Preventing Impoverishment, Promoting Equity and Protecting Households from Financial Crisis: Universal Insurance through Indtitutional Reform in Mexico

Abstract

Generating effective, fair, and sustainable financing is an important challenge facing modern health systems. In developing countries, financial protection for health tends to be segmented and fragmented. Access to insurance coverage is scarce and regressive. This lack of financial protection causes families, and health systems, to rely on out-of-pocket spending that both provokes impoverishment, and is inefficient and inequitable.

The Mexican health system was designed around a segmented model. As a result, out-of-pocket spending accounts for more than half of health financing, and each year 2-4 million households –most poor and uninsured– suffer catastrophe or impoverishment to meet health needs. In response, the 2003 health system reform offers publicly-subsidized insurance to the more than 50% of families without social security.

This study analyzes the evolution and determinants of catastrophic and impoverishing health expenditure in Mexico between 1992 and 2004, a period that includes economic crisis and the initial phases of health reform. Methodologies and results can be generalized to other developing countries.

Indicators are developed to measure the implications of health spending on equity and impoverishment, and these are analyzed using econometric techniques. A methodology is developed to project the potential impact of extending insurance through the reform. The results show that financial protection deteriorated during economic crisis. Post-crisis improvement is concentrated among the poorest and the uninsured, and coincides with health reform and poverty alleviation. This suggests that financial protection in health can prevent temporary shocks to income and from illness – from causing permanent impoverishment. The projections and the econometric analysis provide evidence on the potential impact on equity and preventing impoverishment of extending health insurance. Offiering insurance coverage to the poorest quintiles, covering medications and ambulatory care, and including families with children and older adults generate the greatest reductions in catastrophic and impoverishing health spending.

Keywords: sustainable financing, financial protection for health, Mexican health system, impoverishment