PAMI'S anticipated future financial surpluses. Yet it i s improbable that PAMI will have a surplus in the near future without undergoing structural reforms. [See Annex VI for a more lengthy discussion of PAMI and the impact of the recent law] Regulatory Gaps 59. The previous sections have shown how, under its present arrangement, the health sector does not ensure the provision of basic and uniform health care services for all citizens throughout the country. The federal nature of the country (lacking effective spaces for consensus building) and the structure of the regulatory framework are two factors that contribute to this lack of minimum health service guarantees. This section describes the challenges to effective regulation; the implications of the federal structure for health will be discussed in Chapter 2. 60. The National Superintendence of Health Services (SSS) is the most developed regulatory entity in the health sector. However, the SSS faces substantial challenges as to the definition of its role and jurisdiction. Officially, the SSS i s the mechanism for overseeing and monitoring SNSS insurers, and has authority over the OSNs and PAMI. However, in practice the SSS has limited capacity to establish policies that may influence PAMI, which functions autonomously. Therefore, the role of the SSS i s focused on monitoring and controlling the hundreds of OSNs, their contracts with intermediaries and service providers, and private insurers' collateral participation. At the provincial level, the SSS does not have regulatory authority over the OSPs and the network of public providers. As a result, provinces lack an entity for monitoring and controlling health insurance and the provision of health services. 61. The SSS needs to clarify its various functions and strengthen its monitoring, control and enforcement capacities. On one hand, the SSS functions as a steward and regulator of the health sector (for example, by defining the contents of the PMO). At the same time, it administrates and executes funds (through the APE or FSR3', for example, or through direct purchasingof supplies or services for the OSNs). Finally it carries out monitoring, control and enforcement functions. This combination of roles can affect its effectiveness. At the same time, despite efforts to strengthen the technical capacity of the institution in past years, the SSS faces serious limitations 27BudgetLaw 25,565 (2002). Employeecontributionsremainat 3 percent. Law 25,615 of July 2002. Some aspects of the new PAMI law, especiallyrelatedto its govemance framework could make it even more difficult to advance a structuralreformof the Institute. 29The increasein contributionsto the OSNs andPAMIhas had an unknownlabor impact. 30Although APE i s a legally recognizedentity that is autonomous and independent of the SSS, in practice, its daily management anddevelopmentare confoundedwithin the Superintendence. 32 that weaken the effectiveness of its interventions. For instance, until the last couple of months there was no consolidated database of health insurance members and beneficiaries, there are political and legal limitations to implementing effective sanctions on certain players in the health care arena, and there i s a high level of instability in the regulations the SSS prescribes. However it is worth noting that since 2002, for the first time, insurers who did not comply with the regulations were fined. 62. Aside from the SSS, there are significant overall gaps inthe regulation of the health sector. A fundamental gap i s in the quality assurance of service provision. There i s no effective national system for quality assurance, despite some individual efforts within the M o H in this direction. In addition, the SSS i s limited in its actions toward SNSS providers (i.e. with respect to licensing, certification and accreditation), OSPs operate relatively autonomously and the private sector defines its own standards for providers. Furthermore, payment mechanisms do not consider quality and performance, and users receive little information. At the sub-national level, each province defines the minimal framework that governs public and private providers. At the same time, control over the purchase and installation of new technologies or the obsolescence of technology already in place i s minimal (and preventive maintenance levels low). Although some provinces have kept the authority over quality control within their ministries, others have delegated this responsibility to associations of medical professionals (private associations created by provincial laws), especially in the case of controlling professional licensing and accreditation. These associations are not monitored by any state organization, despite the fact that they operate within the public domain. r Table 8 Argentina. Regulation of the Health Sector by Sub-sector Sub-sectors Regulatory Agency I OSN P A M I OSP Private Public Private Provision Provision SSS/ Ministry OSN/ PAMU Financing sss National Each Each 3overnmenl Province of Economy OSP/ Private/ W O E ) Province PMoH Insurance jSS defines Provincial (Coverage of sss minimum Each SSS/ MoE Each M o E and beneficiaries) and PAMI Province Province consumer modifies it advocates Provincial Service Each MoE- Each M o E and Provision sss 'AMI itself Province Consumer advocates Province consumer advocates Supplies ANMAT (i)Quality of moving Their own supplies ANMAT ANMAT between ANMAT supplies: ANMAT provinces: each ANMAT province sss/ PAMU (ii)Service Municipalities OSP/ providers sss Different and provinces Province/ 'AMI itself lrrangement Each s in each Province 3ach province (iii)Human province Provincial sss/ PAMU Resources sss authority OSP/ Private/ Zach province 33 63. In addition to the aforementioned gaps, there are significant overlaps in regulation, monitoring and control. For example, the National Drugs, Food and Technology Administration (ANMAT) is responsible for the monitoring and certification of medical supplies at the national level. However, in the case of the financing, marketingand consumption of medical products that do not cross provincial borders, provincial authorities are responsible for ensuringregulations. In fact, there are currently about 16 provincial laboratories, 21 municipal ones and even more operating within hospitals, public universities and specialized areas (i.e. the armed forces) that, for the most part, are not accountable to ANMAT regulations. Table 8 summarizes the regulatory instances of the Argentine health system. 1.4. Public Health and NationalPrograms 64. During the 1990s, there were important improvements in the principal indicators of the population's health status. However, the current social crisis and persistent, substantial inequities within and between provinces call for renewed prioritization of public health within the heath sector development agenda. This i s especially the case for strengthening priority programs and developing and targeting new interventions, such as those related to tobacco and injuries. 65. The federal structure and inertia in resource allocation are two key challenges to the design and implementation of public health interventions. Like many countries in the region, Argentina has concentrated most of the health sector resourceson individual care, especially in areas of high technology or high complexity care found within hospitals, to the detriment of primary health care and public health efforts. Although the proportion differs from one province to another, in general no more than 10percent of health care spending i s allocated to primary care. Ultimately, public health spending is tied-up in historically-determined programs and allocations, with relatively little innovation in internal management or in resource distribution. This situation i s exacerbatedby the inherent difficulties in coordinating national public health programs within the health sector's federal structure and its fragmentation. 66. Over the past two years (2002-2003), in response to the crisis, the national government has attempted to reinforce certain priority public health programs. To this end, it has declared a state of health emergency, which emphasized financial protection for maternal and child health services (including nutritional supplementation), immunizations, infectious disease control (Tuberculosis, Chagas and Dengue), HIV/AIDS, access to essential drugs and, more recently, sexual and reproductive health. The national government also increased the budget available for these programs [Annex I1 shows total spending in these programs between 2001 and 2003 (projected)]. Table 9 briefly describes the current status of each of these national public health programs and gives recommendations for improvements. Chapter 3 will expand upon these recommendations, especially regarding sexual and reproductive health. 34 Table 9 Argentina. Nation 1 HealthPrograms Current Status Recommendations ExpandedImmunizi ionsProgram(PAI) No cases of polio since 1984,no diphtheria since The PA1should be strengthened. The 1998,no neonatal tetanus since 1999 and no recommendations from the last review carried out measles since 2000. by PAHO (2000) are still valid, including (a) A t the same time, with the exception of BCG, improve the systems for surveillance, monitoring vaccination coverage is very low (based on a PAHO and reporting; (b) clarify roles at the national and study in 2000, 85 percent for polio, 91 percent for provincial levels; (c) clearly define the proposed measles and 80 percent for DPT), there are marked goals; (d) strengthen the administration of the PA1 regional inequities and there are concerns regarding (including systems for monitoring, reporting and the reporting system. evaluation), and (e) expand communication and Management o f the PA1has been affected by the social participation activities. crisis, suffering setbacks in the purchase of necessary chemicals and vaccines, inconsistent distribution to provinces and difficulties in consolidating information. Tubercu 4 s (TB) TB incidence in Argentina (55/100,000) The program needs to be strengthened to guarantee substantially exceeds rates in Chile and Costa Rica clear roles at the national and provincial levels that (26 and 17/100,000, respectively). would increase the percentage of treatments Only 75 percent of treatments were completed, completed and expand the coverage of treatment. compared with a goal of 90 percent. The supply of medication has been inconsistent, both before and during the crisis. HIV LIDS The prevalence of HIV/AIDS in Argentina is Strengthen prevention interventions. estimated to be similar to that of Brazil (0.7 percent Clarify roles at the national and provincial levels among individuals 15 to 49 years of age). and improve articulation with insurance sub- Prevention and early detection interventions are systems to prevent duplications, cross-subsidies and scarce; more emphasis i s placed on uncovered areas. pharmaceuticals. Responsibilities are not clearly articulated throughout the health sector. Vector TransmittedDiseases(Dengue, Malaria, Yellow Fever and Chagas) Regions in the northeast and northwest have a high IThe sector should maintain the effective prevention risk for yellow fever and hemorrhagic dengue, but efforts against vector-transmitted diseases- these have not yet been a problemthanks to solidifying the achievements and preventing effective prevention programs. Cases of malaria are reversals. scarce. The fight against Chagasprogram has successfully interrupted the disease in four provinces in which it i s endemic and another four provinces are close to haltinn the disease. 35 The health status of the maternal and child An integrated, sustainable strategy for maternal and population is a key concern in Argentina, given the child health is needed. This strategy should be relatively high rates of morbidity and mortality. articulated within the federal context o f the health (See the discussion in other sections of this sector. (See the discussion in other sections o f this document). document) Barriers to accessing medications in Argentina are It is necessary to discuss and define the significant and are primarily caused by inability to sustainability of the REMEDIARprogram at the pay. Inresponse, the national government initiated national level, considering the federal nature of the national policies including: (i)development of the health sector and the necessary articulation of the REMEDIARprogram, which should guarantee free program with insurance systems. Complementary access to essential medications through the public alternatives should be explored to contribute to the primary health care network, and (ii) sanctioning a generic prescription law. law for generic prescriptions to change medication pricing and improve access. Despite high IMR and MMR,especially inthe The regulations that accompany the national Law northern regions of Argentina, access to modern need to be developed and sanctioned, the National contraceptive methods i s unequal and especially Program for Reproductive and Sexual Rights threatens the human rights of people with lower developed and implemented, the necessary incomes, denying them their right to choose. The budgetary resources ensured, and a close monitoring availability and provision of reproductive and and evaluation system implemented (for more sexual health supplies and services i s not details see Box 6). guaranteed,even in provinces that have laws regarding these services. The national Sexual Health and Responsible Procreation Law, approved inthe second semester of 2002 creates the National Sexual and Reproductive Health Program to address these issues (for more detail, see Box 6). 36 CHAPTER 2. THE PASTAND FUTUREOF HEALTHREFORMSINARGENTINA 67. This chapter analyzes the variables that are determinant for the success of future health reforms in Argentina. The chapter begins with a summary of the key reforms undertaken in the 1990s and the major lessons learned from their implementation. It then discusses key characteristics of the health sector, namely its federal nature, its complexity in terms of political economy and its heterogeneity. Next, the chapter looks at the essential public health functions that are indispensable to improve the performance of the health sector. The chapter concludes with a discussion of how to promote federal negotiations that would articulate provincial responsibilities, under national leadership. 2.1. Reforms ofthe 1990sandLessonsLearned 68. The reform efforts of the 1990s in Argentina covered wide and varied areas. The most important included: attempts to improve the efficiency and management of public hospitals, modernize the SNSS and restructure insurers (the OSNs and PAMI), strengthen certain priority national programs (for example, the maternal and child health program, the HIV/AIDS program and the national surveillance system) and advance provincial health sector reforms. These reforms unsuccessfully attempted to regulate the activities of the private health insurance agencies and promote competition between them and the national social security insurers. Despite the technical robustness in the design of these reforms, the results were incomplete and insufficient to resolve the structural problems of the health sector and improve its performance. [See Box 1: "Reforms in Health Social Security", Box 2: "Provincial Health Reforms of the 1990s", and Box 3: "Public Hospital Reforms of the 199Os"l. 69. What are the major lessons learned from the recent reform efforts? One of the primary lessons learned is that in order to establish minimal guarantees of health care for the poor and vulnerable populations, the provinces (and the province-nation relationship) must be at the center of the reforms. Second, in the 1990s,the key health sector reforms were focused on transforming social security at the national level. It was hoped that changes in the SNSS would have an indirect impact on the services delivered to the uninsured, poor and vulnerable populations, which depend on the provincial public sector. This strategy was unsuccessful. The SNSS transformation was marginal and did not modify incentives or improve access to, and provision of, services for the poor and uninsured at the provincial level. 