Managed Care Goes Global
Latin America Confronts the Multinational
by Celia ran, Howard Waitzkin
and Emerson Merhy
Multinational Monitor, October
For two decades, a tidal wave of market-based
"reform" has washed over the Latin American health sector.
Arguing that "mismanagement"
- not a lack of resources or other pressures was the main cause
of public health sector problems, starting in the 1980s the World
Bank, InterAmerican Development Bank and International Monetary
Fund (IMF) aggressively demanded that countries marketize and
In its 1993 World Development Report,
Investing in Health, the World Bank argued that the inefficiencies
of public-sector programs hinder service delivery. The report
called for the expansion of private insurance schemes, privatization
of public services and promotion of market competition. The Bank
has made numerous loans to support managed care initiatives that
convert public health institutions and social security funds to
private management and/or ownership.
Multinational insurers have rushed into
the region to take advantage of the new opportunities available
in Latin American healthcare insurance. For these firms, at least,
privatization has been a success.
The market-based approach is supposed
to spur more efficient management of resources, since excess services
are controlled and financing is directed toward providers of presumably
higher quality care.
However, public health advocates in the
region report that marketization and the shrinking of the public
sector have introduced new inefficiencies and irrationality in
the healthcare system, with troubling results for public health
in Latin America.
INSURANCE Co.'s INVADE THE REGION
The results of World Bank healthcare restructuring
loans, and the market-obsessed ideology promulgated by the Bank
and the other international financial institutions, are evident
throughout Latin America. Countries have reduced state participation
in the financing, administration and delivery of services, while
enhancing the role of the private sector.
For example, in Argentina, Decree 578/93
obligated public hospitals to obtain contracts with the social
security and private sectors, as well as to collect user fees
from people without social security or private coverage. Other
decrees deregulated social security institutions, decreased the
healthcare services that the participants received through salary
contributions, and increased out-of-pocket costs to participants.
In Brazil, the government changed a law
that had restricted foreign ownership of any Brazilian health-related
service or insurance concern to 49 percent; foreign businesses
may now own up to 100 percent of these companies.
Multinational corporations have capitalized
on the privatization trend, gaining a significant foothold in
the region by purchasing established companies in Latin America
that sell indemnity insurance and prepaid health plans, establishing
joint ventures, and entering into agreements to manage social
security and public sector institutions.
Private national and multinational businesses
operate as middlemen between social security institutions and
providers, performing billing and administrative work. This administrative
work brings in a high rate of reimbursement, in some cases 20
percent or more of the managed funds.
Meanwhile, private insurance markets are
growing, as wealth has become more concentrated in the region.
Increasing numbers of wealthy people have opted out of the public
system and for additional private insurance.
Those corporations operating in healthcare
are able to do so without regard to national boundaries, thanks
to "free trade" within the region, especially in the
countries of the Common Market of the South (known as Mercosur,
the group's membership includes Argentina, Brazil, Uruguay and
Paraguay). If the Free Trade Area of the Americas (FTAA) is adopted,
this could be the case for all of Latin America.
The list of investors in Latin America
includes some of the largest insurance companies in the United
States. Others are subsidiaries of European insurance corporations.
The main multinational companies operating in Latin America include
Aetna, CIGNA, the EXXEL Group (a Latin American private equity
fund), the American International Group (AIG), International Medical
Group (IMG), Prudential and International Managed Care Advisors
By 1999, Aetna International had already
put together health plans with 3.3 million members in seven Latin
American countries. The CIGNA International healthcare unit enrolled
1.5 million members in five countries. And MG attracted more than
300,000 health insurance customers in the region.
Multinationals have invested heavily in
Argentina and Chile, less so in Brazil, and are in the very early
stages of entering Ecuador.
During the late 1990s, Aetna International
invested more than $510 million in Latin American healthcare ventures.
Since 1997, CIGNA has invested $475 million overseas, mostly in
Brazil. Both Aetna and CIGNA have reported more than $800 million
in Latin American healthcare revenues annually. These corporations
tend to buy shares in several companies within each country and
then to merge them, sometimes with the participation of local
While access to healthcare for the poor
is shrinking, the investments are paying off for the corporations.
Between 1996 and 1999, revenues of multinational healthcare corporations
grew much faster in Latin America than in the United States, a
period of slow growth in managed care earnings. During this period,
AIG's revenues in Latin America increased 20 percent annually
The multinationals are working to expand
their business operations into the medical social security and
public sectors in Latin America, since the scope of the private
somewhat limited. (This trend has also
been seen in the United States, where the private insurance market
is saturated. As a result, they have pushed for policy changes
that allow them to provide insurance to enrollees in the Medicare
and Medicaid programs.)
In contrast to the United States, pension
plans for many employed workers in large private or public enterprises
in most Latin American countries are publicly managed. Employers
and workers contribute to what are called social security funds;
workers without coverage and the unemployed rely on public sector
institutions, including public hospitals and clinics.
Throughout Latin America, social security
systems have become very large funds, managed by the government
or by publicly regulated agencies. And North American executives
see management of these funds as new and major sources of revenue.
For instance, a managed care executive whom the EXXEL Group recruited
from Indianapolis has noted: "It's a very lucrative market
. ... The real opportunity here for an investor-owned company
is to develop tools in the prepagas [private prepaid] market in
anticipation of the obras sociales [social security] market."
MANAGING A LACK OF CARE
As in the United States, critics of managed
care in Latin America argue that establishing the profit motive
as the guiding principle of the healthcare system has restricted
access for vulnerable groups and diverted funds towards administrative
costs and investor return, and away from clinical services.
