HEALTH FINANCING PROFILE - MEXICO 89376 Mexico is one of the largest countries in the Latin American and Caribbean region with a population of 113 million. GDP per capita is high by regional standards at over US$10,000.1 Poverty and socioeconomic inequality remain an issue. This is mirrored in health disparities between states and regions. For example, in 2012, infant mortality in the state of Nuevo Leon was approxi- mately 9.4 per 1,000 live births while this same figure was 18.6 in the poorer state of Guerrero.1 These differences in health outcomes between states can in part be linked to the distribution of health re- sources across states with poorer states lagging behind in infrastructure and human resources. In light of these disparities and challenges, the Mexican government introduced a comprehensive and ambitious package of reforms to the General Health Law in 2003. The reforms strive to operationalize the right to health of all citizens as enshrined in the 1983 Constitution. The primary focus of the General Health Law has been to expand health insurance coverage to previ- ously-excluded groups (those not eligible for Social Security through formal-sector employment), pro- tecting them from catastrophic health expenditures and improving healthcare access and utilization. Changes in how federal health funds are distributed to states in order to reduce entrenched dispari- ties have also been a top priority with promising results to date. Health Finance Snapshot Total Health Expenditure (THE) as a share of gross domestic product (GDP) rose from 5% to 6% between 1995 and 2012. General Government Expenditure on Health (GGHE) as a percentage of THE is increasing and has recently exceeded 50%. Table 1. Health Finance Indicators: Mexico 1995 2000 2003 2005 2007 2009 2012 Population (thousands) 91,165 98,295 101,884 103,831 105,677 107,443 114,793 Total health expenditure (THE, in million current US$) 16,156 32,288 40,494 49,677 59,696 56,485 72,370 THE as % of GDP 5 5 6 6 6 6 6 THE per capita at exchange rate 177 328 397 478 565 526 618 General government expenditure on health (GGHE) as % 42 47 44 45 45 48 52 of THE Out of pocket spending as % of THE 56 51 53 52 51 48 44 Private insurance as % of THE 2 2 3 3 4 4 4 Source: WHO, Global Health Expenditure Database; National Health Accounts, Mexico Figure 1. Total Expenditure on Health per capita, 4 Out of pocket spending (OOPS) makes up a considerable por- Mexico tion of total health spending (Table 1, Figure 1), though it has Total Expenditure on Health per capita remained below 50% of THE since 2008. (USD at official exchange rate) • OOP costs are point-of-service fees (i.e.: for consultations, medications, etc.) and do not include private insurance pre- miums. • OOPS in Mexico is just slightly below the LAC region average of 48% (2011).2 • Approximately 3% of the Mexican population has private in- surance coverage. These are typically high-income earners with employer-sponsored health insurance that supplements Social Security coverage.3 Source: WHO, Global Health Expenditure Database; National Health Accounts, Mexico Health Status and the Figure 2. Demographic Indicators, Mexico Demographic Transition Non-communicable diseases have far surpassed communicable diseases as contributors to morbid- ity and mortality in Mexico. In poor and often ru- Crude birth rate ral areas, however, the burden of communicable (per 1,000 diseases as well as maternal and child mortality population) remains high, often an order of magnitude higher than in more affluent urban areas. This dual bur- Infant mortality rate den of disease taxes the health system, presenting (per 1,000 financial and logistical challenges. live births) Under-5 Demographic Transition mortality rate (per 1,000 4 Birth rates are declining (Figure 2). births) 4 Life expectancy is increasing. 4 The ‘bulge’ in the population pyramid is moving markedly upward (Figure 3). Source: United Nations Statistics Division and the Instituto Nacional de Estadística, Geografía e Informática, 4 The total fertility rate (TFR) has fallen from 3.4 Mexico. in 1990 to 2.2 in 2011. Epidemiological transition Table 2. International Comparisons: Health Indicators. 