70. The Argentine provinces are responsible for serving the poor, even more so during times of crisis, and they have the public health networks with which to do this. The importance of the role of the province is even more evident when consideringthe salient characteristics of the Argentine health sector, namely: (i)its federal nature, (ii)complex political economy, and (iii) heterogeneity. Each of these i s discussed in turn below. 37 ~~ ~ Box 1. Argentina -Reforms inHealth Social Securityof the 1990s Many reform efforts of the 1990s were centered on the National HealthInsurance System(SNSS).The specific actions undertakenand the achievementsobtainedto date are summarizedbelow: - Reorganization of the OSNs and PAMI. This included attempts at technical, financial and managerial strengtheningof the insurerswithin the SNSS. The insurers who did not adequatelyrestructure were expected to merge or close, thus improving the system's risk managementand economies of scale. Progress obtained in this restructuring was incomplete. The OSNs participating in the reform program did not significantly improve their performance and financial and service inequities persisted. PAMI reforms were unsustainable and the merger or closure of dozens of obras that do not meet the minimum criteria for continuedoperations - i s still pending. Changes in the Solidarity Redistribution Fund (FSR) in order to introduce automatic compensation to members. This objective was achieved and the transparency and equity in allocation of FSR resources improved. In April 2003, the MoH took a further step by instituting automatic compensationbased not only - on the number of affiliates but also their dependant beneficiaries. Development of technical instruments and tools central to thefinctioning of the SNSS, such as costing the PMO and establishing a consolidated database of SNSS beneficiaries. Again, results were incomplete. Although there was significantprogressin 1997in terms of developinga social security beneficiary database, its maintenance, implementationand utilization has become a serious challenge. Only at the beginning of 2003 did the SSS once again consolidate this database, and the challenge continues to lie in its implementationand permanentupdating. Regardingthe PMO, there is still no detailedcost study that could be publicly debated, andno system has beendevelopedthat would allow periodicupdatingof the contentsof the PMO, according to cost-effectivenessandfinancial equilibrium criteria. - Zntroduction of more free choice to beneficiaries, thereby inspiring incentives for greater quality and efficiency. This was achieved in 1997, with certain restrictionsregarding the nature of the obras sociales, and has been maintained, to date. Concems have arisen over potential risk selection and information bamers - for beneficiaries. Strengthening the regulatory capacity, monitoring and control of the SSS. Substantial progress was made regarding the structure and technical capacity of the SSS. However, its functioning still needs to be improved, its roles and govemance better defined and the development of effective monitoring and control instrumentsguaranteed. -- Regulation of theprivate health insurance sector. No progresswas made; still pending. Increased competition between insurers. Despite the introduction of free choice for OSN beneficiaries,this systemof managedcompetitionwas not opento the provincial or private insurers. The mainlessonsleamed throughthe implementationof these reforms include: (i) Interest groups threatened by these changes strongly opposed the introduction of a more open, unified, organized andcompetitiveregulatorysystemfocused on beneficiaries. (ii) The capacity (or incapacity) of the highest authority for monitoring and control (in this case the SSS) largely determined the final results, especially in terms of complying with the new norms. The SSS was subject to intense political pressures from various interest groups, which undermined its effective functioning and introductionof reforms. (iii) There was very little information availableto the public regardingthe objectivesandprogressof the reforms. Lack of attention to issues of beneficiary rights and social communication reduced the effects and sustainabilityof some of the transformationefforts. (iv) A common perception is that the intense debate among health sector interest groups moved inside the govemment andultimately blockeda goodportion of the anticipatedreforms. (v) Future reforms would benefit from placing more effort on aspects related to health service provision, including (i) the model for contracting services used by obras sociales; (ii) intermediaries and their operationalscheme; (iii)quality assurance indicators: and (iv) monitoring and evaluation systems focusing on effective healthservice provision. (vi) The needto move towards recognizingrisk-adjustedpremiums. (vii) The needto develop efficient andeffectivealtemativesto managehigh cost events. 38 Box 2 Argentina Provincial HealthSector Reforms inthe 1990s - Aside from reforms at the national level, there were also health sector reform efforts at the provincial level in the 1990s. For the most part, these efforts were linked to World Bank loan operations (called "Provincial Reform Loans - PRLs" or Credits for Provincial Reform). These reforms were implemented in the provinces of Salta, TucumBn, Rio Negro, San Juan, Cbrdoba, Santa Fe and Catamarca (still ongoing in the last three provinces). The majority of these provincial reform programs centered on five main objectives: (i)developing health provision schemes (sometimes called "public insurance") that guarantee and improve health services for the uninsured; (ii) hospital autonomy and improvements in the performance of public hospitals; (iii) financial equilibriumin OSPs; (iv) strengthening the legal and operational capacity of Provincial Ministries of Health; and (v) strengthening primary health care. These reforms have had varied results related to the different foci of each province. Overall, the pressure exerted by the ministry of economy and the executive power to reach the objectives of the sector reforms pushed efforts along. However, the high level of instability in the institutional framework and among the provincial health care authorities complicatedboth the development of such reform programs, as well as the sustainability of these programs at the end of the loan operation period (such i s the case inTucumhn, San Juan, Rio Negro). Insome cases (Rio Negro and SanJuan), the reformprogram was not concluded. The mechanisms introduced through these provincial reforms and their results (both positive and negative) provide examples of the types of initiatives and incentives to be used among health sector actors. Interms of the five main objectives mentioned above, the following advances stand out: (i) Insomeprovinces, thedevelopment ofprovincialpublic healthinsurance schemeshas improved access to services for the poor (in Catamarca and Santa Fe); on the other hand, in the case of Salta, the development of such an insurance scheme based on the OSP was not achieved. (ii) In some provinces, the introduction of management agreements improved management of public hospitals (Catamarca, Santa Fe and Cbrdoba), and strengthened the management autonomy of these hospitals (Salta). (iii) The reforms have contributed to improving or maintaining the financial equilibrium of the respective OSP (in Santa Fe, C6rdoba and Catamarca), and have improved the information systems and purchasingof services (in C6rdoba); (iv) The Provincial Ministries of Health improved their legal framework and their overall performance in regards to: (a) their relationship with hospitals in terms of services provided to the uninsured (Salta, Catamarca, C6rdoba and SantaFe); (b) insurance for the uninsured(Salta, Catamarca, Santa Fe and Rio Negro), and (c) monitoring and control of health care professionals and the private service provider group (Santa Fe and C6rdoba). (v) The budget allocation for primary health care has been protected and improved, thus expanding effective coverage of the population with primary health care (in Cbrdoba, SantaFe and Catamarca). 39 Box 3 Argentina. Reformsinthe Public Hospitalsinthe 1990s Throughout the 1990s, the national government carried out reforms to establish "autonomous public hospitals" (HPA) and thus improve the performance of public hospitals. This policy sought to increase autonomy and accountability, define incentives and establish a culture of results-basedmanagement in public hospitals. The health sector decentralization, which occurred years earlier, served as the basis for this transformation. However, when this policy was implemented, public hospitals were concerned about recovering costs from national social security insurers. In response and to introduce greater legal, organizational and functional reforms in the public hospitals, the national government expedited Decree PEN 578 (1993). This Decree established a mechanism for public hospital's automatic cost recovery from SNSS insurers through the SSS. This Decree was a strong stimulus to reform; until then, there had been no legal obligation for the OSNs and PAM1 to reimburse public hospitals for services rendered to their beneficiaries. The M o H addedincentives for the provincesto adopt this new hospital policy. Among these the M o H made external financial resources available (i.e. through PRESSAL,, a World Bank loan) to support investments and technical assistance for provincial reform efforts. This project provided infrastructure, equipment and technical assistanceto 15 public hospitals in three provinces. Nevertheless, seven years after the implementation of the "autonomous public hospitals" initiative, there has been minimal impact. One reason i s that initially, the policy mobilized the provinces but only towards the formal agreements necessary to benefit from the new cost recovery mechanism, rather than towards true reforms in hospital management. The provinces hesitated to implement the latter because they anticipated strong labor resistance. To make matters worse, there was no follow-up on the national or provincial levels to measure the achievements of true reforms in the internal and external management of the public hospitals. Other sector issues took priority and displaced interest in the reform of public hospitals. This re- direction of priorities also limited the impact of internal improvements in hospital management attempted under PRESSAL. To date, the level of autonomy of public hospitals in Argentina remains low, and problems of governance, accountability and performance remain. Note: As of the end of 1999, HPAs were re-named "public hospitals with decentralized management", reflecting the results of an ideological debate at the national level regarding the term"autonomous". Federalismin health care in Argentina 71. The health sector in Argentina i s immersed within a complex federal structure with important consequences for health policies, institutions and administration. Although the national level i s the official regulator and leader of the health sector, according to their constitutions, provincial governments are responsible for guaranteeing their citizens' right to health care. Therefore, all efforts for comprehensive and sustainable reforms must begin with the provinces and be set within a framework of effective federal negotiations. It i s within this framework that the provincial responsibilities and initiatives should be articulated with the national priorities. The national reforms attempted to date did not sufficiently recognize the strong role of the provinces, which may explain why they have been largely incomplete and of limited success. Similar results can be expected of projects that are identified and implemented from the national level with limited provincial participation. 72. The dominant role of the provinces in health care is undeniable. Twenty-five percent of total health spending in Argentina lies in the hands of provincial governments and depends upon their 40 decisions as financiers, insurers, purchasers and providers of health services. The provinces control more than 60 percent of the public hospital network (and 41 percent of all hospital beds in the country). Provinces also directly control their OSPs, which are usually the primary insurers at the local level. By contrast, the national administration plays a minimal role in terms of direct financing, purchasing and provision of services. Through the MoH, the national govemment executes only 3 percent of total health spending and controls less than one percent of the public hospital network (only 1.5 percent of all hospital beds). 73. Despite minimal participation in direct provision of services, national authorities retain important regulatory functions, as well as effective instruments that allow them to have a bearing on the health sector and the provinces. The national level controls the regulation and functioning of the SNSS, which covers a little less than a third of the entire population and accounts for 25 percent of total health spending. As leader of national-level insurers (i.e. OSNs and PAMI) and national service providers, the role of the SSS does not go unnoticed by the provinces. The decisions made by the SSS and the performance of the SNSS have an immediate impact on the functioning of the provincial public hospital network. A concrete example i s illustrated by PAMI, which as the largest purchaser of health services, strongly influences the rules of the game for providers, especially in provinces with substantial numbers of PAMI beneficiaries. In these provinces, the recurrent financial crises of the INSSJyP lead to severe financial imbalances in the public health networks and strong political pressuresat the provincial level. 74. The national government has other instruments to influence the health sector, such as its control over national programs and international technical and financial cooperation. These instruments are influential because of the inflexible nature of provincial health expenditures. Therefore, any additional resources provided by the national government (in the form of basic supplies, infrastructure, equipment, training and technical assistance) are significant for the provinces, even if marginal in amount. This i s because they are much-needed additions to an otherwise rigid operational and spending structure. [See Annex Ifor an analysis of national and provincial public health expenditures.] 