Argentina - Health Insurance for the Poor Project

Report No. PID8094 Project Name Argentina-Health Insurance for the Poor Region Latin America and the Caribbean Sector Health, Nutrition & Population Project ID ARPE63388 Borrower Government of Argentina Implementing Agency Ministry of Health and Social Action Av. 9 de Julio Phone: 5-41-345-3612/3641 Fax: same as telephone Date this PID Prepared August 18, 1999 Appraisal Date July 19-23, 1999 Project Board Date September 30, 1999 1. Country and Sector Background: Health outcomes and public satisfaction with the quality of care fall short of what could be expected in a country with the income and health spending levels of Argentina. The problem can be traced to: (a) inequitable health coverage; (b) an inefficient service provision system; (c) the segmented nature of health insurance financing; and (d) insufficient emphasis on public health and primary care. - Inequitable health coverage. The system is characterized by the existence of a large (36.5 percent of total population, i.e., around 13 million persons) and overwhelmingly poor uninsured population. At present, some 8 million are covered by the union-run, mandatory health insurance system (Obras Sociales Nacionales), another 6 million under provincial health insurance for public sector employees (Obras Sociales Provinciales), 4 million are covered by the National Social Services Institute for Retirees and Pensioners, and 2.2 million have private health insurance coverage. Health care for the uninsured population is financed mostly through provincial budget allocations to public facilities which then provide health care for free at the point of entry. The poor are captive to the public hospitals and cannot hope to obtain better health care from alternative providers unless they pay for these services out- of-pocket. As a first step towards correcting these shortcomings, the Government is attempting to extend formal and explicit health coverage to the poor, thereby establishing the legal and institutional basis: (a) for providing public hospitals with an incentive to provide appropriate care to the poor; and (b) for offering the recipients a choice of insurance carriers and of providers. The creation of health insurance for the poor initiates a process of switching to a more efficient, equitable, and transparent subsidization scheme. In effect, since these 'demand' subsidies would be de-linked from providers, they can more effectively be targeted to the poor, and they can be used as an instrument to motivate providers to be more efficient. - Inefficient service delivery in the public sector. Resources are allocated to public providers on a historical basis. Since they receive allocations that bear only a distant relation to the quality and quantity of services they  provide, public hospitals neither have an incentive to provide appropriate care, nor to increase the efficiency of service provision. To increase the efficiency of heath care delivery in the public sector, the Government launched a pilot program through the Provincial Health Sector Development Loan (Ln. 3931-AR) which aimed at introducing management autonomy in public hospitals while strengthening their management systems, increasing the quality of hospital assets in selected areas, and developing the capacity of public hospitals to bill for services provided to insured patients. Similar reforms are also contemplated in the policy conditionality matrix of the Second Provincial Reform Loan (Ln. 3877-AR) that is currently being implemented in four provinces (San Juan, Tucuman, RUo Negro and Salta). Significant administrative and financial autonomy was granted to some public hospitals, allowing them to collect fees from insured patients, and to use part of the revenues thus collected (80 percent in Salta and RUo Negro) to finance additional salary for staff, as well as some investments and maintenance costs. It is expected that the public hospital reform would be further expanded through follow-on operations. - Segmented health insurance financing. Until the reforms that started in 1995, the insured population was captive to national union-run health insurance funds (Obras Sociales Nacionales) or provincial funds (Obras Sociales Provinciales) which were associated with place of employment and offered widely different health care coverage. Since Obras had captive beneficiaries who could not select another health insurer, they had little or no incentive to improve the quality and quantity of services, operate more efficiently, or control costs. To address these inefficiencies, the GoA launched the first phase of a health insurance reform program with support from an adjustment operation and a complementary technical assistance loan from the Bank in 1996 (Loans 4002/4003/4004-AR). The health insurance reform helped to introduce competition among national social insurance funds, to improve their internal efficiency, to develop risk adjustment mechanisms among social insurance funds, and to set up a central regulatory body as well as consumer protection and prudential norms for both social and private health insurance. The major outcomes of these reforms have been to increase choice for the insured population, to mandate a standard package of benefits (PMO), to compensate Obras for income disparities among them, and to improve the financial sustainability of the national health insurance funds. Follow-up operations would support the second phase of the health insurance reform program, including deepening the reform at the national level, and developing reform mechanisms for provincial health insurance funds (Obras Sociales Provinciales). - Insufficient emphasis on public health and primary care. Health outcomes in Argentina are lower than could be expected at its income level or its spending in health. Part of the problem is that of allocative inefficiency: the public sector places insufficient emphasis on those health services that have high payoffs (typically, preventive and primary health care) and those services that are underprovided by the private sector (public goods and goods with externalities). Four Bank loans (the Maternal and Child Health and Nutrition I and II Projects, Ln. 3643-AR and Ln. 4164-AR, the Public Health Surveillance and Disease Control Project, AR-PE 55482, and the AIDS and STD Control Project, Ln. 4168-AR) are currently assisting the Government of Argentina to strengthen the public role in the health sector. 