4 Non-communicable disease mortality on aver- Upper Middle age has eclipsed mortality from communicable Mexico Income Country % Difference diseases, nutritional deficiencies and maternal/ Average perinatal causes (Figures 4 and 5). GNI per capita (year 2000 US$) 5,666.4 1,899.0 198.4% Prenatal service coverage 95.8 93.8 -0.8% Figure 4. Mortality by Cause, 2008, Mexico Contraceptive coverage 72.9 80.5 -9.5% Skilled birth coverage 95.3 98.0 -2.7% Sanitation 85.0 73.0 16.4% TB Success 86.0 86.0 -- Infant Mortality Rate 14.1 16.5 -14.6% <5 Mortality Rate 16.7 19.6 -15% Maternal Mortality Rate 50.0 53.2 5.1% Life expectancy 76.7 72.8 14.2% THE % of GDP 6.5 6.1 5.9% GGHE as % of THE 35.3 54.3 -35% Physician Density 2.0 1.7 15.9% Hospital Bed Density 1.6 3.7 -56.4% Source: WHO, Global Burden of Disease Death Estimates (2011) Source: The World Bank, World Development Indicators database Figure 5. Non-Communicable Disease Mortality, 2008, Figure 3. Population Pyramids of Mexico Mexico 1950 1980 2010 75-79 65-69 55-59 45-49 Male 35-39 Female 25-29 15-19 5-9 4000 0 4000 10000 0 10000 10000 0 10000 Source: WHO, Global Burden of Disease Death Estimates (2011) Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2010 Revision. Health System Financing and Coverage Article 4 of the Mexican Constitution (1983) guarantees access to to those not working in the formal sector and therefore not eligible universal healthcare to all Mexicans. However, Social Security (SS), for SS benefits. The General Health Law (LGS) reform was imple- which includes health benefits, remains linked to formal employ- mented in 2004, extending the program nationwide and giving rise ment so that much of the population was excluded from SS benefits to the System of Social Protection in Health (SPSS). The SPSS is and did not have access to SS-run health facilities. Until recently, meant to offer a comprehensive package of medical interventions their healthcare access was limited to underfinanced public (non- and medications to those who do not qualify for SS and regardless of SS) facilities. The Ministry of Health (MOH) created a pilot program the beneficiary’s ability to pay. Mexico has achieved near-universal called Seguro Popular de Salud (SPS) in 2002. The SPS was targeted health insurance coverage as of 2012.2 Figure 6. Timeline of Mexico’s Public Health System2 The General Health Law (LGS) reform extends SPS nationwide and the System of Social Protection in Health (SPSS) is born to offer a comprehensive Mexican Constitution guarantees package of medical interventions and medications to healthcare as a right for all citizens. all those not covered by Social Security. 1983 2002 2004 MOH pilots Seguro Popular de Salud (SPS) to target those Public sector: not eligible for Social Security through formal employment. 4 Social Security (SS) Figure 7. Population Health Coverage, 2012 4 Provides health insurance (and pensions) for formal-sector workers and their dependents. 4 Two main schemes exist: The ISSSTE covers most government employ- ees while the Mexican Institute for Social Security (IMSS) covers the remainder of SS beneficiaries. 4 Funded through employee and employer payroll contributions com- bined with federal government contributions. 4 Covers primary, secondary and tertiary services and medications. 4 Services are provided at facilities owned and run by the individual SS schemes. 4 Social Protection System in Health (SPSS) Source: http://www.imss.gob.mx and Knaul et al., “The quest for universal heal- 4 Voluntary government-subsidized regime open to anyone not covered th coverage: achieving social protection for all in Mexico”. The Lancet, 2012 by Social Security schemes. Enrollment required. • Popular Health Insurance (PHI): Covers close to 300 • Medical Insurance XXI Century (MI XXI) - Previously primary and secondary services and medications. “Health Insurance for a New Generation” (SMNG): Cov- • Fund for Protection against Catastrophic Health Ex- ers a comprehensive package of services for children penditures (FPGC): Covers a package of high-complex- under 5. ity, high-cost services. Table 3. Coverage and Financing in Mexico’s Social Health Insurance Financing and Contributions Purchasing and Provision - The Social Security schemes own and run their own networks of providers, Employers & Employees: Contributions are mandatory for those creating full vertical integration. employed in the formal sector. The size of each party’s contribution is based on the level of the employee’s earnings. Social Security -Each SS scheme has its own network (no crossover). Independent Workers: Fixed annual fee for individual sickness and -These schemes perform both the purchasing and health service provision functions maternity insurance. Additional payments apply for family members. for beneficiaries. - PHI premiums are actuarially calculated and indexed to minimum income and inflation. - The premiums are co-financed by Federal transfers to each State for all enrolled (89% of the total), with State funds making up the rest (11%). - Co-financed through federal and state level general government - State payments to providers are still based on historical budgets. revenues. - Non-indigent beneficiaries are supposed to pay contributions (in - Federal MI XXI funds for primary and secondary services are transferred to states on a Social Protection in the form of premiums) but rarely do. capitation basis (fixed amount per person). Health (SPSS) - State payments to providers are still based on