75. Despite the importance and complexity of national-provincial relations in health care, the sector lacks the instruments and institutional space to effectively coordinate these interactions. Other sectors have their own national legal frameworks (i.e. education) or councils where activities, investments and policies are defined and debated (i.e. energy and mining). In contrast, the health sector lacks a national law that defines sectoral relations and has no means to articulate the different jurisdictions and advance national proposals. The key instrument that may fill this gap, the Federal Health Council (COFESA), currently lacks the legal and functional attributes necessaryto play an effective role. This i s discussedin more detail inthe following sections. PoliticalEconomy 76. Another important characteristic of the Argentine health sector i s its complex arrangement, which imposes high transaction costs whenever reforms are introduced (see Box 4: "Political Economy of the Argentine Health Sector"). This complexity i s evident inthe fact that, aside from the traditional key players in the health sector (i.e. health care personnel, hospital workers, hospitals, universities, etc.), there are: (i)close to 300 OSNs that are intimately linked to professional organizations, unions and political activity; (ii)a national institute for retired persons and pensioners (PAMI); (iii) 24 OSPs (each is independent); (iv) 24 provincial states, each with its own provincial MoH; (v) various specialized insurance schemes; (vi) multiple special programs; and (vii) a large number of private insurers. This asymmetrical and complex universe 41 of financiers, insurers and purchasers of services i s strongly interconnected with a vast supply of private and public providers who largely depend on contracts with social security insurers. These contracts are often operated through intermediaries, thus adding a layer of complexity to the system. Box 4 Political Economy Considerations inthe Argentine Health Sector31 An integrated reform of the Argentine health sector is complex and costly due to the high transaction costs that accompany it. The federal nature of the sector and its high level o f fragmentation account for these high costs. Due to this highly complex structure, there are many actors with vested interest in the reforms, and many opposing and supporting opinions. This multitude of actors must be consulted with when attempting to introduce sector transformations. These negotiations increase in complexity when one considers that (i)some of the strongest actors in the health sector have interests that cross into other sectors o f national interest (Le. political and economic); (ii) there is no arena in which multiple actors may be negotiated with simultaneously - as opposed to bilaterally; (iii)there i s no clearly defined regulatory framework or effective monitoring and control mechanisms; this led to low levels of transparency and serious conflicts of interest as reflected in recurrent corruption problems; and (iv) as a result of the aforementioned issues, there are strong rent-seeking groups in the sector who further increase the transaction costs of any attempts at modifying sectoral arrangements. Two examples illustrate the complexity of the transactions in the health sector: a) A reform of health social security in Argentina affects national unions who are active in the administration of the OSNs and PAM1 and are strongly linked economically (largely informal) to the private provider sector, primarily in urban areas. All such reform efforts would have political implications in other national arenas where the interests o f unions and professional organizations also play a role. Similarly, these reforms would affect the private insurance sector, which is currently unregulated, and have an impact on the provincial monopoly for the insurance of public employees (OSPs). b) Efforts to increase health insurance coverage for the poorest (for example, through demand-based subsidies) imply the modification or elimination of historical financing to public hospitals. This would require (i) individual negotiations with each province; (ii) flexibility in hospital fixed costs (especially in terms of personnel); and (iii)guaranteeing that hospitals can recover costs from third-party-payers, primarily national social security insurers. 77. This complexity suggests that it is very difficult and costly (in terms of political economy) to introduce profound "fast-track" reforms. The costs include the need for multiple bilateral agreements with provinces and complex negotiations with different actors that, in many cases, operate outside the actual health sector. The resistance generated by this complex arrangement often leads to a preference for transformation strategies and focused sector improvements that are very gradual and sustainable over time. This also implies that territorial equity can only be achieved gradually. 78. The lack of transparency and in some cases corruption, often result from this complex structure, and seriously affect the efficiency and. effectiveness of the health sector. The lack of transparency and corruption also generate low trust among the different actors and make it even more difficult to institute reforms3'. The combination of a weak and heterogeneous structure for regulation, monitoring and control, along with strong interest groups (who manage mandatory 31Basedon a study by A. Fiszbeinand M.Tommasi(2003, forthcoming). 32 A World Bank study (2001) found that 59 percent of provincial MoH workers considered corruption to be a significant problem within their institutions; only 7 percent confirmed that such cases of corruption were reported to competent authorities. More than half of the personnel felt that there was a lot of political interference in the contracting and promotion of personnel. World Bank. "An Assessment of Institutional Capacity for Social Sector Reformin Argentina" 2001. 42 contributions and the contracting and sub-contracting with providers) and a lack of accountability contribute to the absence of trust and transparency that permeate the health sector. The press frequently features scandals of poor management or possible corruption that affect the sector's performance. PAM1and some other national and provincial insurers are unfortunate examples. Another source of concern is the use of contracts with intermediaries, based on capitated payment mechanisms. It is striking that the private sector has been able to withstand the social security's successive financial crises without massive breakdowns, which may lead one to conclude that in many cases, the corresponding services were not fully provided to beneficiaries. Finally, also at the level of service provision, there are frequent suspicions regarding the management of centralized purchases, the corporate pressure mechanisms used by certain professional associations andthe lack of compliance with working hours. Heterogeneity 79. The Argentine health sector i s extremely heterogeneous and thus requires flexibility and prioritization in policy design and execution. The regions and provinces have very different health status indicators, epidemiological profiles, regulatory frameworks, institutional capacities, installed capacities and levels of health spending per capita. To make things even more difficult, the differences between provinces in levels of spending and supply of health services do not correspond to their respective populations' needs for health care services. For example, spending per capita in the provinces with higher levels of income i s four times greater than spending in the poorest provinces. However, the poorest provinces have IMRs that are three times greater than the higher-income provinces. Within this context, it i s clear that implementing policies from the national level may be risky and entail inflexible designs, inefficient levels of spending, contradictions in leadership, duplication and/or resistance to implementation and weak prospects for sustainability. However, sustainable and consistent reforms are unlikely to prosper without the active participation of the national level. [Annex I1presents the heterogeneity between provinces interms of spending, coverage and healthresults]. 2.2. EssentialPublic HealthFunctions 80. The health sector achievements as well as its problems and gaps reflect, to a certain degree, the effectiveness of the government's stewardship function (provincial and/or national). This behavior, described in more detail below, includes a set of functions referred to as "essential public health functions", which serve to articulate the sector, guide its development and, more importantly, guaranteethat it meets the health objectives anticipated for the citizens of Argentina. The level of development of public health functions is thus an important determinant of the identification, design, implementation and sustainability of successful health sector reforms. 81. Indeed, strengthening essential public health functions i s a key challenge for national and provincial governments. Recent evaluation^^^ determined how solid these functions are in Argentina. The results show strengths in monitoring, evaluation and analysis of the health status of the population, as well as in risk control, epidemiological surveillance and response to emergencies and disasters. At the same time, they point to the need to strengthen the functions of 33 PAHO 2001. This evaluation was based on interviews within the MoH that reflect self-perceptions regarding the level and capacity of compliance with the various essential public health functions. World Bank. "An Assessment of Institutional Capacity for Social Sector Reform in Argentina"; 2001. This evaluation i s based on surveys and focus groups with provincial government employees. 43 (i) planninganddevelopment; (ii) policy regulation and control; (iii) assurance; and (iv) quality social parti~ipation~~. Health Sector Policy Planning and Development. In 2000, WHO emphasized the importance of formulating and developing health policies. This entails the formulation of a clear sector vision that promotes coherence and sustainability of sector policies while facilitating the definition of the goals by which progress may be measured. Argentina currently has no clear sector vision that has been discussed and agreed upon. This gap is present both at the national and provincial levels. There are no well-defined priorities by which the sector can measure its success or failure. The level of public debate and consensus over sector policies has been scarce, with the exception of recent efforts centered on the response to the crisis. Indeed, this reaction to the crisis has occupied most efforts, with little time left for long-term planning. In this context, it i s difficult to determine the long-run targets for the sector's development and there i s a risk for rash changes and inconsistent decisions. 0 Regulationandcontrol. Aside from the absenceof regulations, the level of compliance with existing regulations seems to be low and unstable. The history of the health sector suggests that the development of new norms does not, by itself, guarantee that the expected transformation will occur, or that the hoped-for results will be achieved. Infact, the sector currently has multiple norms and regulations that are complied with only partially before being modified, that are contradictory (especially between the national and provincial levels) or ignored altogether. This situation i s aggravated by the federal nature of the sector and its heterogeneousregulatory, monitoring and control frameworks. 0 Quality assurance. Quality assuranceis growing as a priority public health function for measuring health services. The lack of a national system for quality assurance in Argentina allows the co-existence of services with varying levels of quality, available to the same beneficiary population. The challenge lies in identifying and implementing policies that establish incentives for improving quality. This would include, among others, interventions in training and certifying personnel, licensing and accreditation of health service providers and insurers, and generating incentives for quality and performance-based monitoring that includes quality as well as outcome measures. Social Participation. The population's health cannot be guaranteed only by the government. International experience shows that to improve health outcomes, it i s necessary to involve civil society. The contribution of civil society participation can be, for example, through their exerting pressure for new legislations or through behavioral changes that reduce risk factors or generate a culture of accountability. Although the tendency in Argentina has been to design top-down actions and policies, with little social participation, there has been a recent effort on the part of the MoHto inspire a process of health sector consultations in response to the crisis (roundtable discussions and agreements on health). 34The PAHO evaluation also determined that the essential function of development and training of personnel was weak; this deserves more attentioninupcomingstudies. 44 2.3. Mechanisms for Health-RelatedFederal Articulation 82. Argentina faces the challenge of establishing a mechanism for articulating sectoral policies with a wide scope of actors. The Federal Health Council (COFESA), created in 1981, i s the institution best-suited to meet this challenge. However, in practice, COFESA has had little influence on provincial or national health sector decisions. Although some critics of COFESA's role suggest that this i s due to the small percentage of total health spending managed directly by the MoH, the limited scope of the current functions of COFESA may, in fact, be the principal barrier. As shown in Box 5, the current functions of COFESA are vague, poorly linked and without influence over sectoral spending and incentives. The poor level of functioning within COFESA (lack of regulations, thematic discontinuity and minimal decision-making) limit its contribution to health sector developments. 83. In recent months, however, the behavior of COFESA has begun to change. As of the end of 2002 and the beginning of 2003, COFESA has acquired more protagonism and broadened its sphere of influence. Meetings have been well-organized and regulated, incorporating themes that are nationally relevant and provide follow-up to previous decisions. For example, according to national priorities, COFESA defined the indicators for determining the distribution of key public health resources, including essential medications, fortified milk and other donations. At the same time, the recent St. Nicolas Agreement of COFESA (March 2003) ratified the agreeement of health sector authorities to advance areform of COFESA's legal framework. Box 5. Argentina. Functionsof the FederalHealth Council (COFESA) According to Decree, Law 22.373 (1981), the functions of COFESA are to: a) understand the health problems common throughout the country, as well as those in each province and region; b) determine the causes of these health problems; c) analyze the actions undertaken and review the issues that require responses in order to establish decisions of whether to ratify or modify them; d) specify basic concepts that may characterize a stable national policy and recommend courses of action for carrying out such policies; e) make the tasks undertaken in assistance programs globally compatible, under the leadership of national and provincial health authorities, in order to achieve agreement on operational criteria, application of available resources and selection of methods of evaluation, which could stimulate regionalization and/or zoning of services; and f) contribute to the development of a federal health system. 