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Doctor’s Orders

A Decade Old Next Month, The Government’s Health Reform Continues To Suffer From Poor Financial Health. Now The Doctor Who Delivered It Wants To Cure It And See It Grow


August 7, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

Happy birthday, Health Reform: After kicking 200,000 beneficiaries off its rolls, the Health Reform still costs Joe Taxpayer $1.3 billion a year and rising. How could it be made to cover everyone in Puerto Rico?

Puerto Rico’s Health Reform will turn 10 next month. It will be a happy birthday for the vast majority of the 1.6 million people in Puerto Rico who benefit from access to better-quality health services, but probably a sad day for another 200,000 who are no longer invited to the party. Meanwhile, doctors, hospitals, and government health officials are still debating whether to celebrate.

What started in September 1993 as a pilot program had spread to cover 1.8 million low-income beneficiaries throughout the island by July 2000—at an annual price tag then of $1.4 billion.

When the Calderon administration took charge in 2001, the reform was reformed. It reduced the cost of running the program by cutting off 200,000 beneficiaries. It also began spending heavily to reopen government-run emergency rooms in every municipality and to develop costly pilot projects such as the smart card.

The 10-year-old acrimonious debate between government health officials, doctors, hospitals, and insurance companies hasn’t subsided and the question remains on the table: Where is the Health Reform going?

Now, the doctor who gave birth to the creature wants to see it grow to maturity. As of press time Monday, New Progressive Party gubernatorial candidate & former governor Pedro Rossello had been expected to announce this week the details of his proposal for universal healthcare coverage in Puerto Rico. "Health is a right of all the people," Rossello told CARIBBEAN BUSINESS in an exclusive interview.

In a nutshell, Rossello envisions every person in Puerto Rico covered by private health insurance and with access to the private healthcare system. He said his proposal doesn’t mean extending the Health Reform’s benefits to the entire Puerto Rico population. It means offering the program’s benefits to those whose annual income is less than 200% of the federal poverty level—currently $12,123 a year for one person—and mandating that all employers provide health insurance to workers.

Under Rossello’s proposal, people over 65, regardless of income, would continue to be covered by federal Medicare. Those under 65 with income below 200% of the federal poverty level would be covered by the local government’s Health Reform, as originally implemented under Rossello’s administration; the local government would buy and finance health insurance from private insurance companies. The number of people in Puerto Rico who would qualify is estimated at 1.8 million.

Those whose income is greater than 200% of the federal poverty level would be covered by private health insurance provided by their employers. "All employers will be mandated to offer health insurance to their employees," said Rossello. He noted that 85% of the employees in this income segment already have health insurance from their employers. His proposal would ensure that the remaining 15% also have coverage.

Rossello explained that employers would have three options for providing insurance to their employees. "First, they could purchase group insurance directly from any private insurance company, as most businesses already do," he said. "Second, they could purchase the government’s Health Reform insurance, which will represent considerable savings given the favorable rates the government is able to negotiate with insurance companies. Third, they could choose to have a payroll tax [so the money would go directly to the Treasury Department, Hacienda] and the government would provide insurance through the Health Reform."

Those businesses whose employees meet income requirements for the Health Reform would have no problem, because those workers would already be included in the Reform.

Rossello emphasized that universal coverage doesn’t mean socialized medicine. "Actually, it’s quite the opposite," he said. "The whole concept is based on the market, to provide access to private healthcare through private health insurance."

Rossello reiterated that under his universal-coverage plan, private health providers would offer medical services to Reform beneficiaries, which is how he conceived the plan in 1992.

"In Puerto Rico, we have the advantage of not having to travel great distances, which minimizes obstacles to healthcare, and under this Reform model, the offer of medical services would be determined by the demand," he said.

This means he believes that some of the 79 emergency rooms the current administration wants to open are unnecessary, as many towns are so small (in size and population) that their residents can receive medical attention in an adjoining municipality. In fact, when the government decided to open these emergency rooms in each municipality, insurers and even hospital executives said it was neither financially feasible nor necessary (CB April 11, 2002).

