How Unstable Has Mexico’s Payment System Become?
How stable and secure are Mexico’s payments systems?
A Daily Publication of The Dialogue
Private hospitals in Mexico and multinational insurer AXA have launched a private insurance offering that provides unlimited medical consultations for 2,799 pesos ($137) per year. The move is an effort to expand affordable private health insurance coverage in Mexico, where the public health care system is overburdened and out-of-pocket costs are high. Will the initiative be able to significantly increase the number of people in Mexico who have affordable private health insurance coverage? To what extent do Mexicans have adequate health insurance, and what barriers prevent more people from being covered? Will it improve quality of care and health outcomes? To what extent will the new AXA offering promote competition among private health insurers in Mexico?
Felicia Marie Knaul, director of the University of Miami Institute for Advanced Study of the Americas, and Héctor Arreola-Ornelas, director of Tómatelo a Pecho: “An increasing proportion of families in Mexico are at risk of suffering catastrophic or impoverishing health expenditures in fulfilling even basic health needs such as accessing a doctor or filling a prescription. Today, at least 20 percent of Mexicans–more than 23 million people–lack access to any kind of public or private health insurance scheme. Additionally, the OECD documented that almost half of health spending continues to come from the pockets of Mexican families, a figure well above international recommendations. Of the population that recently used outpatient health services, more than 40 percent went to the private sector. The reduced supply of medicines, long waiting times and the perception of poor quality of public care explains why even those affiliated with social security turn to private doctors. Covid-19 intensified both need and lack of access. Yet, the pandemic is not the only culprit. The disappearance at the beginning of the current administration of the Seguro Popular, which served the population without social security, worsened the situation. In the absence of an explicit, well-defined financial protection instrument for comprehensive access to the public health system, millions have had to pay out of pocket or postpone care. Eliminating the Seguro Popular reintroduced a huge source of inequity between ‘haves’–Mexicans with social security or private health insurance–and ‘have nots’ those who, solely by virtue of their place of work, lack financial protection in health. Now more than ever, the health of Mexico and its economy depend on identifying novel opportunities to access health insurance.”
Andrea Keenan, executive vice president and chief strategy officer at AM Best Rating Services, and Carlos De la Torre, senior director for business development and operations at AM Best América Latina Institución Calificadora de Valores: “More than 25 percent of Mexico’s population lacks access to health insurance provided by the Mexican Institute of Social Security (IMSS) or the Mexican State Employees Social Security and Social Services Institute (ISSSTE). Programs exist, such as the Institute for Health and Wellbeing (INSABI) and the IMSS-Opportunities Program, but more help and innovation are needed to close the coverage gap and increase the overall well-being of Mexico’s at-large population. There is no obvious private sector solution because of the challenge in providing affordable and sustainable health insurance for poorer populations. AXA’s efforts in this regard have brought insurance coverage to some of the world’s poorer populations, and it has gained experience from projects launched in countries such as Malaysia and Egypt, which face similar challenges. By partnering with Mexico’s health care system, the program is joining its global experience with intimate local knowledge, supported by the CNSF, which has a growing awareness of this potential. Arturo Herrera, Mexico’s secretary of finance and public credit, advocated pursuit of solutions in 2019, noting its need despite the fact that some in Mexico may have limited economic resources. Competition shouldn’t be a concern as microinsurance represents less than 1 percent of insurance premiums in Mexico. With innovation and creativity, and reliable and accessible distribution channels, there is ample opportunity for many companies to be involved. Other companies have also pursued providing coverage to this segment. As the old saying goes, ‘many hands make light work.’ The cooperation of multiple parties will make insurance for the underprivileged attainable.”
Andrew Rudman, director of the Mexico Institute at the Woodrow Wilson Center for Scholars: “The Covid-19 pandemic has underscored the well-known challenges and deficiencies of the Mexican health care system—inadequate and inefficient spending and a lack of access, including for primary care. Mexico’s allocation of public financing for total health spending is the smallest among OECD countries, and even when considering all sources of funding (such as out-of-pocket expenditures), it remains among the lowest. In addition, the number of nurses, doctors and hospital beds per thousand inhabitants are far below OECD averages. Because of these systemic failures, many conditions and diseases that can be managed inexpensively with early detection, such as diabetes, turn into chronic conditions that require costly interventions. This places additional demands on the strained health care system and may also limit the participation of both patients and caregivers in the work force. The lack of access to adequate public care drives those who can afford it into the private market, leading to one of the highest out-of-pocket expense rates in the hemisphere. The new insurance program demonstrates the potential for private-sector-driven innovation to address Mexico’s health care challenges. Reducing out-of-pocket costs and providing unlimited basic care should lead to early detection and prevention of the noncommunicable diseases that account for a growing share of health care spending. To the extent that the new offering functions as a value-based care scheme where the provider benefits from keeping its beneficiaries healthy, it may indeed lead to improved outcomes and additional private sector competition. It may also encourage other stakeholders in the health care ecosystem, including the public sector, to explore similar innovation.”