45 CHAPTER3. OPTIONSFORIMPROVING THE PERFORMANCEOF THE HEALTH SECTOR 84. The impact of the socio-economic crisis on health combined with the underlying chronic sectoral problems reaffirm the urgent need to improve the performance of the health sector and the health status of the population, especially the poor and vulnerable. Reforms and instruments must be developed that sustainably and efficiently reduce existing inequities in access to quality health services and provide effective financial protection against the risks of illness or death. The current conditions to develop and introduce such initiatives are propitious, considering the experience of the reforms of the 1990s and the recent efforts led by the MoH to inspire greater debate on reform options for the health sector. 85. There are various options available to improve the performance of the Argentine health sector. This section presents some of these options, chosen because they have the potential to benefit the poorest populations and their implementation i s feasible. The chapter begins with a brief framework that explains the complementarities of the identified reforms and moves on to describe the options in more detail. These options for improvements are grouped into three categories: (i)actions at the provincial level; (ii)actions at the national level; and (iii) complementary reforms through health social security. Finally, the chapter presents a series of changes in the regulatory framework that are necessary to successfully advance and sustain improvements inthe health sector. 3.1. Frameworkof Options to Improvethe HealthSector 86. The main challenge facing the Argentine health sector i s to improve the health status of the population, especially the poorest and most vulnerable, thereby narrowing the existing equity gaps. To achieve this objective, the health sector needs to incorporate sustainable changes in its operational framework; changes that would guarantee effective access to a defined set of high quality health services and provide sufficient financial protection to all Argentines during times of illness and/or death. 87. The provinces have a pivotal role in all efforts to improve the health status of the poorest. As already pointed out, under the current political and institutional arrangements, the provinces are ultimately responsible for guaranteeing adequate health services to their citizens. But how can they effectively accomplish this? 88. Although all provinces face the common challenge of developing sustainable schemes to guarantee health care to all citizens, especially the poorest, the options for reform are varied and may differ between provinces. Given the high level of provincial heterogeneity, it i s expected that there i s no "one-size-fits-all" plan that could be uniformly applied in all provinces. Some provinces may opt to develop public or private insurance schemes, while others might maintain the current provincial coverage through their service providers and introduce a clear separation of functions with explicit definition of beneficiary rights. Similarly, they can resort to different options for public and private participation in service provision. 89. Among these multiple possibilities, provincial governments, with the support of the national government, could implement a series of specific interventions aimed at improving the purchasing function for health services and introducing incentives for better provider performance. A set of such complementary actions, with the potential to significantly contribute 46 to sector improvements, could include: (i)the development of "provincial public health insurance" schemes that would serve to improve access to health care (especially for the poorest), separate the functions of purchasing and providing services, define incentives for service providers and insurers and reorient public spending towards priority health needs; (ii) improving the management and performance of public providers through the use of specific tools, such as management contracts; and (iii)strengthening public financing of health care by eliminating regressive cross-subsidies. 90. The national government has a fundamental role to play in supporting provincial efforts and ensuring better sector results. Specifically, the role of the national government i s to (i) strengthen the overall stewardship of the health sector, including incentives and rewards to provinces that progress most in improving the health status of their populations; (ii)lead national health insurance initiatives that complement provincial efforts (for example, in the area of catastrophic health insurance); and (iii) guarantee the adequate availability of public health programs (with large positive externalities). Its central responsibility i s that of correcting inequities and guaranteeing equal minimumcoverage of health services across all provinces. 91. Social security for health (national and provincial) should complement these efforts. In particular, the social security system could enhance sector improvements by facilitating: (i) better articulation with the provincial public assistance network (thereby reducing regressive cross subsidies); and (ii) intemal reforms that would improve access, efficiency and quality, thus reducing pressures on public provincial budgets and the requirements for the respective governments to recurrently fund the financial recovery of social security insurers. 92. Finally, a solid, transparent regulatory framework, along with a participative forum for debate and consensus-building would contribute to the development and sustainability of reform initiatives in the health sector. Table 10summarizes the identified options, which are discussed in greater depth below. 93. A detailed financial analysis is needed for option, but on balance, it can be expected that the overall financial impact of these reforms will be neutral or even positive. The increased efficiency achieved through management improvements in public hospitals, priority national programs and social security insurers is expected to increase the availability of resources. These could be used for initiatives that require additional financing, such as the development of provincial health insurance schemes and the strengthening of priority national public health programs. In this way, the health sector could better target resources to priority areas and vulnerable populations within the current context of budget limitations. 94. With these reforms, the Argentine health sector can assure a package of basic guarantees for all citizens. This could be provided through a combination of provincial insurance, social security health insurance and private insurers, complemented by effective national public health programs. In this manner, the sector could ultimately reduce the preventable morbidity and mortality, improve health status and strengthen financial protection for the population, especially the most vulnerable. 47 Table 10 Argentina. Opi ms for Improving t :Health Sector Level Objective Provincial National Social Security Others Strengthen health Develop provincial Incentives for the Compliance with care guarantees public health development of efficiency- National- for thepoorest insurance schemes provincial health increasing provincial insurance schemes regulations agreements on Develop a national Improve the health care goals. insurance for high internal equity of costkatastrophic the system (FSR) health events Improvepublic - Better use of Incentives for Timely provision of health management usingmanagement reimbursement of Consolidatean services -agreements agreements services delivered effectiveand Introduce by public hospitals transparent changes in the regulatory management of framework healthservices Eliminate cross- Establish a consolidated beneficiary subsidies with database. Simplify the mechanism for Establishaforum social securitv billine and cost recoverv for debate and Improvepublic Strengthen priority --- consensus-building health national public around health health programs policies, and promote civil Develop new society programs (sexual participation. and reproductive health) 3.2. Options at the Provincial Level 95. At the provincial level, it i s necessary to strengthen the purchasing of services and introduce performance incentives for service providers. This will allow provincial governments to ensure access to a package of benefits (explicit or implicit) to all citizens. The development of provincial health insurance is one option for strengthening the purchasing function of provincial governments. Another complementary or alternative option i s to promote the use of management agreementsto improve public hospital management. 96. Development of provincial health insurance schemes. Strengthening the provincial health insurance function is necessary to guarantee explicit health benefits for all citizens, especially those with low income levels. This strengthening implies expanding and improving management of the population's health risks, developing the service purchasing function, redirecting spending to improve effectiveness and efficiency, and introducing provider performance incentives. Such strengthening also entails deliberate efforts to improve the articulation of social security and private insurers with the provinces. 48 97. Initiatives to strengthen health care guarantees - through the establishment of provincial public health insurance schemes - are already underway and may be rapidly im~lemented~~. The development of provincial public health insurance schemes implies significant changes in the incentives and functioning of the provincial public health network, social security insurers and private providers. For the public provider network (both hospitals and ambulatory care), the implementation of a provincial insurance implies the nominal affiliation of the beneficiary population, changes in the cost structure, the creation of incentives linked to results, complementary participation from private providers and the establishment of a specific financing fund. For social security insurers (national and provincial), the provincial health insurance would imply that jurisdictions have explicit control over the package of services provided and could introduce modified results-based payment mechanisms. For private providers, the provincial health insurance would represent an opportunity for them to complement the public supply of services and, eventually, compete with public entities in terms of the quality and efficiency of care delivered. 98. In many provinces, the provincial health insurance could initially focus on a basic package for the maternal and childpopulation. Inthis way, the provinces would be targeting a component of the burden of diseasethat i s key because of its highly inequitable impact and because it stands to benefit significantly from interventions. Later, provincial health insurance schemes could add other benefits for specific populations, or to meet certain identified health care needs. Inthis way, the provincial health insurance could become the "launch-pad" for overall health sector reforms. Annex IV presents the critical aspects in the design and implementation of a provincial health insurance scheme that would focus initially on the maternal and child population (Seguro Materno Infantil). 99. This mechanism presents the advantage of improving access to essential medication for the population at risk, which is a significant barrier to access and an important component of out-of- pocket spending. The development of a provincial health insurance may thus support the national government's efforts in recent years towards the provision of essential medications (for example, through the REMEDIARprogram). 100. There are various technical challenges to the development of provincial health insurance schemes. First, effective risk coverage implies ensuring a large enough pool of insured citizens. In some cases, this would require grouping populations from various provinces into insurance "regions". A second challenge refers to the contributions that the respective OSPs will have to make to the organization and management of provincial insurance schemes. In some cases, this support may be considerable and deserves further analysis. 101. Provincial health insurance schemes represent an opportunity to strengthen the purchasing function of the provinces and thereby guarantee a package of benefits to all citizens, but at the same time, there are significant risks involved. One risk is for this mechanism to become simply an additional source of financing on top of the current sector structure with no underlying changes in the incentives faced by public and private providers. Options to minimize this risk include: (i) financing to performance/results; (ii) linking expanding competition between public and private health service providers; and (iii) gradually modifying the financing structure to replace supply-based subsidies with demand-based subsidies. 35 Provinces are currently at different levels of establishingthis form of health insurance; provinces in which this i s already underway include Catamarca, Santa Fe and most recently the launch of the Maternal and Child Insurance in Jujuy. 49 102. Another risk associatedwith the implementation of provincial health insurance schemes i s that these schemes may actually increase the fragmentation and inefficiency of the sector. Therefore, it i s necessary to ensure that provincial insurances do not pay for people who are already covered by another insurance entity. This implies enabling cross-referencing of databases of different insurers, ensuring articulation of provincial insurance schemes with national public health programs and the services these national programs provide, and analyzing other sources of financing inthe sector to avoid duplications. 103. The national government can drive the provincial efforts to assure minimumhealth care guarantees. For example, the national government may offer financial incentives to provinces that support the development of public insurance schemes using basic, solid criteria. These incentives could be financed through resources available at the national level, international technical and financial assistance, as well as through better articulation with national programs and the regulation of SNSS insurers (i.e. OSN andPAMI). 104. Improving public hospital management. The implementation of provincial health insurance, or other insurance mechanismsthat separate the functions of purchasingand providing services, will highlight the need to strengthen the management capacity and improve the performance of provincial public hospitals. There are various options available to achieve this goal, mostly related to providing hospital management with incentives linked to performance. The unsuccessful reform efforts of the 1990s suggest that, without changes inexternal incentives, it is unlikely that effective and sustainablereforms to the management of public hospitals will be possible. The experience of the 1990s also exposed the hesitancy at the national and provincial levels to truly move toward self-managed public hospitals, which implies a shift from supply- basedto demand-basedsubsidies. 105. The promotion of management agreements (or performance agreements) that link provincial financingto the achievement of targets related to the hospitals' operation, may be an intermediate step to improve public hospital performance. In various provinces, the recent use of such agreements has had positive initial results in efficiency, quality and user responsi~eness~~. In addition, the provincial health insurance schemes may be an important complementary instrument for provincial governments, in terms of separating the functions of purchasing and providing services. 