Mexico's reforms leave many poor without health care

Now that Mexico is getting back on its feet economically, it must find a way to care for 30 million people without health coverage.

When an economy's domestic success is based almost entirely on the international price of oil, all is well, often exceptionally so, in times of high demand. But during oil gluts - like the one the world is currently experiencing - global commodity markets are practically wallowing in crude oil, and an oil-producing nation's revenues evaporate quickly. When they do, social services are often the first to go.

In modern Mexico oil has been, and to a degree remains, the lifeblood of the economy, but these days that blood is running a little thinner. In the early 80s, Pemex, the country's nationalized petroleum concern, provided the government with more than 50% of its annual revenues. Today, it generates less than 35%, and its contribution is predicted to continue falling.

Mexico's economic problems and the government's seeming inability to provide its citizens with basic social services can be traced to the heady days of high oil prices, when Mexico borrowed heavily from foreign creditors. Leaders wrongfully assumed that the various oil crises of the period were destined to become recurring trends that would bolster prices indefinitely. Mexican leaders, apparently unconcerned that the annual rate of inflation had topped 70%, convinced foreign lenders that oil assets would perpetually appreciate, and subsequently foreign currency poured into Mexico.

Debt, however, quickly grew so astronomically high that the cost of servicing foreign loans actually surpassed Mexico's total export revenue. Repaying any principal on the loans was utterly impossible. Debt continued to grow all the while, as the price of oil on international markets plummeted.

In an attempt to rein in the economy a couple of years ago, the ruling Institutional Revolutionary Party (PRI) - which has had a veritable stranglehold on Mexican politics for seven decades - announced sweeping cuts in government spending, affecting social programs, infrastructure programs, defense and education.

Despite the last ditch efforts to pull the economy back from the brink, debt caught up with the economy and it experienced a catastrophic devaluation that touched off a massive exodus of capital and people. At the beginning of the 1980s, about 23 pesos were equivalent to US$1. By the end of 1990, the peso-to-dollar exchange rate had fallen to 2,500 to 1. In 1995, the economy contracted 6.2%.

Global intervention

Deeply concerned that its neighbor and trade partner to the south was on the verge of complete chaos, the United States, partnered with Canada and the International Monetary Fund, put together a $20 billion aid package designed to reel Mexico back in. The bailout package, and a subsequent peso reform plan, worked. Foreign investors, heartened by the acceptance a year earlier of Mexico into the North American Free Trade Agreement by the United States and Canada, gave the country a second chance. Despite the fact that Mexico remains in the midst of what the Economist referred to as a "lingering tequila hangover," its economy has stabilized (US$1 equals approximately 9 pesos), and there is an enthusiastic buzz these days on the part of investors.

Persistent corruption at the highest levels of government and banking, as well as a host of internal political problems notwithstanding, Mexico is mounting what economists have characterized as an impressive recovery - even being held up as a model of reform for the ailing Tiger economies of Asia.

Emerging market indicators show that both Mexican gross domestic product (GDP) and industrial production have made impressive gains since this time last year. GDP in this country of 95 million grew 6.6% to about US$395 billion, and industrial output increased 7%.

GDP per capita of about US$4,000 compares favorably with other Latin American nations. Foreign reserve holdings are around $31 billion, about $7 billion more than in 1997, and inflation hovers around 15% - high, but not uncharacteristically so for the region.

Financially, interest rates of about 21.5% are on par with those of other Latin American nations, and Mexico's low unemployment rate of around 5% puts it in a far better position than every other major Latin American economy. (In Argentina, for example, the official unemployment estimate is 15%.)

Emerging appreciation

Following the economic salvage operation in Mexico, there seemed to emerge an appreciation of the need for reform at all levels of government and banking. Aware that their actions would be closely monitored by the foreign governments responsible for bailing out the economy, policymakers underwent a metamorphosis. Law making related to banking, economics and commerce, for example, was once in the clandestine realm of back room deals and nepotism. Today, official policy is openly debated and criticized in the press. The Mexican government is still far from being free of corruption, but it has improved.

