Mexico - Health System Reform Technical Assistance Project

Report No. PID5983 Project Name Mexico-Health System Reform Technical (@) Assistance Loan Region Latin America and the Caribbean (LCR) Sector Human Development Project ID MXPE55061 Borrower BANOBRAS, S.N.C. Guarantor United Mexican States Implementing Agency Mexican Social security Institute (IMSS) Dr. Santiago EchevarrIa Zuno Alvaro Obregon 121, ler. Piso Col. Roma Distrito Federal, Mexico Telephone: (525) 2084395, 2084042 Fax: (525) 2085144 Date This PID Prepared November 13, 1998 Appraisal Date January 26, 1998 Board Date June 30, 1998 Country and sector Background 1. While Mexico's health indicators have improved markedly over the last 50 years, its population is aging rapidly. In 1970, 47 percent of Mexicans were under 15; in 1990 the figure was 39 percent and, in the year 2000, it is expected to be 35 percent. Over the same period, the proportion of Mexicans over 60 is expected to have risen from 5 percent to 7 percent and, by the year 2020, to reach 12 percent. While this is fairly universal phenomenon, it has important implications for health delivery, expenditures and insurance-based financing. Due to strong economic and regional inequalities, Mexico also combines two epidemiological situations: while the northern states have health indicators similar to OECD countries, urban slums, rural areas and the southern states are still subject to a pattern of common infectious diseases and malnutrition typical of low-income countries. Mexico's achievements in the health sector over the past several decades have led to significant improvements in the health status of the population, a broadening of access to basic services, and support of important public health measures. But its health sector faces major structural problems, as measured by financial access to health care, efficiency and, increasingly, total cost. 2. Following extensive consultations and deliberations with all segments of society, the Social Security Law (SSL) was passed in December 1995, formalizing major policy changes in both pensions and health. The most important provisions in the SSL affecting the health sector include: (a) shifting part of the financial burden from payroll taxes to Government financing through general revenues; (b) introducing greater consumer choice in the selection of providers (e.g., primary care physicians, secondary hospitals, etc.); and (c) increasing coverage of the social security system to the self-employed and informal sector workers through a publicly subsidized insurance scheme.  Project Objectives 3. This Technical Assistance Loan (TAL) has the broad objective of supporting the design and implementation of major policy changes in the health sector in Mexico, mainly through reforms in the Mexico Social Security Institute (IMSS). For the short-to medium-term, these policy changes aim to: (a) improve the financial management of the health insurance system, introduce new resource allocation mechanisms, and limit the fiscal impact of the proposed reforms; (b) strengthen the institutional and regulatory framework for health insurance to extend coverage to the self-employed and informal sector workers, ensure greater transparency and accountability among providers, develop measures for quality assurance, and promote consumer choice; and (c) improve the quality and efficiency of the IMSS health delivery system by supporting the decentralization of decision-making, restructuring of the health care delivery network around a population-based system, and the introduction of performance-based incentives for providers. Project Description 1. The TAL will complement a parallel adjustment operation ("Health System Reform?IMSS") which would support the reform program for the period 1998-2000 through a two pronged approach: (a) developing and implementing health insurance financing reforms and the necessary regulatory framework through (i) separating financing from provision of services, (ii) increasing consumer choice and extending coverage, and (iii) developing and implementing purchasing mechanisms; and (b) institutional strengthening of IMSS through (i) decentralization and (ii) strengthening its health care delivery network. The TAL would have the following components: (a) Technical Assistance for Policy Design and Implementation. IMSS will receive direct technical assistance to design and implement new resolutions, regulations, and operational guidelines contemplated under the changes in regulatory framework in the Health System Reform adjustment loan. (b) Institutional Strengthening. This component will finance training, workshops, exchanges with other institutions, study tours to foreign countries, and consultant services to help IMSS: (i) reform its organizational and functional structure; (ii) design, implement and evaluate new models of management in selected Medical Area Units and Specialty Hospitals; (iii) design and install a new enrollment database; (iv) introduce a Quality Assurance program and client satisfaction survey system; and (v) design and implement a performance-based incentive system. (c) Management and Technical Training Program. This component would finance training programs for IMSS managers at all levels to acquire change management understanding and basic management skills as well as for bio-medical engineers and technicians to receive technical training for maintenance of equipment and infrastructure. (d) Project Coordination Unit. Under this component, the project would support two basic activities essential to the implementation of the proposed reform program, including both the adjustment and the TAL: (i) project coordination; and (ii) project monitoring and evaluation. - 2 -  Project Financing 5. The TAL would have a total project cost of US$30 million, of which the Bank will finance US$25 million. Project Implementation 6. The TAL would be implemented by IMSS through a PCU, assisted by consultants. The PCU, which will be integrated within the regular structure of IMSS, will be in charge of overall coordination and reporting, technical and logistical support to IMSS' Regional Offices and Medical Area Units, supervision and auditing, and monitoring and evaluation of the project. Project Sustainability 7. Experience in Mexico with technical assistance loans accompanying adjustment operations is that commitment to carry out the program of technical assistance (and consequently, the program's effectiveness) closely tracks the progress of the overall reform. In this context, the strong Government commitment to reform the health sector and its openness to learn from international experience bode well for the TAL to make a lasting, sustained contribution. There are no financial sustainability issues. Lessons Learned 8. The reform concept and process supported by the project are of a long- term nature and politically and institutionally involved. Nations that have followed reform principles similar to those proposed include Germany, the Netherlands, Israel and, more recently, Russia, as well as Latin American nations supported by the Bank, including Chile, Costa Rica, and Argentina. All have evolved from employer-based insurance schemes. The key lesson learned from the unfolding collective experience is that no two systems are alike and therefore each system must be carefully considered on its own merits. 9. Lessons specific to TAL's center around reaching early agreement on Terms of Reference for consultants and studies and on having the administrative capacity to manage the consultancies and to carry out contracting efficiently. IMSS does have this capability. Project Benefits 10. The TAL's benefits are ultimately measured through the success of the reform program, which seeks to: (a) reduce the fiscal burden of the current health system and its concomitant potential distortions, while improving its financial sustainability; (b) improve the system's efficiency; (c) raise the quality of care; and (d) increase its contribution to equity. The reform would ultimately contribute to greater welfare and productivity, based on improved health status and satisfaction with the system. Project Risks 11. The TAL has been designed to provide the necessary inputs to help IMSS carry out its reform, but ultimately the TAL's risks are also directly related to the risks facing the adjustment operation, which are (a) need for continued - 3 -  support within the Government, (b) difficulties which may arise within IMSS, both institutionally and politically, in the decentralization of health services, and (c) possible delays in the approval and implementation of key norms and resolutions (i.e., capitation formulas, guidelines for Medical Area Unit operations, guidelines for opting-in and opting-out). 12. An implementation risk is the large number of consultancies involved as well as the complexity of the tasks to be carried out. While IMSS has adequate internal capacity to coordinate the project, consideration is being given to hire a firm or team of consultants to help manage and coordinate some of the consultancies. Poverty Category 13. Not Applicable. Environmental Aspects 14. The project has no environment effects and is proposed to receive an environmental rating of "C". One of the conditionalities under the adjustment operation would support the adoption of good environmental practices through an Operational Manual governing IMSS' investment program. Program Objective Categories 15. The TAL belongs to the category of Economic Management by helping the Government develop policy and tools to limit the fiscal impact of health finance reform and stimulate growth in the formal employment sector. Contact Point: The InfoShop The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone No. (202)458 5454 Fax No. (202) 522 1500 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 December 11, 1998. - 4 -