106. At the same time, public hospitals should progress towards improving their internal management systems. This could be accomplished by introducing organizational models for health assistance that have already been successfully implemented in other countries, such as greater use of ambulatory surgery and day care services, using integrated clinics, and extending the hours during which people may be treated according to target group characteristics. Without a true change in the current model of service delivery, it i s difficult to imagine an improved guarantee of health care services for the overall population. In addition, it i s necessary to ensure that public hospitals offer services that are in line with the needs of the system, thus guaranteeing the functioning of effective health service networks. 107. The M o H can provide incentives to provinces in their efforts to improve provider performance. To do so, the M o H could once again use its available resources, particularly its regulatory authority over national insurers. Specifically, the MOH could ensure that a current, 36 This is the case in the provinces of Santa Fe and Catamarca, which have obtained favorable results using management agreements within their correspondingPMoHs. 50 consolidated database of social security beneficiaries i s made available to provincial public hospitals to facilitate cost-recovery. At the same time, the M o H can lead the dialogue on the development of a comprehensive quality assurance system (including provider licensing, classification and accreditation). 108. Strengthening public hospital budgets. In the short term, provincial governments, along with the M o H and the SSS can initiate actions to reduce cross-subsidies from the public network to different national and provincial (public and private) insurers and thereby relax the budget constraints of the public hospital network. This would enable hospitals to use recovered funds for: (i) improving the provision of basic supplies, especially at the primary care level; (ii) improving the maintenance and repair of hospital equipment that has been neglected for years due to lack of budget and incentives; and (iii) incorporatingperformance incentives for personnel. 109. An effective policy for recovering costs requires the political decision of provincial authorities, as well as concerted support at the national level. This support should include: i) Consolidating (and periodically updating) a database of social security beneficiaries available to the public hospital network. This database would include, as a minimum, all beneficiaries of OSNs, PAMI, OSPs, PROFE and other specific health insurance programs; ii)Reviewing and simplifying the billing and automatic reimbursement mechanisms for public hospitals, guaranteeing fluid, timely and transparent processes; iii)Expandingcostrecoverymechanismstootherinsurers(for example, tootherinsurance agenciesand insurance for motor vehicle accidents and professional risks); iv) Reviewing and periodically updating, in the framework of the COFESA and on the basis of cost-analysis, the list of service fees. v) Periodically monitoring and evaluating, also in the framework of the COFESA, progress made in cost recovery and takingcorrective actions if necessary. 3.3. Optionsat the NationalLevel 110. Stewardship on the part of the national government i s critical for health sector development and reform. Stewardship requires the establishment of well-defined short and long- term goals that reflect the priorities established by consensus with provincial governments, civil society, health professionals and other pertinent stakeholders. Good stewardship requires strengthening the essential public health functions. To move inthis direction, a first step would be the development of a proposal for a unified sector vision, established through a participatory process involving the various health sector actors, within the framework of the COFESA. The development of this sector vision would help overcome the challenge of building consensus regarding health care priorities and the monitoring and evaluation of the progress made in addressing them. Ultimately, this consensus building could lead to national-provincial agreements on health care goals. 111. National-provincial agreements on health care goals would allow: (i)consensus on national and provincial health priorities; (ii)firm establishment of specific targets and commitments, including the timeframe and resources to achieve them; (iii)clarifying responsibilities and accountability of the different actors in the health sector; and (iv) monitoring and evaluatingthe achievement of these targets, as well as incorporating changes as needed. The MillenniumDevelopment Goals, particularly the three that are directly linkedto the health sector -reducingIMR, improving maternalhealthand effectively combatingHIV/AIDS, malariaand 51 other infectious diseases - may serve as a benchmark for various provinces in setting health goals. 112. Finally, another effective method for assuring adequate stewardship of the health sector is, as already mentioned, the provision of incentives to provincial governments that advance effective reforms aimed at strengthening health insurance and the provision of services for the poor. The creation of these incentives entails a thorough review of the current distribution of national health spending, the effectiveness of national programs and their articulation with the various sub-systems. 113. Other insurance initiatives. The national government can lead the definition and implementation of a national insurance scheme for catastrophic health risks. The development of a national insurance scheme for catastrophic illness (or high cost, low incidence illnesses) would reduce risk-selection of insurers and improve the financial protection of all citizens, especially low income groups. The establishment of such a health insurance scheme, which would replace the APE, requires detailed technical work, which i s still pending37. However, it i s anticipated that its final design would include the following essential attributes: (i) independent and specialized administration (assigned through an open competitive process); (ii)a risk pool that is wide enough to guarantee sustainability (for example with the voluntary participation of the private sector, mandatory participation of OSNs, OSPs, PAM1 and other insurers, and gradual incorporation of provinces in order to cover the uninsured); (iii) financing through a system of dues paid by all participating insurers; and (iv) a framework for risk-sharing between providers and insurers. 114. Strengtheningnationalpublic healthprograms. Aside from supporting provinces in improving individual health services, the national government i s responsible for guaranteeing public health initiatives. The challenges in the public health arena include (i) reviewing the current national programs to determine which should be maintained in the long-term and under what conditions; (ii)strengthening priority programs; (iii)developing new programs as needed; and (iv) guaranteeing their adequate financing and management. i) The current composition and functioning of national public health programs should be closely reviewed in order to strengthen their effectiveness, efficiency and sustainability. Not all the national programs need to remain under the national authorities. Some public health programs relate more to responsibilities and competencies of sub-national levels and could be transferred back to these entities once the current financial crisis has been mitigated. Other public health programs correspond to sub-sectors that already have the financing needed to assume these functions (i.e. insurers). Some functions that may be delegated to the provincial level include the acquisition and distribution of medications currently conducted by the central level (independent of the possibility for maintaining economies of scale through consolidated purchases among provinces) or the provision of critical supplies for provincial blood banks. Other programs should be transformed as new insurance instruments are established - for example, the maternal and child health program, in light of an eventual provincial maternal and child health insurance. The national government should seek broad coordination and consensus with provinces on these issues, for which COFESA becomes key. 37A technical study is underway which will point out specific alternatives for developing an insurance for catastrophic health risks. 52 ii)Someprioritypublichealthprogramsmeritpromptanddecisivestrengthening. Thisis the case for the Sexual and Reproductive Health Program, recently launched after the 2002 proclamation of the National Sexual Health and Responsible Procreation Law. Effective implementation of this program i s necessary to reduce the high rates of maternal and infant mortality, especially in the poorest populations (see Box 6). Another program that deserves strengthening i s the Expanded Program of Immunizations, whose coverage and managementhave been affected by the recent crisis. Box 6. Sexual and ReproductiveHealth inArgentina In Argentina, one third of all maternal deaths and thousands of yearly hospitalizations are a result of clandestine abortions and their complications. Seventeen percent of pregnancies occur in adolescents (between 10 and 19 years of age) and the prevalence of HIV/AIDS has already reached levels seen in Brazil (0.7 percent among adults from 15 to 49 years of age). Modern methods of contraception are inconsistently available in Argentina, usually limited to people who are able to pay (usually within the privatesector), to the exclusionof the low-incomepopulation. During the last decade, almost half of the provinces passed sexual health laws that called for providing sexual health services in the public assistance network. However, arecentWorld Bank survey (2002)38 of a sample population showed that the mere existence of these laws does not guarantee availability of the necessary supplies and services. The recently approved National Sexual Health and Responsible ProcreationLaw (2002) creates, for the first time in Argentina, a National Sexual and Reproductive Health Program. The objectives of this program are to (i) reduce IMR and MMR; (ii) prevent unwanted pregnancies; (iii) promote the sexual health of adolescents; (iv) prevent sexually transmitted infections (STIs); and (v) respect the right of women to make decisions regardingsexual matters. To achieve these objectives, the programwill involve community-based agents to strengthen services for prevention, diagnosis and treatment of STIs, and provide modern contraceptive options through the public assistance network. This law also demands that access to contraception i s ensuredin the social security PMO. Implementationof this law is fundamental for improving the status of maternal and child health, especially in low-income sectors of the population. To this end, it is necessary that (i) the law is properly regulated through the corresponding legislative means; (ii) the inter-ministerial coordination required is ensured, particularlyregardingthe education sector; (iii) sufficient financial resources are approved and executed at the nationallevel in order to serve as incentives and complement provincial efforts; and (iv) there is close monitoringand evaluation of the programand its annual implementationplans in order to introducetimely adiustments neededto achieve the desiredresults. iii)Itisnecessarytostimulatenewnationalprogramsthatrespondtogrowingpublichealth challenges in Argentina. In particular, there i s a need for programs that promote and prevent non-communicable chronic diseases, which account for a growing proportion of the burden of disease. To carry this out in a coordinated and integrated manner, it i s recommended that Argentina reconstitute a National Commission for Health Promotion (which was abandoned during the health emergency) and resume work on the National Plan for Preventing Risks and Promoting Health, reached by consensus with multiple social sectors in 2001 but never implemented. Immediate priorities include control of tobacco use (Argentina has the highest prevalence of tobacco use in the continent), improvement in nutritional status, prevention of motor vehicle accidents, and reduction of risk factors for hypertension, diabetes and cardiovascular disease (e.g. lack of physical activity, overweight and highfat intakes). 38Cesilini S. and Gherardi N. "Los Limites de la Ley: L a SaludReproductiva en Argentina"; The World Bank, 2002. 53 iv) Finally, Argentina faces the challenge of guaranteeing financial protection for priority public health programs, avoiding interruptions or sub-standard execution that could lead to costly and serious adverse effects. In order to avoid such financial difficulties, budgeting exercises at the national level are not sufficient. A detailed review of the provincial flow of financing for each program and their articulation with other sub- sectors, especially social security, i s also needed. This effort can be led by the MoH, with the support of COFESA, and i s key to prevent duplications, inefficiencies and cross- subsidies. 3.4. Complementary Social Security Reforms 115. While the reform options presented in this paper focus on improving the health status of the poorest population sub-groups (typically not covered by the social security insurers), this cannot be done unless there is a high level of functioning within the social security sub-sector (largely focused on the populations with higher relative incomes). The performance of the social security system influences the entire health sector in terms of financing and incentives, displaced demand and significant opportunity costs for the country as a whole (because of the frequent financial "rescue" interventions sponsored by the national g~vemment)~~.To this end, simultaneous improvements in the social security system are key. These include: (i)insurers' compliance with the current legal framework (Le. applying the operational regulations regarding financial solvency, service provision and beneficiary choice of insurer); (ii) improvements in the efficiency and equity in the financing structure of social security for health; and (iii) introducing effective reforms in PAMI. 116. The efficiency and effectiveness of the health care system would greatly benefit from social insurers' compliance with the current national social security regulations. Compliance with these norms would most probably lead to the merger or closure of a considerable number of insurers that do not comply with the minimum legal, financial and service provision criteria established to guarantee citizens adequate health insurance. Ultimately, this would improve the quality and efficiency of the health sector by reducing administrative costs and financial imbalances (and the subsequent frequent requests for financial rescue), improving timely access to the PMOand simplifying surveillance and control functions. 