Healthcare Reform In Action

BMI View: President Juan Manuel Santos' re-election in June has given him a strong mandate to continue the process of healthcare reform in Colombia. Although the Santos administration has been successful in limiting medicine price increases, [1] financial problems will to plague the Colombian insurance system if structural issues are not addressed.

The Colombian government has introduced a new system to reform its healthcare system:

  • In June 2014, the Colombian constitutional court approved health as a fundamental right, under which the group of independently run enterprises - known as Health Promotion Entities (EPS) - will cease to exist. Under the Statutory Health Law, all Colombian citizens will benefit, as the new healthcare model will be much more efficient and accessible. We note that President Juan Manuel Santos' re-election in June has given him a strong mandate to continue his healthcare reform process to address the many issues, such as the financial stress within Colombia's healthcare system.

  • In July 2014, the Unique Health Accreditation System (SUAS) was launched through Decree 903 of 2014 and Resolution 2082 of 2014 to provide a mandatory system to ensure 'the highest standards' in healthcare provision at both public and private healthcare institutions. Health Minister Alejandro Gaviria announced that healthcare providers in Colombia will be requested to meet the standards of the International Society for Quality in Health Care (ISQua). Currently only 32 hospitals are accredited in Colombia, but Gaviria expects thousands of institutions will join to pursue excellence in clinical management and healthcare service.

Historic Problems Implementing Change

Strong Growth
Colombian Healthcare Forecast

Healthcare Reform In Action

BMI View: President Juan Manuel Santos' re-election in June has given him a strong mandate to continue the process of healthcare reform in Colombia. Although the Santos administration has been successful in limiting medicine price increases, [1] financial problems will to plague the Colombian insurance system if structural issues are not addressed.

The Colombian government has introduced a new system to reform its healthcare system:

  • In June 2014, the Colombian constitutional court approved health as a fundamental right, under which the group of independently run enterprises - known as Health Promotion Entities (EPS) - will cease to exist. Under the Statutory Health Law, all Colombian citizens will benefit, as the new healthcare model will be much more efficient and accessible. We note that President Juan Manuel Santos' re-election in June has given him a strong mandate to continue his healthcare reform process to address the many issues, such as the financial stress within Colombia's healthcare system.

  • In July 2014, the Unique Health Accreditation System (SUAS) was launched through Decree 903 of 2014 and Resolution 2082 of 2014 to provide a mandatory system to ensure 'the highest standards' in healthcare provision at both public and private healthcare institutions. Health Minister Alejandro Gaviria announced that healthcare providers in Colombia will be requested to meet the standards of the International Society for Quality in Health Care (ISQua). Currently only 32 hospitals are accredited in Colombia, but Gaviria expects thousands of institutions will join to pursue excellence in clinical management and healthcare service.

Historic Problems Implementing Change

We note that the lack of coordination - in terms of both the scope of coverage and financing - appears set to lead to continuing lawsuits by patients and conflicts between the taxpayer-financed FOSYGA funds and insurers. Colombia is one of the Latin American countries with the highest and most expensive number of right-to-health litigation cases. In the last decade, thousands of Colombians have used a judicial action for the protection of basic rights (Tutela) and demanded the provision of health services, which are excluded from the Mandatory Health Plan (POS). The Social Welfare Fund of Communications (Caja de Previsión Social de Comunicaciones, CAPRECOM) is responsible for providing all non-POS services, including pharmaceuticals and treatments. The FOSYGA reimburses EPSs for these non-POS services.

Due to the increasing costs of covering these non-POS services, the government declared an economic state of emergency in January 2010. A number of controversial decrees were issued, some of which curtailed Colombians' right to health and made the Tutela useless as a means to obtain non-POS medications from EPS. However, after increasing patient and physician demonstrations, the Constitutional Court ruled that many of these decrees were unconstitutional. Only the tax measures were adopted, in order to increase financial resources for the health system. We believe that the new court rule will enhance demand for medical treatments in Colombia, and put more pressure on public finances.

The EPSs have been the focus of much negative publicity. Various large-scale embezzlement scandals surrounding the EPS system have led many to call for the elimination of the intermediary model altogether, according to the health expert David Bardey at Los Andes University. 'The EPSs have two functions to serve as intelligent purchasers of treatment, and to provide a high quality of service. Because the EPSs receive government funds up front and independently approve of any services for patients. They are incentivized to spend as little money as possible, regardless of the quality of the treatments,' Bardey said in 2013.

Improvements On The Horizon

The government has planned to establish a single healthcare funding pool, 'Salud Mia' (My Health), to distribute its annual healthcare budget [when was this planned - how recent?]. Salud Mia will make payments only after treatment has been approved to ensure some level of government control over its own funds. The government will also create a number of 'health consultancies' to replace the EPS system. They will not directly manage any health funds but define medical service networks, audit accounts and direct payments to healthcare institutions. Certain existing EPS will be allowed to take on the role of health consultancy under strict regulations.

We expect Colombia's total healthcare expenditure to grow relatively strongly year-on-year (y-o-y), as the cost of healthcare provision escalates and an increasing number of drugs are demanded under the POS. We calculate that Colombia's total health expenditure will post a five-year CAGR of 7.5% in local currency terms and 8.3% in US dollar terms. Our forecasts also take into account the government's efforts to contain costs and the possible implementation of further schemes to increase out-of-pocket payments. The latter is fraught with difficulties, however, as the government has already stepped back from the introduction of greater, universal out-of-pocket payments by confining them to high-income groups.

Strong Growth
Colombian Healthcare Forecast

[1]  Business Monitor Online - Industry Trend Analysis - Drugmakers Face The Heavy Hand Of Government Price Controls - 05 March 2014.

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