2. Project Objectives -2-  The objective of the proposed LIL is to pilot the development of health insurance for the poor in selected provinces of Argentina. The LIL will assist the Government of Argentina (GoA) in developing the legal, institutional and financial framework to establish the proposed health insurance scheme which could eventually be replicated throughout the country. The introduction of such a policy initiative involves significant risks and has major long term structural and political reform implications. It involves introducing radical changes in the financing of public health care providers, gradually replacing budgetary allocations with a mix of payment per capita, per group of services and fee-for-service. It also involves establishing financially sustainable health insurance that would improve the targeting of public subsidies to the most needy. Finally, it would mean gradually empowering the poor with similar basic rights, with regard to health care, as those of the currently insured population, and ultimately seeks to improve their health coverage. Several provinces in Argentina have already initiated activities to introduce health insurance for the poor as part of larger reform programs to improve health services, and many others have expressed their willingness to do so. In order to move this process of change along, the proposed LIL will advance implementation in a select number of provinces. 3. Project Description The project will have three parts: Part A: Enrollment Database would include the following activities: (i) identifying eligibility criteria based on different poverty measures; (ii) designing a questionnaire and implementing on-site surveys; (iii) establishing the enrollment database of the uninsured poor and implementing the mechanisms for its regular updating; (iv) designing and distributing identification cards to the beneficiaries; and (v) designing and implementing communications campaigns targeted to the beneficiary population and to the provider networks. Part B: Health Insurance for the Poor would include the following activities: (i) establishing the legal framework for the proposed health insurance; (ii) identifying a fiscally affordable minimum health benefits package for the beneficiary population as well as alternative health plans for the uninsured, non-poor households; (iii) selecting the network of providers in the public and private sectors; (iv) designing payment systems to providers, including at the primary health care level, that would include appropriate incentives; and (v) establishing, within the selected Agency, the capacity to manage the proposed health insurance. Part C: Preparation, Monitoring, Evaluation and Administration would support diagnostic and preparation activities in provinces other than the two pilot ones (RUo Negro and Salta). The project would also support monitoring and evaluation activities that would allow evaluation of the impact of the project and capitalize upon the learning opportunities that this project provides. 4. Project Financing Bank financing would be for US$4.90 million. 5. Project Implementation The executing agency will be the Ministry of Health and Social Action. 6. Project Sustainability Sustainability is not addressed in Learning and Innovation Loans (LILs). The - 3-  project is, however, expected to be fiscally neutral (or close to), at least in the early part of the implementation period, because: (a) the proposed health insurance for the poor will be funded out of existing provincial budget allocations (principally global allocations provided to public hospitals and health centers); (b) the funding available for the newly insured poor is expected to increase due to a concomitant decrease in the cross-subsidies from the public to the insurance sector; and (c) the project should generate increases in the efficiency of the provincial delivery systems through the introduction of new payment mechanisms and other incentives. However, it is also expected that the change in incentive structure for consumers (access to a clear package of benefits and ability to claim their right to certain services) and providers (particularly fee-for-service reimbursement mechanisms for hospitals) will exert an upward pressure on the production of health services and on provincial public health spending. The spending pattern of the health insurance agencies for the poor will be closely monitored out and adjusted according to the provincial fiscal situation. 8. Poverty Category N/A 9. Environmental Aspects There are no environmental issues. The proposed operation will support the implementation of a health insurance reform program which will not pose any environmental risks or damage. The operation would provide technical and financial assistance to implement policy and institutional changes in the health insurance market. None of these activities would have direct implications for health care delivery facilities, nor potential to generate hazardous waste. 10. Program Objective Categories: The primary category is Other Population, Health and Nutrition. Contact Points Dr. Lelio Marmora Marie-Odile Waty, Task Manager Coordinador General The World Bank - LCSHD Programa de Reconversi6n del Sistema 1850 I Street NW, I 7-001 de Seguro de Salud (PRESSS) Washington, D.C. 20433 Lima 355/369, Piso 10 ("B" y "C") Phone: 202-473-4085 Buenos Aires, Argentina 1073 Fax: 202-522-3135 Phone: 54-114-381-1979 Fax: 54-114-381-1979 The Infoshop The World Bank 1818 H Street, N.W. Washington D.C. 20433 Telephone No. (202) 458 5454 Fax No. (202) 522 1500 -4-  Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project. Processed by the InfoShop week ending September 3, 1999. - 5 -