117. Recent progress in improving the efficiency and equity of the financing structure of the SNSS should be continued. This can be done through a further re-engineering of the FSR, entailing a gradual increase in the percentage of contributions the FSR receives from insurers and a modification of its redistribution mechanism. This would benefit low-income individuals and families, thus preventing the existence of insufficient insurance coverage, which results in low- income social security beneficiaries seeking care in the public service network. The financial basis of the FSR can continue its progressive expansion, through the retention of a growing percentage of the mandatory contributions to the health insurance system. These contributions can then be redistributed on the basis of per-capita risk-adjustedformulas. 118. The challenge of the pending reform of PAMI cannot go unmentioned, given its substantial social impact and its role as the largest single purchaser of health services in Argentina. However, at present, there i s no consensus over a reform proposal for the Institute. One alternative may be to transform PAMI into an insurer among others, forcing the Institute to 39 The basic health care guarantees agreed to in the country must also be applied to all social security beneficiaries. 54 compete in a regulated framework. Another option i s to transfer PAMI's resources and beneficiaries to provincial governments that comply with selected criteria (such as fiscal accountability, information production, technical solvency, etc.). This would lead to greater overall control of PAMI management and performance. A third option i s to maintain current conditions while generating a process of federalization in the control and monitoring of contracts for providing services to beneficiaries. Moreover, the Institute's social assistance programs that are not central to health care could be transferred to other entities specialized in dealing with these issues. 3.5. Regulatory Frameworkand Sector Dialogue 119. National forum for dialogue and policy definition. To ensure the viability of the proposed reforms, it is crucial to establish an effective federal forum for the discussion and definition of key sector policies. The timing is opportune to establish such a forum; the M o H can promote the reform of COFESA for it to become an effective forum for deliberation and decision- making on health sector policies. The purpose of this forum would be to promote the discussion, definition, monitoring and evaluation of sector policies, to improve the articulation between the different sub-systems and programs, to ensure compliance with priority health objectives (reflected in national-provincial agreements) and promote a culture of results, evaluation and accountability. 120. These changes require legal and functional modifications to COFESA that would endow it with effective technical and legal instruments. The reformed COFESA should be able to directly, or indirectly, influence resource allocations and the definition of incentives. To achieve this, COFESA could be involved in designing priority national health programs or have more responsibility for the evaluation and control of key health sector players (for example, social security insurers). In addition to legal reforms, the transformation of the role of COFESA would require strengthening its capacity for technical analysis and the definition of an adequate internal structure and order of business (i.e. regular meetings with pre-defined agendas and continuity in the follow-up on previous discussions and agreements, with public participation in deliberations and decisions, etc.). 121. There is also a need for a deliberate effort to expand the participation of civil society in the health sector dialogue. Social validation of priority health care needs improves the chances for effectively implementing the necessary changes, which are usually subject to strong resistance. To this end, it may be useful to consider continuing the process initiated in 2002 in the roundtable discussions, ensuring that involved actors are truly representative, and encouraging the establishment of consumer organizations that can develop social control mechanisms over key players inthe health sector. 122. Regulation and control. Regulation and control i s critical for health sector development and should be focused on ensuring compliance with the basic guarantees established in sector regulations. To this end, the challenge remains to transform the SSS into an entity with greater capacity and effectiveness in the surveillance and control of the health sector. The SSS could concentrate its efforts toward ensuring compliance with the normative framework of the health sector and protecting the rights of beneficiaries. Its scope of action should initially cover the SNSS (OSNs and PAMI beneficiaries), and later expand to cover beneficiaries of other health insurers. Such a reform would require changes in the organization and functioning of the SSS to ensure that it: (i) is a valid entity for all actors in the health sector, independent of the political processesand influence of special interest groups; (ii) has greater links to COFESA, which would 55 participate in its governance; (iii) participates in deliberations regarding the sector's normative framework, but does not act as the decisive entity; (iv) eliminates conflicts of interest in its functions; and (v) consists of a group of highly qualified professionals who are publicly elected. The SSS functions would focus primarily on defending beneficiary rights. To do so, it would monitor compliance of insurers (and eventually, service providers) with regulations, collect and managing critical information for the health system (starting with the consolidated beneficiary database), supervise financing mechanisms, and respond to health insurance beneficiaries' complaints. 123. Coordinating the multiple regulations in areas where there are duplications within the health sector and with other sectors is another challenge. These areas include, for example, regulations over food and drugs and the areas of interaction between the health sector and other sectors, such as education, environment, labor, and social protection. In these areas, it i s necessary to create a clearer framework and streamline competencies and responsibilities. 56 CONCLUSIONS 124. Reform of the Argentine health sector i s a process that implies changing institutions, as well as incentive structures. Thus, it i s a long-term endeavor that requires continuity of efforts and vision to guarantee the consolidation of the anticipated results over time. 125. The Argentine health sector has to face the challenge of better using its available resources to improve its performance in responseto the needs and demands of the population. To do so, it must use options that enable it to resolve the inequities inhealth status, access to services and financial protection across provinces. In addition, it should overcome the inefficiencies that arise from its complex and uncoordinated framework. Addressing these issues becomes even more critical in the presence of a social and economic crisis that exposed the sector's underlying weaknesses, while exacerbating its challenges. 126. The main objective of the health sector transformation should be to improve the health status of the population, especially the poorest and most vulnerable, and guarantee basic health rights to all. These rights should be explicitly defined, reflect underlying societal consensus and be supported by sufficient financial and organizationalresources. 127. Because of the federal structure of Argentina and its internal heterogeneity, the provinces are central players in efforts directed at improving the performance of the health sector. It i s the provinces that respond directly to the health needs of the poor. The national government, on the other hand, has a key role to play in guiding, coordinating and establishing incentives for sector development. This includes ensuring that other sub-sectors, the most important being social security, work in line with priority health objectives. 128. There are concrete options to improve the performance of the Argentine health sector and, in particular, to improve its response to the needs of the poor and most vulnerable population. Among these, the following stand out: .b strengthening the provincial health insurance function by implementing instruments (for example provincial public health insurance schemes) that enable a separation of roles between the purchase and the provision of services, improved targeting of resources and > a better responseto current inequities; improving the management of public providers by tying financing to performance and avoiding the existence of cross-subsidies in favor of third parties (i.e. social security insurers); .b improving the functioning of the health social security system, by ensuring compliance with current regulations and increasing solidarity in its financing mechanism and articulation with other subsectors (especially private providers); and .b strengthening public health by ensuring sufficient financing and adequate management for priority national public health programs and covering new critical areas that were not previously protected (for example, sexual and reproductivehealth and chronic diseases); 129. A strong framework of stewardship, regulation and sector dialogue is key to ensure progress and sustainability of these transformations. Stewardship from the national and provincial levels should lead to consensus with social sectors on well-defined short and longer-term health goals for the country and the endorsement of national - provincial agreements that include these health goals (and their corresponding monitoring and evaluation). In.addition, the essential public 57 health functions should be strengthened to ensure the establishment of, and compliance with a strong regulatory framework. This would lead to greater transparency and accountability and generate an environment of trust between the different stakeholders. Finally, the existence of a permanent forum for sector dialogue (for example, based on a restructured COFESA) would strengthen the process. 130. With these transformations, the Argentine health sector will be able to ensure some basic guarantees for all citizens. Such benefits would be established through a combination of provincial insurance, social security and private insurers, complemented by effective national public health programs. As a result, the sector may lower the avoidable morbidity and mortality, improve overall health status and strengthen the financial protection of the population, especially the most vulnerable. 131. The Argentine health sector today faces the double challenge of an institutional transition and the requirement of responding to urgent health needs. On both fronts, the opportunity for change exists. By taking the right direction, the sector has the potential to ease and improve the quality of life of millions of poor Argentines and set the basis for deeper subsequent reforms in the continued endeavor for more equity and quality inhealth care. 58 ANNEX I:PUBLICSPENDING ONHEALTH InArgentina, the provinces account for more than two-thirds of public health spending. These funds primarily come from federal co-participation contributions. These co-participation funds are derived from taxes collected at the central level, which are then redistributed4'. A key characteristic of provincial health sector financing i s that the allocation of federal co-participation funds does not take into account the health needs of the population, or performance of the sector. Another key characteristic is that there i s no "earmarking" of resources for health: each province i s responsible for defining the percentage of its budget (and co-participation resources) that will be spent on health. Consequently, provincial health spending differs between provinces, from less than 8 percent to 28 percent of total provincial spending. The majority of public health spending is used to sustain public hospitals (see Table Al). IN 2001, out of a total of $3,900 million pesos, 88 percent of provincial health spending was allocated to the public health network (including salaries, supplies, infrastructure, equipment and maintenance), 9 percent to policy, coordination and regulation activities, and only 2 percent to public health programs. The national government, which spends much less on health (462 million pesos in 2001) also concentrates its spending on service provision (66 percent), but allocates a greater percentage to policy, coordination and regulation activities (20 percent) and to public healthprograms (14 percent). The variations observed in provincial public health spending do not appear to be related to the needs of the respective provincial populations. The supply of services, rather than the demand for them, appears to be the most important determinant of public spendingon health. A recent study on provincial health spending41shows that spending i s not related to the health needs of the respective provincial populations, measured in terms of Unsatisfied Basic Needs (UBN), IMR and epidemiological profile. Instead, the study found that spending was related to the supply of services available, measuredby the number of health care facilities, beds and physicians. On the other hand, while the national spending on priority health programs that complements provincial actions i s relatively small, it i s well targeted. In the case of the Program for the Fight Against AIDS and STIs, the distribution of resources among provinces is strongly related to the distribution of deaths caused by AIDS. Similarly, the allocation of resources from the Maternal and Child Health Program i s positively correlated to provincial indicators of IMR, malnourished children and proportion of births42. Aside from national government spending on public health programs, the national government also transfers resources to provincial governments for specific health-related goals. These transfers are rather insignificant in relation to total provincial spending on health (accounting for only 2 percent, on average), but they represent an important contribution for national programs. In2000, on average, 56 percent of all provincialresourceswere derived from co-participationfunds, and 15 of the 23 provinces financed over 70 percent of their total spending with these resources. Despite the fact that the Argentine Constitution establishes broad responsibilities at the provincial level, the provinces have actually delegated the responsibility for tax collection to the national level. In 2000, the federal level was responsible for collecting 83 percent o f the taxes in Argentina, while provinces collected only 17 percent and municipalities 0.4 percent. Tommasi, M.Federalism inArgentina and the Reforms of the 1990s.May 2002. 41Maceira et al., 2002. 