Núria Homedes, executive director of Salud y Fármacos: “In Mexico, private health insurance is reserved for the well-off, and it covers about 8 percent of the country’s population of 128 million. The Instituto Nacional de Salud para el Bienestar (INSABI), established in 2020, should provide all needed health services for free. For those covered by social security (about 40 percent), all health services are free at the point of service. However, due to convenience and patients’ dissatisfaction with the public sector, many use private ambulatory clinics and pharmacies. Thus, out-of-pocket expenditures represent 41 percent of total health care costs. Many physicians work in offices adjacent to pharmacy chains and offer consultations in convenient locations, during extended hours and at bargain costs. Despite the drawbacks of this model, mainly in terms of quality and continuity of care, it has gained popularity throughout the country because it is accessible, expedient and affordable. The success of the AXA private insurance program will be contingent upon the breadth of services offered, access barriers (such as location, office hours, ease in making appointments and waiting times), perceived quality of care and the costs and quality of ancillary diagnostic and treatment services. All insurance policy details should be clearly explained to potential clients. Despite its apparent low cost, many relatively healthy Mexicans will be reluctant to pre-pay for services they are already getting unless they are guaranteed better quality, continuity of care (including contingency plans for catastrophic events) and convenience. Covering only patient-provider encounters and charging unknown amounts for all other health related expenditures is unlikely to lure those already paying for private care.”
Guido Cataife, managing director at IMPAQ International: “According to the North American Observatory on Health Systems and Policies, 17.6 million Mexicans lacked access to free public health care and were unlikely to have private insurance in 2018. These are mostly self-employed middle-class individuals with no intention to enroll in Seguro Popular or its replacement, INSABI. AXA is targeting this segment of the population. Will this initiative significantly increase the population that has affordable health insurance and improve the quality of care and health outcomes? That depends heavily on AXA’s capacity to implement a model that can truly change health care providers’ incentives and the beneficiaries’ behavior. Mexico has a high prevalence of costly conditions such as obesity, hypertension and diabetes. In part, this is due to the lack of preventive care, postponement of initial service and self-medication practices. The alliance between AXA (the insurer) and Keralty (the provider) allows for providing medical services directly, without involvement of a third party. This arrangement can be fruitful because it facilitates the introduction of value-based payment systems instead of the traditional (and highly inefficient) fee-for-service. Under this arrangement, AXA could introduce pay-for-performance or care integration payment systems similar to those currently being piloted in the United States (such as accountable care organization or shared-savings models). This would incentivize cost containment and health care outcome improvements. In addition, the focus of the initiative on providing first contact care, which is a main current limitation of the system, is another sign of the potential that this initiative has to reduce out-of-pocket and insurers’ costs and improve health outcomes.”
Omar Viveros, leader of the health and benefits practice at Willis Towers Watson Mexico: “In Mexico, insurance coverage has usually been focused on covering diagnosed illnesses or accidents, not on promoting disease prevention. It is well known that public health in Mexico has important issues and problems, with nontransmissible illnesses growing. Some actions have been taken to cover some preventive actions through insurance. In the early 2000s, Instituciones de Seguros Especializadas en Salud, or ISES, was introduced to the market, offering products to cover prevention, such as medical consultation and lab tests for healthy people. Since then, this type of health insurance has slowly been growing. As of the end of 2020, direct premiums represented $160.4 million, which represents 3.41 percent of the total major medical insurance in 2020, including group and individual coverages. Therefore, there is still some room to increase coverage within the population. Some insurance companies are promoting contracts with large prevention components; it is better to prevent illness than pay the costs for treatment after diagnosis. A healthier population is always a much better alternative, so we hope to see higher rates of penetration of products focused on prevention.”
Nicolás Mariscal, chairman of Grupo Marhnos in Mexico City: “Early medical care is crucial to prevent illnesses from spreading and worsening. In Mexico, 49 percent of resources allocated to health services comes from individuals, according to the OECD. Diseases such as diabetes or cancer, which could be halted in early stages if diagnosed in time, last year represented an average cost of $50,000, a considerable amount of money considering per capita GDP in Mexico. In addition, Covid-19 has exposed several loopholes and the overall inefficiency in the Mexican public health system. For instance, Mexico spends only about 6 percent of its GDP on health care, below the 9 percent average of OECD members. Underspending on public health has undermined access to services to some marginal and vulnerable groups in Mexico. Hence, AXA and private hospitals in the country launched a private insurance initiative to provide private health services at affordable prices at 45 hospitals nationwide. This could be the future of health care in Mexico, as public hospitals are overflowing with people, particularly during the pandemic. Additionally, more than half of Mexico’s labor force has informal jobs and thus lacks insurance, social security and health care. An accessible private insurance project could definitely alleviate the gaps and social inequality in health services. The plan will consist of $120 million dollars in initial investment through 2024, and this alliance will allow for an expansion to 51 health centers.”
Eduardo González-Pier, global fellow at the Woodrow Wilson International Center for Scholars: “For a long time, the mostly fee-for-service private health care markets in Mexico has been characterized by an unmet demand for medical consultations and mostly underemployed public sector physicians working part time to make ends meet in the private sector. The bold attempt by AXA to bridge this gap will no doubt help improve access to care and lower out-of-pocket payments, at least in the short run. Nevertheless, the large majority of the population can´t afford to pay privately for the diagnostic tests and hospitalization services needed to make this offering financially sustainable for doctors and private hospitals in the long run. There are no quick fixes to a largely inefficient and fragmented health care system in Mexico. The real challenge lies in the quest for affordable integrated quality care for all.”
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