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Latin America Healthcare System Overview a Comparative Analysis of Fiscal Space in Healthcare

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Latin America Healthcare System Overview a Comparative Analysis of Fiscal Space in Healthcare Latin America Healthcare System Overview A comparative analysis of fiscal space in healthcare Panos Kanavos, Georgia Colville Parkin, Bregtje Kamphuis, Jennifer Gill August 2019 Latin America Healthcare System Overview: A comparative analysis of fiscal space in healthcare This report is commissioned via LSE Consulting which was set up by the London School of Economics and Political Science to enable and facilitate the application of its academic expertise and intellectual resources. LSE Enterprise Ltd, trading as LSE Consulting, is a wholly owned subsidiary of the London School of Economics and Political Science. The LSE trade mark is used under licence from the London School of Economics and Political Science. LSE Consulting LSE Enterprise Ltd London School of Economics and Political Science Houghton Street London, WC2A 2AE (T) +44 (0)20 7106 1198 (E) [email protected] (W) lse.ac.uk/consultancy Latin America Healthcare System Overview: A comparative analysis of fiscal space in healthcare TABLE OF CONTENTS Executive Summary i Introduction 1 Rising healthcare costs and the concept of fiscal space 2 Enhancing the fiscal space through indirect and earmarked taxation without endangering fiscal sustainability 3 Report aims and objectives 4 Conceptual framework 7 Methods 8 Study countries 8 Secondary data collection 9 Primary data collection 10 Analysis 11 What are the key organizational and financial factors in Latin American healthcare systems? 16 Key challenges 16 Health expenditure 16 Health systems in the study countries 20 Universal healthcare coverage 32 Health indicators 33 Other priorities 39 Healthcare system challenges 41 Macroeconomic performance in Latin American countries 42 Macroeconomic environment and policies 42 Assessment of macroeconomic environment and policies 54 Macroeconomic performance and fiscal space 57 How are key financing mechanisms perceived by policymakers in terms of political feasibility and necessity? 59 Political feasibility of financing mechanisms 60 Key mechanisms for revenue generation 62 Key mechanisms for health efficiency 63 Perception of financing and efficiency mechanisms by policymakers 64 How large is the fiscal gap in healthcare spending in the countries? 66 Shortfall in public healthcare financing 66 Latin America Healthcare System Overview: A comparative analysis of fiscal space in healthcare Cost of increasing public healthcare financing to fill the fiscal gap 69 Observed fiscal gap in public healthcare spending 70 How can increases in indirect taxes generate fiscal space for health? 71 Value-Added Tax 71 Taxes on harmful products 78 The potential of indirect taxes to generate fiscal space for health 86 Using the proceeds of indirect tax increases: Simulation scenarios 87 Scenario 1: Allocating additional tax revenue to health 88 Scenario 2: Health as one of the priorities in human services 91 Scenario 3: Improving efficiency 95 Simulation scenarios and the fiscal gap 98 Conclusions and Policy implications 100 Summary of key results 100 Policy implications 103 Bibliography 107 Appendices 120 Appendix 1: Collected Indicators 120 Appendix 2: Protocol for Comprehensive Literature Review 122 Appendix 3: Modelling the Effect of Changes in VAT – Data and Assumptions 124 Appendix 4: Modelling the Effect of Changes in Harmful Product Taxes – Data and Assumptions 130 Appendix 5: Demographic and Health Indicators 133 Appendix 6: Price Elasticity of Demand used for VAT modelling 138 Appendix 7: VAT Modelling Results 140 Appendix 8: Harmful Product Tax Modelling Results 143 Latin America Healthcare System Overview: A comparative analysis of fiscal space in healthcare ACKNOWLEDGEMENTS This research has received financial support from by F. Hoffmann-La Roche AG. The authors are thankful for the research assistance provided by Colin Flannelly and Marisa Sophiea, and grateful to three anonymous referees for providing very useful comments on earlier versions of this report. The authors also extend their gratitude to the policy experts and stakeholders who provided their insights and expertise on the necessity and feasibility of cost containment mechanisms through our survey. Latin America Healthcare System Overview: A comparative analysis of fiscal space in healthcare ABOUT THE AUTHORS Dr Panos Kanavos is Associate Professor of International Health Policy in the Department of Health Policy at London School of Economics and Political Science and Deputy Director of LSE Health. Dr Kanavos is also Programme Director of the Medical Technology Research Group (MTRG), an LSE-based research group focused on interdisciplinary and comparative policy research in the fields of the economics of