The new openness among lawmakers has led to a push for privatization of institutions and services formerly managed by the government. Included among the services slated for transfer to the private sector are large chunks of the health care system. While privatization of services may not eliminate corruption in the system entirely, it does suggest a more open policy in regard to the way the nation is managed.

Shrinking middle class

Mexico's economic crisis prompted lawmakers to support changes in the system that could increase the number of privately owned hospitals and insurers, but the measures taken to rescue the economy, ironically, have worked to increase the gap between Mexico's small, elite upper class and its large poor population.

In theory, Mexican economic reforms should bolster the nation's economy, creating jobs and raising the standard of living for everyone. And it did, for some.

The recession that was caused by the currency crisis has, as the United Nation's Economic Commission for Latin America and the Caribbean noted, "exacerbated the already pronounced inequality in the region." Mexico's unemployment rate may be lower than that of its Latin American neighbors, but its economy is not yet strong enough to create jobs for the impoverished underclass that most needs work.

The government must now look for other solutions. Most of Mexico's poor are without health coverage. Because a privatized health system could decrease costs and make health care more accessible to everyone, some argue that by selling the government's stake in health care to private interests, at least one problem could be remedied. But because any improvements to the health system would likely begin at the top and trickle down, others say Mexico's indigent population will remain without health care for some time.

Health care inequalities

According to Mexico's constitution, all citizens are entitled to health care benefits from the government, but a strain on resources and generally poor distribution of facilities and funding mean that as many as 30 million Mexicans are without services.

Health care is overseen by the Ministry of Health's National Health System, a massive bureaucracy that employs about 427,000 doctors, nurses, technicians, support staff and administrators, and is funded at US$2 billion annually. Care is provided by three sub-groups - essentially systems within the system.

The largest is the Mexican Institute of Social Security (IMSS), which is charged with providing care to about 50 million people. It is the nation's general health care insurer, providing care to individuals and their families in all professions - from factory workers to accountants. By law, all workers in Mexico are required to contribute between 10% and 12% of their annual earnings to the IMSS. Employers pay the remainder of the approximately US$225 annual fee. The IMSS maintains its own facilities, which tend to be located in developed, urban areas.

The first tier of IMSS care is provided at small clinics by general practitioners who handle minor illnesses and injuries. The second tier of care is provided by small hospitals, usually by a staff of surgeons, internists and pediatricians. At these facilities, a large portion of ophthalmic care is also provided, including cataract surgery. Third-level facilities are major intensive care and trauma centers where large groups of specialists and subspecialists practice. These facilities are only found in the largest urban areas; there are about 10 across Mexico. (Not only is the IMSS the largest of the Mexican care providers, it is also considered the most insolvent and probably the most corrupt. Its size has rendered it vulnerable to internal corruption in the form of embezzlement, as well as external fraud in the form of false claims.)

The second largest care provider in Mexico is the Institute of Services and Social Security for Employees of the State (ISSSTE). It provides health benefits to state and federal employees, and maintains facilities similar to those of the IMSS. It, too, requires an annual payroll contribution of between 10% and 12%.

Combined, the IMSS and ISSSTE provide coverage for about 55% to 60% of the population. The remaining 40% to 45% of Mexicans are without formal coverage and seek care from the third division of the health system, the Secretariat of Health and Medicine (SSA).

The SSA attempts to provide care to individuals who are without work, or whose employers do not offer health benefits. Most migrant farm workers, street vendors, day laborers, small landowners and indigenous people seek treatment here. Quality care at the SSA level is difficult to come by and patients often wait weeks or months for service. Those who depend on SSA services are expected to live 7 to 10 years fewer than the national average of approximately 70 years.

SSA facilities are designed and funded to provide basic care to poor patients, who are considered doubly vulnerable because they lack both formal health coverage and the means to pay privately if they require care. Equipment at SSA facilities tends to be outdated, and the facilities are often underfunded and understaffed.

