Elsevier

Health Policy

Volume 71, Issue 1, January 2005, Pages 83-96
Health Policy

Why neoliberal health reforms have failed in Latin America

https://doi.org/10.1016/j.healthpol.2004.01.011Get rights and content

Abstract

This paper reviews Latin American neoliberal health reforms sponsored by the IMF and the World Bank, and analyzes the impact on the region of decentralization and privatization, the two basic components of the reforms. The second part of the paper examines in some detail the Chilean and Colombian reforms, the two countries that have implemented closely the principles of the neoliberal reform. The two case studies confirm that neoliberal reforms do not improve quality of care, equity, and efficiency. In the discussion the authors identify the beneficiaries of the reforms: transnational corporations, consultant firms, and the World Bank’s staff. The recognition of the beneficiaries helps to explain some of the reasons behind the Word Bank continuing pressures to implement neoliberal health reforms in spite the growing evidence of their failures.

Introduction

The inefficiencies and inequities of the Latin American (LA) health systems have been known for many decades, but by the late 1970s and early 1980s LA political leaders, users, providers, and researchers were all well aware that some changes were needed to reverse to revert the increasing users’ dissatisfaction and decreasing quality of care, and improve the equity and efficiency of the systems. The economic crisis of the 1980s only accentuated these problems and by the end of the decade it was more evident than ever before that the health status of the LA population did not correspond to the level of development of the region nor to the amount of resources spent on health care.

The International Monetary Fund (IMF) and the World Bank (WB) took advantage of the crisis and pressed for health reforms as a condition for borrowing. The IMF required structural adjustments to reduce the huge public debts that governments had contracted in previous years and were in part responsible for the crisis [1]. Because a large part of public expending correspond to social services (health, education, and welfare), the IMF and the WB required governments to reduce them [2], [3]. It was at this juncture that the WB began to have a prominent role in international health policy; by the end of the 1980s, the WB had become the major international health lender [4] and began to assist countries to prepare health reforms based on neoliberal economic principles. The mission of the WB was to provide technical guidance, loans, and directives to implement the reforms; other international agencies such as the Inter-American Development Bank (IDB), US Agency for International Development (USAID), and some private foundations followed the WB’s neoliberal ideology and provided additional logistic and financial support to the health reforms.

The underlying principle of the neoliberal health reforms is the belief that the private sector is more efficient than the public sector. Based on this belief, neoliberal health reforms advocate for a reduction of the role of governments. In the WB’s vision of a neoliberal state, the government function in public health is to regulate while the private sector provides health and medical care services.

One of the objectives of the reforms was to free central government funds to pay for the huge public debt [5], [6], and shifting the financial burden of public services from central governments to provinces was an expedite way to accomplish it. The policy of decentralization was wrapped under the hard-to-oppose principle of transferring power from unconcerned and inefficient central bureaucrats to the people, and marketed as part of a democratization process—even in countries under dictatorial and authoritarian regimes.

In 1993, the WB devoted the World Development Report to the health sector. In this document [7], in addition to reinforcing the decentralization and privatization strategies, the WB included the need to improve equity and allocative efficiency through guaranteeing universal access to a basic package of services, determined according to what each country could afford and based on cost-effectiveness principles. The governments and the rest of the population would subsidize the provision of the services included in the basic package to the indigent.

The WB model included the creation of third party administrators responsible for collecting and administering mandatory health insurance fees and government subsidies, and for contracting and paying service providers. Users, based on what their insurance premiums could afford, would be able to select among different types of health plans and providers. The WB’s expectation was that the reforms would increase equity and efficiency, and improve quality of care and users’ satisfaction.

During the 1980s several LA countries, including Brazil, Mexico and Chile started implementing some of the policies promoted by the World Bank while many others did not begin until the 1990s. Colombia is the country that followed the 1993 WB’s guidelines most closely. Chile had started a neoliberal health reform in the 1980s. The main difference between the Chilean reform and the reform promoted by the WB is that, as it will be explained later, Chile maintained a large network of public services and did not define a basic package of services.

With the exception of Chile and Colombia, all other countries have faced difficulties in implementing the IMF and WB’s envisioned reforms. Technical, logistic, political, and financial problems have surfaced everywhere, and most countries have implemented only some aspects of the reform, for example decentralization, or the definition of a basic package, and/or some limited privatization of medical care. The truncated reforms have produced confusion among civil servants and users, while countries have wasted scarce resources.

In this paper, first we discuss briefly the attempts and results of privatization and decentralization in a few countries of the region. Then, we present in some detail our findings from Chile and Colombia, the two countries that have followed most closely the neoliberal reforms, and examine the impact of the reforms on the stated objectives (to improve efficiency, equity, and quality of care). The analysis of the two countries is followed by a discussion of the factors that need to be in place to enable a successful implementation of some components of the reforms. Finally, we offer some suggestions explaining why the IMF and the WB continue to press on countries to adopt neoliberal health reforms in view of the documented failures.

Section snippets

Privatization

The WB attempts to increase the role of the private sector in the management and delivery of health services has had limited success in Latin America. Only a handful of countries, namely, Chile, Colombia, and Brazil, partially privatized the management and/or delivery of publicly financed health services. The rest have made small changes to increase the role of the private sector through service contracts for specific interventions or other limited schemes. For example, Mexico’s attempt to

Decentralization

The WB and other international agencies have been more successful in promoting the decentralization of health services. Practically all countries of the region have transferred some decision-making powers to state/provincial/departmental governments. In most cases it would be more accurate to say that there has been some deconcentration of decision making from the central government to the next lower administrative level, and in a few countries to municipal governments.

As indicated earlier, the

The Chilean reform

Prior to the 1973 military coup, Chile had a national health system with universal coverage financed by the central government. It was considered the most comprehensive and one of the best organized in the region [38]. With the military dictatorship, and under the influence of economic consultants from the University of Chicago, Chile was the first Latin American country in LA to implement a neoliberal economic reform.

In 1981, the public health system was decentralized; the first level of care

Colombia’s reform

The case of Colombia is important because its first Health Reform Law in 1990 began a comprehensive decentralization to the municipal level, and in 1993 the government passed a new Health Reform Law that followed closely the recommendations advanced by the 1993 World Development Report [7]. In addition, in 2000 the WHO 2000 World Health Report ranked Colombia’s health system at the top of all LA health systems [47]. As a result, the Colombian system is offered to other countries as the model to

Discussion

As mentioned above, under the WB model, the health sector achieves maximum efficiency when services are provided by the private sector under state regulation. The complexity of regulating the health sector should have raised a red flag when the WB promoted neoliberal reforms in LA. Even industrial democratic nations that regulate public utilities with more or less success public utilities have faced difficulties in regulating the health market. Reformers should not have taken for granted that

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