The privatization of health care in three Latin American social security systems

Most Latin American social security institutes are direct providers of medical care services to their beneficiaries. As many of the institutes have developed serious financial problems over the course of the last decade and a half, they have come under increasing attack for (a) exacerbating inequalities in access to and use of health care, (b) further heightening the geographic overconcentration of services, (c) focusing a disproportionate amount of resources on high technology, curative care to the near total exclusion of primary health care, and (d) being administratively top heavy and, more generally, inefficient. In the past few years, many Latin American countries have begun searching for methods to ameliorate these problems. This paper analyzes three recent efforts, all of which involve some degree of privatization: (1) El Salvador's partial privatization of specialty physician outpatient consultations, (2) Peru's minor surgery and its decentralized ambulatory care programme, and (3) Nicaragua's "administrative services only' approach wherein social security beneficiaries choose to join a certified public or private provider organization for one year, and, on behalf of the individual, social security pays the organization a fixed, annual, per capita fee to provide all health care for the enrollee. The paper also identifies political and technical considerations, as well as health care market characteristics that have shaped these efforts and that condition their likelihood of success, including: the size, composition, level of capacity utilization, degree of organization and geographic distribution of private sector resources; relative prices in the private vis-a-vis the public sector; and the size and nature of the private health insurance market. Other Latin American countries would do well to examine these factors and characteristics before embarking on efforts to reform their own social security health care delivery systems.