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ISPOR LATIN AMERICA CONSORTIUM NEWSLETTER
Health Policy
Out-of-pocket Expenses in Latin America: Implications for Policy
VOL 3 ISSUE 4, NOV/DEC 2015
Author:
The magnitude of out-of-pocket expenses on health
care systems is directly related to the degree of
vulnerability that citizens face. The adverse effect
of health contingencies on financial stability can
be inferred as the share of direct costs, assumed by
families, increases1.
Marino J. González
Reyes, MD, MSc, PhD
Head Professor and
Researcher, Public
Policy Unit, Simón
Bolívar University
(USB), Caracas,
Venezuela
.
This is especially disadvantageous for families experiencing poverty. Hence, health policies should seek to fairly decrease the
2
out-of- pocket expenses by increasing public funding, specifically through taxation mechanisms.
Out-of-pocket expenses also have an effect on the capacity to allocate resources properly through economic evaluation.
When public resources are robust in respect to total health care system resources, institutional mechanisms are often
developed to enable the best allocation possible. Therefore, there are agencies dedicated to examining effectiveness and
quality in order to consider these factors for resource allocation in those countries. On the other hand, when most of the
service purchase decisions depend directly on individuals and families (provided that all they only have their personal
resources), such decisions are made without major consideration to information regarding effectiveness and quality, which
should be involved in the process. It is therefore not surprising that those countries with high proportions of out-of-pocket
expenses are those with less institutional capacity to conduct economic evaluation and utilize their findings towards the
general allocation of resource in the health care system.
Over the last fifteen years, a vast majority of Latin American countries have made significant progress in the structuring of
their economies. Many of them maintain significant growth rates with low inflation. The growth of the real per capita income
is also evident. However, inequity reduction and health care services financing do not seem as satisfactory.
Table
Largest economies in Latin America
Percentage of out-of-pocket expenses
in respect to total health spending, 2011
Argentina
21
Bolivia
26
Brazil
31
Chile
33
Colombia
16
Costa Rica
23
Dominican Republic
40
Ecuador
55
Guatemala
53
Mexico
46
Panama
27
Let's consider the fifteen countries with the largest economies in
the region (table 1). According to the data published by the
World Health Organization (WHO) 3 and estimates on out-ofpocket expenses percentage out of the total expenditure in 2011,
the results are very uneven. Only two countries (Colombia and
Uruguay) have less than a 20% proportion of out-of-pocket
expense of the total health expenditure. Eight countries
(Argentina, Costa Rica, Bolivia, Panama, Brazil, Chile, Peru and
Dominican Republic) have an out-of-pocket expense of 20% to
40% of the total health expenditure. Five countries (Mexico,
Guatemala, Ecuador, Paraguay, and Venezuela) maintain
proportions greater than 40% out-of-pocket expense. For the last
four countries, the indicator is above 50%.
According to this data, it is clear that inequality in health care
financing is one of the principal issues in many countries of the
region. If this indicator is representative of the population as a
whole, it is evident that lower-income sectors shoulder a greater
proportion of out-of-pocket expenses. The impact of this
situation in terms of health care conditions and access to quality
care is very significant. Therefore, reducing the high out-ofpocket expense proportion should be considered one of the main
demands for health care policies in the region.
It is important to examine the options that could be considered
in these health care systems. In countries with lower out-ofpocket expense proportions (Uruguay and Colombia), the per
capita expenditure from public sources is higher than the region's
Uruguay
14
average. In the case of Colombia, the proportion of resources
Venezuela
61
allocated to health care (out of total GDP) is 6.5% and Uruguay's
is 8.5%. The increase in resources needs to be examined in
Source: Calculations based on WHO 2014
consideration of the general economic conditions. These two
countries could still achieve greater public investment returns by
extending the use of economic evaluation methods as they are doing today. From the citizen's point of view, the existence of
a growing tendency to demand the reduction of out-of-pocket expenses is also predictable.
Paraguay
56
Peru
38
Countries with higher out-of-pocket expense are divided can be two groups. The first group consists of Venezuela, Peru,
Bolivia, Dominican Republic, Mexico, Guatemala, and Ecuador, which have less than 7% of their GDP resources allocated to
the health care sector (7% is the current regional average). In these countries, especially for the first ones in the list, it is
possible for proportions of health care expenditure to be increased in order to make sure their population groups can be
incorporated into public financing models. At the same time, resource allocation mechanisms must be implemented or
improved, mainly by means of economic evaluation incorporation.
The second group is composed of Chile, Argentina, Panama, Brazil, Paraguay, and Costa Rica, which are already investing a
higher fraction than 7% of their GDP to health care. In these countries, the possibility of diminishing out-of-pocket expenses
should be preferably linked to optimization of resources and not to investment increases in terms of GDP. This means, a
greater use of resource allocation methods, which includes economic evaluation, as a mechanism is of vital importance. Not
all of the countries in last group have circumstances that are comparable. Costa Rica and Paraguay are notable examples. In
Costa Rica, the proportion of out-of-pocket expenses is 23%, which is very close to the 20% limit in Uruguay and Colombia. In
Paraguay, there are even greater issues to consider given almost 9% of GDP is allocated to health care expenditure and yet
the proportion of the out-of-pocket expense is 56%.
All health care systems in the region will face universal coverage demands in a context of increasing life expectancy and
restrictions to the increase of the sector's resources in the next years. Special attention should go to reducing out-of-pocket
expense given of its adverse consequences on equity. The use of resource allocation options that derive from the application
of economic evaluations will become more critical with the implementation of these changes. This will be an excellent
opportunity to link the adoption of polices to the accumulated knowledge about these topics in Latin America.
ISPOR Latin America Consortium HEALTH POLICY RESOURCES
Science Policy Brief: El Análisis del Impacto Presupuestario: Nuevas Normas
HTA Health Policy Series: Presented by “News Across Latin America”
-----------------------1 Moreno-Serra, Rodrigo, Sarah Thomson, Ke Hu. 2013. Measuring and Comparing Financial Protection. En Irene Papanicolas
y Peter C. Smith. Health System Performance Comparison: An Agenda for Policy, Information and Research. Open University
Press. Capítulo 8.
2 The evidence of seven low and medium income countries are examined for the increase of public financing in this paper:
McIntyre et al. Health Research Policy and Systems 2013, 11:36
http://www.health-policy-systems.com/content/11/1/36
3 Ver: WHO. 2014. World Health Statistics 2014.