medical technologies, access determinants to medical technologies, sustainable financing of healthcare, and health system performance. Georgia Colville Parkin is a Research Associate at the Medical Technology Research Group of the London School of Economics and Political Science. Bregtje Kamphuis is an Assistant Director in Health Policy at the Medical Technology Research Group of the London School of Economics and Political Science. Dr Jennifer Gill is an Associate Director at the Medical Technology Research Group of the London School of Economics and Political Science. Latin America Healthcare System Overview: A comparative analysis of fiscal space in healthcare ABBREVIATIONS CSS Social Security Fund (Panama) CCSS Caja Costarricense de Seguro Social (Costa Rica) DRG Diagnosis Related Group ECLAC Economic Commission for Latin America and the Caribbean EMP Prepay Private Insurance (Argentina) EPS Healthcare Provider Enterprises (Peru) EsSalud Seguro Social de Salud (Peru) EU European Union GDP Gross Domestic Product GNI Gross National Income FFAA Armed Forces (Peru) FONASA Fondo Nacional de Salud (Chile) IADB Inter-American Development Bank IESS Ecuadorian Social Security Institute (Ecuador) INS National Insurance Institute (Costa Rica) IMF International Monetary Fund ISAPRE Instituciones de Salud Provisional (Chile) LA Latin America NCD Non-Communicable Disease NGO Non-Governmental Organization NHS National Health System (UK) MIES Ministry of Economic and Social Inclusion (Ecuador) MINSA Ministerio de Salud de la Republica de Panama (Panama) MSP Ministry of Public Health, Ecuador OECD Organization for Economic Co-Operation and Development OOP Out of Pocket OS Obras Sociales (Argentina) PAHO Pan American Health Organization PAMI Comprehensive Medical Assistance Program (Argentina) PED Price Elasticity of Demand Latin America Healthcare System Overview: A comparative analysis of fiscal space in healthcare PNP National Police (Peru) PPP Purchasing Power Parity THE Total Health Expenditure SDG Sustainable Development Goal SHI Statutory Health Insurance SIS Integral Health Insurance (Peru) SNIS Integrated National Health System (Uruguay) SNS National Health System (Spain) SPSS Social Protection System in Health (Mexico) SS Social Security (Mexico) SSB Sugar-sweetened beverages SSC Seguro Social Campesino (Ecuador) SUS Sistema Único de Saúde (Brazil) VAT Value-Added Tax UHC Universal Health Coverage UK United Kingdom UNICEF United Nations Children's Fund USD United States Dollar WEF World Economic Forum WHO World Health Organization Latin America Healthcare System Overview: A comparative analysis of fiscal space in healthcare TABLES Table 1 Scenario Inputs for VAT Modelling ............................................................. 13 Table 2 Scenario inputs relating to harmful product tax modelling ............................ 15 Table 3 Health Expenditure in Latin America, France, Spain and the UK, 2015 ........... 17 Table 4 Health Systems in Study Countries ........................................................... 21 Table 5 Coverage, Service, and Cost Indicators...................................................... 32 Table 6 Achievement of UHC Dimensions .............................................................. 33 Table 7 Government spending as a proportion of GDP ............................................ 40 Table 8 Credit-worthiness of study and comparator countries .................................. 53 Table 9 Macroeconomic Indicators ........................................................................ 54 Table 10 Achievement of favourable macroeconomic environment for fiscal space ....... 55 Table 11 Respondent characteristics: survey on healthcare financing preferences ........ 61 Table 12 Cost of increasing public healthcare financing ............................................. 69 Table 13 Standard and non-standard VAT rates in Latin American countries ................ 72 Table 14 Increase in revenue due to the simulated VAT rate (million, US$) ................. 77 Table 15 Current levels of excise taxes on alcohol and tobacco products ..................... 78 Table 16 Simulation tax rates for harmful goods (5-percentage point increase) ........... 79 Table 17 Concurrent VAT and harmful products tax increases… (scenario 1) ................ 90 Table 18 Concurrent VAT and harmful good tax increase… (scenario 2) ...................... 94 Table 19 Consumption of differentiated alcohol and tobacco products ....................... 130 Table 20 Demographic and Health Indicators......................................................... 133 Table 21 VAT PED (supporting evidence for study countries) ................................... 138 Table 22 VAT PED (supporting evidence for comparator countries) ........................... 139 Table 23 VAT Modelling (PED=0) ........................................................................
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