Co-payments required under managed care
plans have introduced new barriers to access and increased the
strain on public hospitals and clinics. In Chile, approximately
24 percent of patients covered by the ISAPRE (Instituciones de
Salud Previsional) managed care organizations receive services
in public clinics and hospitals because they cannot afford required
co-payments, according to World Health Organization statistics.
And indigent patients undergo lengthy means testing; at some hospitals
in Argentina, the rejection rate for such applications averages
between 30 and 40 percent.
Public hospitals in Argentina that have
not converted to managed care principles face an influx of patients
covered by privatized social security funds. For instance, in
1997, public hospitals in the city of Buenos Aires reported approximately
1.25 million outpatient visits by patients covered by the privately
administered social security fund for retired persons. Before
turning to public hospitals, these elderly patients often had
not been able to access healthcare at the privately administered
hospitals due to co-payments, or they had been refused treatments
by private practitioners because the healthcare providers had
not been paid by the social security fund, among other bureaucratic
And as for-profit managed care organizations
have taken over the administration of public institutions, increased
administrative costs have diverted funds from clinical services.
To attract patients with private insurance and social security
plans, Buenos Aires' public hospitals have begun to hire management
firms that receive a fixed percentage of billings. Meanwhile,
co-payments are being demanded for vaccines and other preventive
measures that create barriers for people to receive services.
In Argentina, the Ministry of Health reports that the number of
private vaccination facilities grew 94 percent between 1980 and
Privatization and cutbacks in public sector
budgets also have undermined support for preventative programs.
As a result, illnesses that had declined or disappeared - such
as cholera, leptospirosis, dengue fever and typhus - have reemerged
as epidemics in Latin America. National health indicators in Argentina
have shown that pulmonary tuberculosis in children under 5 years
of age increased 153 percent between 1991 and 1996 and childhood
diarrhea increased 41 percent during the same period (the population
of children under 5 increased by only 12.5 percent in this period).
In Buenos Aires, the richest and most populous province in the
country, polio immunization coverage decreased 23.3 percent between
1992 and 1998, and DPT (diphtheria, pertussis, tetanus) vaccination
coverage decreased 24.4 percent. This deterioration occurred despite
a strong growth rate during those years in the Argentinean economy,
averaging 5.5 percent annually.
Finally, Latin American managed care organizations
have also attracted healthier patients, while sicker patients
gravitate to the public sector. In Chile, the ISAPREs have aimed
to capture and enroll younger workers without chronic medical
conditions. As a result, only 3.2 percent of patients covered
by the ISAPREs are more than 60 years old, in comparison to 8.9
percent of the general population and 12 percent of patients seen
at public hospitals and clinics.
HEALTH INEQUITY AND ITS DISCONTENTS
There is every reason for Latin American
countries to anticipate that reforms which open the door to managed
care companies will likely result in the same inequities caused
by managed care companies in the United States and in some European
countries. After taking huge profits and helping undermine public
healthcare systems, managed care organizations and health insurance
companies leave when profit margins fall.
In the United States, companies have operated
Medicare and Medicaid managed care programs for a number of years,
and then left these markets - leaving people without coverage
and health providers bankrupt. Managed care organizations (MCOs)
have exited from Medicare and Medicaid programs in multiple geographical
areas in the United States. Data gathered by the Centers for Medicare
and Medicaid Services on withdrawals from the Medicare program
showed that by 2001, Aetna had withdrawn from Medicare managed
care markets in 11 states, affecting an estimated 355,000 members.
CIGNA withdrew from Medicare markets in 13 states, affecting more
than 100,000 members. According to a recent estimate, MCO pullouts
affected more than 2.2 million beneficiaries between 1998 and
Lending agencies and managed care organizations
cannot point to many reform successes in Latin America. However,
failures are systematically presented as problems of the state,
such as corruption and lack of technical capacity. Problems are
regularly blamed on not properly introducing market-based reforms,
or not going far enough.
The explosion of the Argentinean financial
crisis in late 2001, which was clearly tied to pursuit of International
Monetary Fund policies, illustrates the hazards of undermining
the public health infrastructure. In 2002, Argentina had an official
unemployment rate of 26 percent, and public hospitals remain crowded
with middle and working class patients who lost their jobs and,
therefore, their health insurance.
Working conditions in Argentina in healthcare
are similarly grim. In public hospitals, healthcare workers toil
under precarious conditions. During the most acute periods of
the crisis, salaries were arbitrarily cut and payment was not
guaranteed. In addition, salaries were not paid in the national
currency, but in parallel bonds issued by provincial and national
governments. There continue to be regular shortages of most basic
medications and supplies, including those for disease prevention
The still-gathering momentum behind privatization
of the healthcare sector notwithstanding, there is growing popular
opposition to the paradigm shift from healthcare as a right to
a market-based model. Social and political movements are growing
to resist market fundamentalist policies, and in some cases focusing
on protection of the public health sector and resistance to privatization
and multinational corporate incursions.
Most notably, perhaps, in El Salvador,
a coalition of healthcare workers, peasant groups and students
have worked together to organize large-scale strikes and popular
mobilizations that have blocked healthcare privatization.
As popular movements gain renewed strength
in Latin America, and increasingly help elect more progressive
governments to power, there is hope that the trend of healthcare
privatization may perhaps be stemmed.
Celia Iriart and Howard Waitzkin are professors
at the University of New Mexico. Emerson Merhy is a professor
at the University of Campinas in Brazil. This article is drawn
from a chapter in Sickness and Wealth: The Corporate Assault on
Global Health (Cambridge, MA: South End Press, 2004).