historical budgets. - No contributions required from most beneficiaries. - No point-of-service fees (i.e.: co-payments) for beneficiaries in - MI XXI funds for tertiary services are paid directly to health facilities by the federal-level public or approved private facilities. CNPSS (an agency of the Ministry of Health), on a fee-for-service basis. -FPGC funds are paid directly to health facilities by the CNPSS, on a fee-for-service basis. Source: OECD 2013 (http://www.oecd.org/ctp/tax-policy/Explanatory%20Annex_2013_Social%20Security%20Contributions.docx), Bonilla-Chacin, M.E. and Aguilera, N., “The Mexican Social Protection System in Health”, The World Bank UNICO Studies Series, No. 1, 2013. Health Sector Financing1 4 Federal funding before the General Health Law reforms of 2003 perpetuated health disparities and inequalities between states by determining funding levels based on existing state infrastructure, rather than population needs. 4 Federal transfers to states for the PHI are now based upon actuarially-calculated premiums to better address population needs and decrease these disparities. 4 State payments to health service providers continue to be based on historical health facility budgets rather than being pred- icated on services provided or patient volume. 4 Public expenditures on health grew from 2.4% to 3.1% of GDP between 2000 and 2009. 4 During that same period, the gap between public spending levels for those employed in the formal sector and for the previ- ously uninsured shrank, and disparities between states in Federal transfers per person decreased. Figure 8. Popular Health Insurance (PHI) Figure 9. Medical Insurance XXI Century (MI XXI) Source: Bonilla-Chacin, M.E. and Aguilera, N., “The Mexican Social Protection Source: Bonilla-Chacin, M.E. and Aguilera, N., “The Mexican Social Protection System in System in Health”, The World Bank UNICO Studies Series, No. 1, 2013. Health”, The World Bank UNICO Studies Series, No. 1, 2013. Financial Protection and Service Utilization Challenges and Pending Agenda1 4 A 2012 study showed that utilization of needed health services for those enrolled in SPSS pro- 4 Large socioeconomic differences between states continue to grams is 1.8% higher than that of the uninsured. contribute to wide health disparities. The SPSS has decreased However, it remains 2.6% lower than health ser- these disparities, however, continued dedication to scaling-up vice utilization by Social Security beneficiaries.1 human resources and infrastructure in poorer states and regions 4 The same study, which controlled for household will be required. characteristics associated with scheme affiliation, 4 Mexico’s health system is fragmented with little communication found that the SPSS households surveyed had sig- or coordination between public, Social Security and private pro- nificantly lower levels of OOPS and catastrophic viders and networks. This leads to inefficiencies marked by small health expenditures than uninsured households. risk pools, duplicative administrative structures and, ultimately, The SPSS households also had similar levels for high administrative and insurance costs. these measures as Social Security households.1 4 Discussions continue about how to address this fragmentation through functional integration of networks and systems, includ- ing the possibility of a single risk and financial pool for the SPSS and Social Security with unification of their provider networks. References 4 Though decreasing after the introduction of the SPSS, levels of OOPS and catastrophic health expenditures re- 1 Bonilla-Chacin, M.E. and Aguilera, N., main high in Mexico relative to other upper-middle-in- “The Mexican Social Protection System in Health”, come countries. The World Bank UNICO Studies Series, No. 1, 2013. 2 Pan American Health Organization (PAHO) Health Economics and 4 In the SPSS, only tertiary level services (of the FPGC and Financing (HEF): Health Care Expenditure and Financing in Latin America and the MI XXI) are now paid on a fee-for-service basis following Caribbean [Fact sheet]. 2012. the reforms. Payments to health facilities for primary 3 OECD Reviews of Health Systems: Mexico. 2005. and secondary care (through the PHI and MI XXI) con- 4 Knaul, F.M, González-Pier, E., et al., “The quest for universal health coverage: achiev- tinue to be based on health facilities’ historical budgets ing social protection for all in Mexico”. The Lancet, 2012. Retrieved from http:// dx.doi.org/10.1016/S0140-6736(12)61068-X and are not linked to output or performance. The intro- duction of accountability mechanisms through incentive This profile was prepared by Dr. Deena Class, A. Sunil Rajkumar and Eleonora Cavagnero structures at the health facility level could increase the with inputs from María Eugenia Bonilla Chacín. volume and quality of health services provided.