Private medicine is on the verge of collapse - IDESA

Report Nº: 91907/07/2021

Private medicine is on the verge of collapse

The pandemic and the government’s refusal to authorize price updates deepened the crisis in private medicine. In a context in which Covid-19 does not budge, it is extremely risky to activate this conflict and simultaneously propose a reform of the health system that is inconsistent.

The private health system is conformed of two types of actors: medical providers and health insurance companies. The latter operate as social security health insurance or prepaid medicine companies. The affiliates of the social security health insurance companies are salaried workers who make mandatory contributions. Members of prepaid medicine companies are made up of members of the social security health insurance companies who choose to transfer their salary contributions to the prepaid company and by individuals who voluntarily pay a fee out of their own pocket.

In general, health insurance and prepaid medicine companies contract with private providers for medical services for their members. Health insurance companies tend to pay lower fees, so they have a more limited list of providers, which are also the ones with low-quality standards. The prepaid companies contract with medical providers of a high level of commercial profile and quality standards. A central aspect of this contractual relationship is that prepaid medicine companies adjust the medical providers’ fees when the government authorizes increases in their affiliates’ health plan prices. Therefore, for private medical providers, the adjustment of health plan prices is very important.

Since the new administration took office in December 2019 up to June 2021, prepaid fee increase authorizations, salaries evolution in the private health sector, and inflation had the following behavior:    

  • Prepayment fees were updated by 26%.
  • Private health care workers’ salaries increased by 63%.  
  • General inflation was 71%.  

These data show that the prepaid fees updates, which are then translated into tariff increases for private medical providers, have lagged far behind the salaries that the providers must pay to their workers and inflation. Surely the government is seeking, as with the rest of the price controls, to mitigate inflationary pressures and to avoid the unpleasant decision of authorizing fee increases that impact the families’ budgets. But generating such a price mismatch, in the particular context of the pandemic, is extremely risky.

The pandemic demands extraordinary efforts from health care providers. In particular, the purchase of many items of personal protection and excessive consumption of drugs in intensive care by Covid patients, whose prices have also increased by more than 100%. At the same time, although the intensive care units are working at full capacity, the installed capacity of the normal floor (which represents 80% of the medical activity) is underutilized due to the protocols for Covid prevention. More expenses, with less activity and low medical fees are causing serious underfunding. In this precarious situation, in July, the sector’s wage bargaining agreements will take place. There it will be made explicit that this underfunding conspires against the possibility of recognizing with better salaries the dedication and effort that private health care workers have been making for the Covid.

Furthermore, a comprehensive reform of the health system led by the public sector has been announced. The proposal is not only inopportune (it is made amid a pandemic and a severe financial crisis) but also inconsistent. It overlooks the fact that public health is administered and financed by the provinces. In order to create a national health system led by the public sector, it is necessary to reform the national Constitution and the 24 provincial Constitutions, which in their articles expressly consider health as a competence not delegated to the Nation. Nor does it take into account that the public system serves a smaller proportion of the population. Most of them opt for and prefer health coverage, which they can access by having a formal job or contracting a prepaid medicine company.

Imposing a deliberate strategy of underfunding private medicine companies and proposing an inconsistent reform is highly inadvisable. Do it in the midst of a pandemic is also reckless. It is an unfair attitude towards the population in general and, particularly, towards those who are at the forefront of the battle against Covid.  


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