42Source: CEDI 2002, based on 2000 data. 59 In 2001, the national government transferred $23 million pesos to the provinces for national public health programs, which corresponds to a quarter of provincial spending on these programs. Table Al: PublicSpending in2001 I millions of pesos) ~~ National Budget Gov'nment Transfers Provinces Total % of total rovision of health services 304.49 45.13 3,453.76 3,803.37 86% ospitals and healthcenters 254.75 45.04 3,387.70 3,687.50 83% Salaries, suppliesand maintenance 198.24 3,342.66 3,540.90 80% Assistanceto PNC beneficiaries(PROFE) 56.51 45.04 45.04 146.60 3% oods and suppliessupportedby the national svemment 49.74 0.09 49.91 1% Fight Against AIDS and STIs 49.74 0.09 49.91 1% ifrastructureandEquipment 65.97 65.97 1% olicy, coordinationand regulationactivities 91.10 364.52 456.93 10% Centraladministration (mainly salaries) 50.70 305.94 357.94 8% Training for health-relatedand administrative personnel 20.60 46.12 66.72 2% III : Planning, control, regulationand fiscalizationof healthpolicies 4.80 11.23 0% Support for public health studies and Research 6'435.29 5.29 0% Health Sector Reform 8.07 - 7.66 15.74 0% Public health programs 66.47 22.73 91.17 180.37 4% Fight againstAIDS and STIs 0.76 4.16 0% Preventionand control of diseases andrisk 3'41 I factors (Le. immunizations, the VIGI-A 38.81 3.65 13.12 55.58 1% program,etc.) Matemal and child healthcare 10.46 19.00 23.62 53.08 1% Coveragefor emergencyhealthcare 1.26 12.80 14.06 0% Other programs 40.87 53.49 1% Total 3,909.44 4,440.66 100% Source: National Office of Cons( dated Public Spending- Ministry of Economy ,003 Duringthe economic and social crisis of the last two years, which caused a drop in total health spending, the national government protected spending on priority health programs. National spendingon public health programs (including transfers to provinces) increased by 70 percent in real terms, from $90 million pesos in 2001 to $150 million pesos in 2002. This increase i s largely attributable to the strengthening of the maternal and child health program and the program for preventing and controlling specific diseases and risk factors (which include the purchase of vaccines). In 2003, national spending on priority health programs i s expected to be less than in 2002 (inreal terms), but greater than in 2001, suggesting a continued emphasis on these programs (see Table A2). 60 On the other hand, provincial public spending on health has been maintained, in real terms, between 2000 and 2001, but dropped significantly in 2002. An analysis of 7 provinces, which account for 60 percent of total provincialhealth sector spending43,suggests that this drop was in the order of 30 percent. Table A2 Total HealthSector Allocations (includingNationalPublicSpendingand BudgetTransfers) I All PublicHealthPrograms 2001 2002* 2003* 89.19 150.84 121.92 Fight against AIDS and Sexually Transmitted Infections 3.41 1.03 0.24 Prevention and Control of Diseases and Risk Factors (including immunizations,VIGI-A, etc.) 42.46 100.52 65.86 Matemaland Child HealthCare 29.46 40.32 41.84 Coveragefor Emergency HealthCare 1.26 0.67 0.88 Other programs 12.61 8.31 13.09 Prevention and care of addictions,andthe control and fight 1 against drug addiction 7.41 11.39 Diagnosis andtreatment of chronic diseases and risk behaviors 5.22 16.42 Source: NationalOffice of ConsolidatedPublic Spending-Ministry of Economy, 200 *Preliminary estimates 43The analysis includedthe provinces of Buenos Aires, Cordoba, Chubut, Neuquin, Rio Negro, San Juan and the city of Buenos Aires. 61 ANNEX 11: HETEROGENEITY AMONG PROVINCES In Argentina, the provinces are very heterogeneous in terms of the health needs of their populations, the coverage of the population by different health insurers and monthly spending per beneficiary on health. This annex presentsthree tables that illustrate these provincial differences. Table A3 presents the maternal and infant mortality rates, the percentage of the population without health insurance coverage and the percentage of the population with unsatisfied basic needs (UBN), by province. It i s notable that the infant mortality rate is three times greater in provinces such as Jujuy and Corrientes, than in the city of Buenos Aires. At the same time, these provinces with highinfant mortality rates have a highpercentage of the population with UBNand no insurance coverage. Table A3 HealthIndicatorsby Jurisdiction IMR (per MMR(per % of the pop. % of the Province 1,000 live wlout social population births) live births) security coverage with UBN (1) (2) (3) (4) City of Buenos Aires 9.4 0.9 34* 7% Tierra del Fuego 10.5 0.0 43 22% Neuquen 11.4 1.o 23 22% Santiago del Estero 13.2 7.1 38 37% Mendoza 14.3 3.9 32 17% Santa Fe 14.4 4.7 43 16% CQdoba 15.0 2.4 42 14% Buenos Aires 15.1 2.1 34* 17% La Pampa 15.3 7.5 24 12% Chubut 15.8 2.4 32 21% Rio Negro 16.6 3.6 16 22% Entre Rios 16.9 5.2 42 19% Santa Cmz 17.2 7.1 40 14% San Luis 17.2 6.0 23 21% Salta 18.8 6.5 41 37% San Juan 19.4 8.7 44 19% La Rioja 20.9 3.4 44 27% Catamarca 21.0 3.7 24 28% Chaco 21.9 15.9 61 38% Misiones 22.2 5.3 56 33% Tucumh 22.4 5.8 34 27% Formosa 23.0 13.9 66 38% Jujuy 23.1 19.7 36 35% Comentes 30.4 5.4 60 30% T O T A L 16.6 4 3 4s Expenditures are presented as constant pesos, 1999. *This refers to the province and city of Buenos Aires, together. Source: (1) 2000.Office of Health Information and Statistics (MoH); (2) Idem, 2001; (3) See Table A4; (4) 1991. INDEC 1993. 62 Table A4 presents the population covered by social security insurers and an estimate of the population without coverage, by jurisdiction. Coverage by social security insurers varies from a maximum of 80 percent of the population in Rio Negro, San Luis and NeuquCn, to less than 40 percent in provinces in the northeast (Chaco, Formosa and Corrientes). Such differences are also seen within each subsector of health social security (OSNs, PAMIand OSPs). Table A4. Population covered by Social Security, by Jurisdiction and Type of Social Security Health Insurance (2001) % of pop. covered by: Without social Province OSN PAMI OSP security City of Buenos Aires 14 BuenosAires 49 10 8 34 Rio Negro 54 6 24 16 NeuquCn 48 4 25 23 San Luis 46 6 25 23 La Pampa 46 9 22 24 Catamarca 20 5 51 24 Chubut 44 6 18 32 Mendoza 43 8 17 32 TucumAn 35 8 24 34 Jujuy 17 6 40 36 Santiagodel Estero 21 8 33 38 SantaCruz 23 5 32 40 Salta 30 6 23 41 EntreRios 25 10 23 42 C6rdoba 31 10 17 42 Tierra del Fuego 48 2 7 43 Santa Fe 32 11 14 43 SanJuan 26 7 23 44 LaRioja 23 5 28 44 Misiones 23 5 16 56 Conientes 15 6 19 60 Chaco 15 6 17 61 Formosa 8 3 23 66 Total 31 9 14 45 Source: CEDI 2002. 63 Per capita spending on health varies considerably from one province to another, and from one sub-sector of health social security to another (see Table A5). In 2000, the average monthly spending on health was $36 pesos per beneficiary in health social security, with a minimum of $18 pesos per beneficiary in Tucum6n and a maximum of $45 in Buenos Aires. Disaggregating this data shows that PAMIdisburses an average of $52 pesos per beneficiary (ranging from $55 to $80 pesos), OSPs spend about $33 pesos per beneficiary (from $15 pesos to $229 pesos) and OSNs spend $30 pesos per beneficiary (from $13 pesos to $47 pesos). In comparison, PROFE disburses $22 pesos per month, per beneficiary. Table AS Monthly Health Spending per Beneficiary By socialsecurity insurance agency. In $ pesos (2000) ~~~ ~ Monthly spendingper beneficiary (in $pesos) Province OSN P A M I Total social security City of BuenosAires 58 BuenosAires 22 56 52 45 Catamarca 30 69 20 26 Cordoba 26 56 35 34 Conientes 37 56 17 31 Chaco 33 63 31 37 Chubut 15 57 53 28 Entre Rios 28 55 20 30 Formosa 41 80 24 34 Jujuy 35 58 15 25 La Pampa 16 66 36 28 LaRioja 26 81 34 35 Mendoza 20 55 22 25 Misiones 30 66 17 30 Neuquen 16 66 66 35 Rio Negro 20 56 25 24 Salta 18 61 28 26 San Juan 21 62 23 27 San Luis 20 60 18 23 Santa Cruz 31 68 81 60 Santa Fe 28 57 30 34 Santiago del Estero 19 72 19 25 Tierra del Fuego 30 72 229 64 TucumAn 13 57 15 18 Total inArgentina 30 52 33 36 Source: CEDI 2002; INDEC Census; and Tobar 2002 64 ANNEX 111: PRIVATESPENDINGONHEALTH As a consequenceof institutional fragmentation and the inequalities in health sector financing in Argentina, a large portion of financing depends on out-of-pocket spending on the part of the population. In 2000, out-of-pocket spending on health accounted for 43 percent of total health spending in the country, or more than US$10 millionu. This includes household spending on medications and health services (payments for private services or pre-paid medicine), but excludes employee contributions to social security systems. The majority of out-of-pocket spending i s used for medications, especially in poor households. On average, Argentine households spend 58 percent of their health spending on medication and 42 percent on health services. For the three lowest income quintiles, spending on medication is even greater, at around 60 percent of total spending on health45. In comparison, the richest 20 percent of the population spend between 36 and 56 percent of their out-of-pocket spending on medication (depending on the region). A regional analysis shows that of all the provinces, only the City of Buenos Aires, Chubut andTierra del Fuego report private spendingon health services greater than private spending on medication. On the other hand, Entre Rios, Santiago del Estero and Chaco are the only three provinces where spending on medication i s more than double the spending on health services. On average, health spending represents 6.8 percent of household spending in Argentina, with variations between income quintiles and provinces. Inter-provincial variations range from a minimumof 4 percent of total spending in Santa Cruz, to a maximum of 11percent inthe City of Buenos Aires. haddition (i) households in the richest regions spend more on health services, as a percentage of the spending on consumption, than the poorer households in the regions, but (ii) households in the regions with greater health needs (measured in terms of IMR and UBN) spend more on health overall, as a percentage of the spending on consumption, than households in other regions46(see Table A6). Table A6. Privatespending % of % provincial Region on health,as % population IMR spendingon of total spending with UBN health Patagonia 4.6 15.1 18.3 18.39 Northeast 5.5 16.5 18.3 10.12 Pampas 7.5 18.3 17.8 9.55 Northwest 6.9 20.9 17.2 9.83 cuyo 8.1 32.2 20.9 10.34 Metropolitan 9.1 34.5 25.5 9.25 Source: Maceira et al. 2002 On the other hand, an analysis by income quintile shows that in all regions, as income rises, households dedicate a greater percentage of their income to health consumption (see Chart Al). 44Source: Tobar, F. 2002 45Maceira 2002. The analysis divides the country in six regions: Metropolitan, Patagonia, Cuyo, Pampas, Northeast and Northwest. 46Note, however, that these inter-provincial differences are not statistically significant. 65 As already mentioned, the out-of-pocket spending is divided between spending on medication and spending on health services. The households with medium-level incomes are the ones that spend most on medications (as a percentage of their total consumption) (see Chart A2). On the other hand, the richest households dedicate a greater percentage of their consumption to the purchase of health services (see Chart A3). This is the case because the richest households are more likely to purchase private insurance than poor households. The medium and low-income quintiles,on the other hand, are primarily insured through the obrus sociales network, or directly from the public sector. Chart AI. Total Private Spendingon Health As a % of Private Spending on Consumption .-aE e 12.0 3 -tPatagonia 10.0 -t-Mrtheast s 8.0 t-Panpas 0 --3tNorthwest sE5 OD 6.0 ' +4+ a y o 4.0 --eMetropolitan $ 2.0 -_ -- 1 0.0 1 2 3 4 5 QuintiIes Source: Maceiraet al. 2002. Chart A2 Chart A3 Private SpendingonMedication Private Spendingon Health Services As a % ofPrivate SpendingonConsumption As a % of Private Spendingon Consumption 7 0 7.0 , I tPatagonia +Mrtheast -Northeast t-Papas +Northwest +a y o ~ --eMetropolitan 10 ~_~__~____-_. o n I 2 3 4 5 1 2 3 4 5 Quintiles Quintiles I Source: Maceira et al. 2002 66 Finally, private spending on health as a percentage of income i s regressive. In all regions, except Patagonia, the poorest households spend more on health - as a percentage of their income - than the richest households (see Chart A4). On average, the poorest population quintile spends 9.4 percent of its income on health, while the richest quintile spends only 5.2 percent. The same trend is observed when looking at spending on medication. Spending on health services, on the other hand, increases with rising incomes. However, given that the greatest share of private spending i s on medications, the overall result i s regressive. These tendencies reflect the inelasticity of demand for medication and the limitations of the health system in offering effective financial protection to the poorest populations. Chart A4. Total Private HealthSpending As a % of MedianIncome 14.016'0 ------i i 12.0 --ePatagonia 10.0 --+- Northeast 8.0 -t-Parrpas 6.0 +Northwest 4.0 +my0 --cMetropolitan 2.0 0.0 ~ 5 1 2 3 4 Quintiles Source: Maceiraet al. 2002 67 ANNEX IV: MATERNALAND CHILDHEALTHINSURANCE As a first step in implementingpublic health insurance schemes, one option in which the country has already made progress is the development of a maternal and child health insurance (MCI). This type of health insurance would respond to the epidemiological profile of the country, and focus resources on the most vulnerable population groups. In addition, this form of health insurance would facilitate: (i)addressing the marked provincial inequities; (ii) improving the health status of the maternal and child population; and (iii)modifying the current resource allocation and incentives framework for service provision. Key technical aspects of such an insurance scheme are briefly discussedbelow. AffiZiation. The development of the M C I implies the compilation of a database that consolidates the various databases existing in the country (including those in the SNSS and OSPs, as well as other social programs) in order to register the population that is not currently affiliated to social security health insurance. The permanent updating and cross-checking of these databases i s key to avoid financing overlaps in the Argentine system, and thus avoid greater fragmentation and inefficiency. At the same time, it is important that the affiliation process for the M C I does not, in itself, constitute a barrier to access. Package of Services. The maternal and child health package should include services prioritized for their cost-effectiveness in controlling maternal and child morbidity and mortality. These should be in line with the available financing to guarantee sustainability of the MCI. Risk Pool. It i s necessaryto ensure a risk pool that is sufficiently large to guaranteethe insurance function. For some of the provinces with small populations, this implies the development of regional insurance mechanisms. Governance and Regulation of the M C I i s crucial and must be set within the federal context of the country. To this end, it is recommended to establish a collegiate council led by the M o H and integrated by the provinces that gradually adhere to the MCI. This council would be responsible for defining the basic criteria that would give uniformity to the M C I insurance scheme. Within this framework, the provinces that adhere to the MCI would sign a management agreement that sets specific health goals and responsibilities. These responsibilities would include: (i)the national government guarantees the compliance of national health social security agencies (PAM1 and OSNs) and concurs with the co-financing agreements (both in new resources as well as through vertical national programs); (ii)the participating provinces agree to include their respective OSP to the M C I scheme (which entails making available the database of OSP beneficiaries and implementing automatic reimbursement mechanisms from the OSP to service providers), to contribute to financing the M C I (initially through physical infrastructure and human resources, but later through increasing financial support), to provide services to MCI beneficiaries in the provincial public network and facilitate the monitoring and evaluation of the insurance. Financing. The M C I could be financed through