(As one physician interviewed for this survey pointed out, the cost of one procedure performed with the rare piece of high-tech equipment at an SSA center usually exceeds the annual per capita income of the patient being treated. There is simply not enough money in Mexico's health budget, some doctors say, to furnish these centers with better equipment.)

Dichotomy

Mexico's SSA deals mostly with so-called diseases of poverty, such as malnutrition, infectious intestinal diseases, anemia and tuberculosis. Like many other Latin American nations, Mexico must contend with health problems unique to both advanced and developing countries simultaneously. While large, mostly rural segments of the Mexican population are without clean drinking water or sewage management and must contend with the health problems associated with those conditions, patients in developed urban areas seek treatment for hypertension, heart disease, respiratory problems and cancer - problems known as "the diseases of the West."

Four of the six leading causes of death among Mexico's poor rural inhabitants are communicable diseases. In contrast, no communicable diseases are among the leading causes of death at the national level. Malnutrition in rural areas is 131% more prevalent than in cities.

Poor, rural areas also tend to be underserved by medical personnel, because the government traditionally has had difficulty recruiting physicians to work in what are considered less-than-ideal environments.

"Doctors don't go to the rural areas because there are no facilities or services there for their families, and the government offers very poor financial compensation to those physicians who do volunteer to work in the poor areas," said José Antonio Villarreal Maíz, MD, a private practice ophthalmologist in Torreon, Mexico.

Moving toward privatization

Currently, between 5% and 15% of Mexicans maintain some type of private insurance. Private health schemes have failed to gain widespread popularity in Mexico, generally because patients who can afford annual insurance premiums can also afford to pay privately for care, as need arises. Although private insurance has had little effect on health care to date, the government views privatization of the National Health System as an essential step in cleaning up corruption, cutting costs and equalizing the redistribution of care.

A government health care privatization initiative, begun in 1994, will allow Mexican workers for the first time since the formation of the system in the 1940s to select a private insurer. (Several U.S.-based managed care organizations have expressed interest in investing in the new Mexican health care system.)

For the past several years, Mexican officials have worked to assess the costs of the new system by looking at needs and the cost-effectiveness of medical interventions in order to design a basic package of essential care.

The plan and its goals

Mexico's short-term health care and privatization plan is an ambitious one. Within the next few years, the government plans to have in place a system capable of providing true universal health coverage. Government insurers and hospitals will be sold off to private sector interests, and the agencies responsible for financing care and providing care will be separated.

By privatizing the system, government planners say competition to provide high quality, low cost care will raise standards nationally. As a result, urban health systems will become profitable, government officials argue. Once so, private sector interests will be solvent enough to embark on joint public/private efforts designed to provide rural Mexicans with care.

Though the Ministry of Health is likely to shrink as a result of the proposed changes, Mexican officials say it will remain an important entity. Instead of paying for and providing care, however, the agency's new role will be one of development, coordination, regulation and consumer protection - a role similar to that of the U.S. Food and Drug Administration.

For Your Information:

• José Antonio Villarreal Maíz, MD, can be reached at Paseo de la Rosita, 620 Col Campestre la Rosita, Torreon 27250, Mexico; ++(17) 212-211; fax: ++(17) 215-252. Dr. Maíz has no direct financial interest in any of the products mentioned in this article, nor is he a paid consultant for any companies mentioned.

Report Card: Mexico

Population	95 million
Gross domestic product per capita:	US$4,000
Annual health budget	US$2 billion
Percentage of population without coverage:	40% to 45%
Percentage of population with private insurance:	5% to 15%
Number of ophthalmologists:	3,000
Number of new ophthalmologists annually:	100
Charge for cataract surgery in public system:	US$300 per eye
Charge for cataract surgery in private system:	US$1,250 per eye
Charge for bilateral LASIK/PRK:	US$1,250