various sources. For the uninsured, this could include: (i) resources from the National Treasury, through the MoH; (ii) and resources supplies allocated through national programs (PROMIN, PAI, VIGIA, Remediar, etc.); and (iii)support from provincial governments, initially in human resources and infrastructure. For the beneficiary population of obrus sociules, their financing would be derived totally from the insurance agencies. From the beginning the M C I should include financial projections in order to ensure its sustainability inthe future. Flow of Funds. The MCI should ensure a transparent flow of funds that avoids the generation of 68 regressive cross subsidies between social security and public financing. To this end, a mechanism i s needed to facilitate automatic reimbursements from OSNs and OSPs (of the participating provinces) to public providers (including primary care centers) for the provision of services to the populations affiliated to the social security insurers. Additionally, it i s necessary to ensure coordination between the national public health program inputsand other services and the SMIto avoidduplicity infinancing. Service Providers. The M C I should include public and private service providers organized as health service networks. These providers would be accredited on the basis of minimum guarantees o f (i) of human and physical resources; (ii)functioning referral system; (iii) quality a access to diagnostic exams; and (iv) expanded hours of service. (The current intermediaries, such as the "Gerenciudorus" would not be considered as service providers). Payment mechanism. The definition of the payment mechanism i s key to prevent the M C I from becoming an additional source of financing within an unchanged sector structure. The payment mechanism should ensure a real modification in the incentives under which public and private providers operate. To this end, the perverse incentives common in capitated systems should be avoided, especially in the case of rural populations with geographic or cultural barriers of access to services. In addition, the payment mechanisms should be linked to process and results indicators, and include incentives, especially for personnel at the primary care level. The monitoring and evaluation system should include the following characteristics: (i)a transparent system focused on outcomes and based on key process and results indicators; (ii) responsibility for collecting information shared between the M C I and the provinces; (iii)an external monitoring system, based on social control and social auditing mechanisms; and (iv) growing technological support (through information systems), in accordance with the capacity of each province. Potential Indicators Process indicators: 0 Expanded hours of service 0 Institutionalbirths Results indicators: 0 Complete cycles of prenatal and pregnancy care 0 Immunizations IMR 0 M M R 0 Analysis of deaths by committee 0 Rate of adolescentpregnancies 69 ANNEX V: NATIONAL INSTITUTE FOR SOCIAL SERVICESFORRETIRED PERSONS AND PENSIONERS - PAMI The National Institutefor Social Services for RetiredPersons and Pensioners (INSSJyP or PAMI) i s a public, non-state entity, privately governed and created in 1971to provide medical and social coverage to the economically inactive population, especially retired persons and pensioners. The INSSJP provides integral health and social assistance services (including nutrition, funeral subsidies and others) to its beneficiary population; these services are financed through mandatory employee-employer contributions, as well as contributions from the economically inactive population (see Table A7). Sector Employee Contributions Employer Contributions Public Sector 3% 2% Private Sector 3% 2% Autonomous 5% --- Economically Inactive 3% of minimum wage (pensioners) 6% of surplus (over min. _-_ wage) At the end of 2002, PAMIhad 3,175,000 direct affiliates, makingit the largest single insurer and purchaser of health services in the country.47 The PAMI beneficiary population i s largely comprised of direct members (only 29 percent are family dependents) of advanced age (79 percent are over 60 years of age and 56 percent over 70 years of age), most of which are women (64 percent) and are distributedthroughout the country (with 52 percent in large urban centers). For some time, PAMI has been experiencing a difficult situation characterized by a low capacity to respond to the needs of its affiliates, weak management, permanent financial imbalances with a growing deficit and recurrent accusations of corruption. This led to numerous interventions on the part of the National Government and various reform efforts, which so far have been unfruitful.The principal problems faced by PAMI, which are strongly interconnected, include: Weakness and inefficiency in administrative management. PAMI has its own administrative infrastructure, which i s highly centralized. This administration is comprised of more than 10,400 direct and local employees working in offices distributed throughout the provinces. Administrative spending i s difficult to determine, but is estimated at close to 20 percent of total spending. Various efforts in recent years aimed at reducing this large administrative structure have failed. Administration of the INSSJP i s highly politicized; this i s reflected in high turnover of managers and frequent changes of strategies and policies. There i s no culture of accountability, and there are frequent corruption scandals. Complex model of service provision. With the exception of two specialized hospitals and certain specific services, PAMI delivers medical services to its members through contracted external providers, both public and private. The preferred method for 47 In addition, close to 350,000 PAMI affiliates opted to remain with their original obru social when they became pensioners, making use of the right to choose, introduced in 1995. PAMI pays these insurers a corresponding contributionper capita. 70 contracting has been fragmented capitation (by levels of complexity and services), usually through intermediary networks in the provinces. In absence of effective information systems and monitoring and control, this contracting mechanism generates a great incentive for under-provision and low quality of services. This is reflected in a high rate of patients using the public assistance network and in the need for additional out-of- pocket spending on the part of beneficiaries. This framework of inefficiency i s exacerbated by marked instability of contracts, which are subject to external pressures and management changes. A reflection of all these problems i s that in 2000, one third of PAMIaffiliates expresseddissatisfaction with the received services. 0 Financial imbalances and growing deficit. There i s no correlation between the Institution's income (tied to labor prices and fluctuations in the labor market) and its spending (pressured by a high risk epidemiological profile, weak insurance management and high politicization). As a consequence, PAMI has faced a. continuous operational deficit since 1994 (see Table A8). PAMI financed this growing deficit at the expense of (i) supportfromtheNationalTreasury, ofabout$1,200 millionpesos; (ii) extra debt accumulation with providers and financial entities (in total, about $1,850 million), and (iii)cutbacks in service provision (including delays in the provision of care and interruptions in services). Table AS. PAMIIncome and Expenditures (1991-2001) 0 Lack of articulation with sector policy. Contrary to the legal provisions, PAMI does not respond to the SSS's regulation and control and, in many instances, PAMI i s not aligned with sector policies. This has been the case with the recent national policy for generic prescriptions, the definition of the PMO, and the reimbursements to autonomously-managed public hospitals. In2002 the National Congress approved a new PAMI law (25.615), which gives the Institute more autonomy and, at the same time, gives its affiliates greater representation and power in the management of the Institute. This law - which instigated vetoes from the Executive Power - has important implications for the possibility of introducing future reforms in the Institute. Specifically, this law (i) maintains PAMIas a public, non-state entity, outside the realm of public administration; (ii)limits the possibility of introducing structural reforms (for example, it prohibits the delegation or contracting out of the administrative or evaluation functions); (iii) reforms PAMI's leadership, which is now to be headed by a collegiate body with a majority of representatives from the beneficiary population; (iv) makes it difficult to intervene from outside the Institute, especially in the case of a major crisis; (v) increases mandatory employer 71 contributions (from 1.5% to 2.0%); and (vi) establishes that once again, the National Treasury should finance PAMI's debt to service providers. Overall, this means that the National Government has lost control over the management of the INSSJP, while preserving the ultimate political and fiscal responsibility for its performance. Are there effective reform alternatives for the PAMI? Reform options are necessary, given the political, social and fiscal significance of its services, especially during a time of crisis. The lessons learned through multiple reform efforts in the 1990s indicate that, above all, to advance and sustain true reforms of the PAMI requires strong will and political consensus. At the same time, the 1990s experience showed that it is impossible to improve the Institute's performance through internal management improvements alone. Instead, a successful transformation of PAMI will require first and foremost the introduction of structural reforms. A true reform of PAMI should include the following: A clear separation of the functions of purchasing and financing, administration and service provision, which today are mixed. The introductionof performance incentives and accountability in each of these functions. The creation of a new model for contracting health services, characterized by competition between accredited providers on the basis of quality, the integration of the capitas that are currently fragmented, an effective control of services, contractual stability linked to results, more information available to users, and free choice for beneficiaries to switch providers. The introduction of regulations holding employees financially responsible for the management of resources (Le. through a financial administration law); this would prevent the uncheckedgrowth of debt. The modernization and increased professionalism of the administrative structure, includingimprovements inthe information and management systems. The insertion of PAMI in the health sector's regulatory framework and its articulation with sector policies. A revision of PAMI's sources of financing, considering alternatives to stabilize income, for example, through general taxes. 72 ANNEX VI: THE FEDERALHEALTHPROGRAM (PROFE) Background. The Federal Health Program (PROFE) is responsible for financing medical and social services for beneficiaries of non-contributory pensions and their families. This program began operating in 1996 under the Secretariat of Social Development, as a separate branch from the services delivered by the INSSJyP. Recently, through Decree No. 1606 of 2002, the PROFE was transferred to the MoH. Coverage. As of December 2001, the PROFEcovered 436,357 beneficiaries, including children, the elderly, handicapped and veterans of war; the majority of these beneficiaries were living in poverty. This is reflected in the distribution of beneficiaries among the different types of non- contributory pensions: assistance (62%), discretionary (29%) and special laws (9%). However, it i s estimated that within the existing beneficiary population, there i s an unquantified, yet important duplication with other national and/or provincial insurance systems. The 2000 Budget Law has basically fixed the PROFE quotas, limiting the possibility for growth in the number (and spending on) non-contributory pensions, except the discretionary ones given out by Congress. Financing. The total budget of the program in 2002 was $805 million pesos. The National Treasury provided more than 80 percent of these resources; the rest of the budget i s derived from internal transfers. Four percent of the budget i s used to cover the costs of provincial management units. Total consolidated administrative spending, also under the central structure, is unknown. Administration. The PROFE is a federal program run at the provincial level. The MoH established agreements with each province, according to which it transfers a defined capita per beneficiary. The distribution of beneficiaries per province varies substantially. For example, while Tierra del Fuego has 780 beneficiaries, Santiago del Estero has close to 29,000. Currently, the PROFE capita amounts to about $22 pesos per month. Each province internally defines the provider networks and models of care for the beneficiary population. In general, the preference i s through public providers by level of complexity of care. An exception to the execution of the program through the provinces is the delegation to the INSSJyP (since 2000) of the responsibility for providing medical services to 125,000 PROFE beneficiaries; these include primarily veterans of the Malvinas Islands War and handicapped beneficiaries. The recent creation of a solidarity fund for the payment of services for low incidence and high cost health events as part of the PROFE (in 2001) merits a more detailed analysis. Results. Weak monitoring and evaluation systems for service provision make it difficult to analyze PROFE's effectiveness. There are no known systematic performance evaluations that assess timeliness of service delivery, access, technical level or consumer satisfaction. Alternatives for the Future. The PROFE, in its actual design, is yet another example of the fragmentation for the Argentine health social security system. Untilnow, the efforts of improving the PROFE focused on its internal management dimensions, with limited results and impact. An alternative to consider i s for the program to serve as an example of a new coverage modality for beneficiaries under the responsibility of the state. Under this modality, beneficiaries would be able to choose their health coverage, either opting for an insurance scheme run directly by their province of residence, or choosing one of the social security insurers (OSP, OSN y PAMI). The program would transfer a risk-adjustedpremiumto the chosen province or insurer. This option i s feasible, especially considering that currently, 30 percent of PROFE beneficiaries are affiliated to the PAMIand that the rest receive care through the correspondingpublic provider network. Inthe future, the fusion of the PROFE fund with one of the national health funds (for example, one 73 which could arise from the FSR) could be considered. 74 REFERENCES 1. Banco Mundial. An Assessment of InstitutionalCapacity for Social Sector Reformin Argentina. 2001. 2. Banco Mundial. Argentina, Rural Reproductive Health; Reporte No. 22255-AR, Junio 2001. 3. Centro de Estudios para el Desarrollo Institucional (CEDI). ElFuncionamientodel Sistema de Salud Argentino en un Context0Federal. CEDI, Buenos Aires, Argentina, Agosto 2002. 4. Centro de Estudios de Estado y Sociedad (CEDES). Debates: Reforma y Salud en Argentina. Buenos Aires, Argentina, 2002. 5. 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