"However, where the market doesn’t provide medical service, the government must intervene and set up healthcare facilities," said Rossello. "If there is a town that is so isolated that it would require a lot of time and effort to get to a medical facility, then it would be necessary to set up a facility there, but these are exceptions to the rule."

It seems, then, that Rossello would eliminate emergency rooms in municipalities where demand is insufficient. "It just doesn’t make sense to have medical facilities in each and every municipality," he said.

Where’s he coming from?

More than a reform, what took place starting in 1993 was a revolution. It was based on a complete redefinition of the role of government in providing healthcare to the people.

Before the Health Reform, the government owned and operated hospitals, clinics, and other healthcare facilities and was the primary healthcare provider for millions who couldn’t pay for private healthcare. The difference between the quality of public and private healthcare systems was enormous. Public hospitals were notorious for having no doctors on duty, understaffed emergency rooms, an extreme shortage of nurses, people waiting hours and even days for service, inadequate supplies, and nonfunctioning equipment. Private hospitals, in contrast, offered excellent facilities and superior service. It was a proverbial case of the haves and have-nots.

The gist of the Health Reform implemented in 1993 was to get the government out of the business of being a direct provider of health services, to sell off to the private sector the government hospitals and health facilities, and to use the money saved from not having to operate the system to buy private health insurance at low rates, which the government could negotiate given the huge number of beneficiaries to be covered.

When the Calderon administration took over, it warned that escalating Health Reform costs were jeopardizing the government’s finances. According to the Health Insurance Administration (ASES by its Spanish acronym), the cost of the Health Reform increased by an average of 25% per year, from $664 million in 1998 to more than $1 billion in 2000.

To tackle the situation, the administration proceeded to cut some 200,000 Health Reform beneficiaries it deemed ineligible and took other measures.

Even before the government began taking beneficiaries off the list, the four local insurers participating in the Health Reform as of April 2002 (La Cruz Azul, MCS, Triple-C, and Humana) had warned that eliminating beneficiaries would be necessary to cut costs (CB April 11, 2002).

While it was stripping people of their medical coverage, the government also began spending heavily to implement projects such as the smart card. Health Secretary Johnny Rullan said the smart card has cost the taxpaying public about $8 million since its launch earlier this year, and could end up costing about $50 million by the time it is implemented islandwide.

This project is expected to generate savings and improve efficiency in the long term, but it can’t be implemented throughout the island until 2006, if it is to be done correctly, Rullan said. This means connecting every health provider (including physicians’ offices, hospitals, laboratories, and pharmacies) and insurance companies.

Rullan also told CARIBBEAN BUSINESS that as of March, the Calderon administration had opened 68 emergency rooms that operate 24 hours a day, seven days a week. This alone is costing an estimated $25 million a year, in addition to the $1.3 billion budgeted to operate the Reform, he said. How much money would it cost to operate the 79 emergency rooms this administration intends to open?

Rullan has said the idea to provide universal coverage which Rossello is touting as a campaign promise is financially unfeasible. The secretary has reportedly said the proposal would cost up to $300 million a month.

How was the Reform reformed

A 2000 analysis of the Health Reform by local consulting firm Estudios Tecnicos predicted the program would require a $1.3 billion operating budget by 2005. That estimate was based on an annual budget increase of 4.5%.

The reality is that the Health Reform is already costing $1.3 billion, even though 200,000 beneficiaries were bumped off the rolls.

As early as 1998, it was evident that the Reform’s costs were increasing by more than 20% each year. According to ASES, the program’s costs increased by 28.6% between 1998 and 1999, 21.4% in 2000, and 25.7% in 2001.

While acknowledging that the Reform’s costs have spiraled, Rossello blasts critics who ignore that the costs of running the old system were expected to have skyrocketed even more. In fact, the same Estudios Tecnicos study revealed that had the previous health system been continued, it would cost about $1.5 billion today.

The government was already spending nearly $1 billion to operate hospitals and clinics when the Health Reform was started. The Health Reform isn’t an additional expense, but a transfer of costs. Instead of running hospitals and clinics; paying doctors, nurses, and other staff; maintaining equipment; and buying supplies, the government is using that money to pay for the healthcare insured and provided by the private sector.

Getting the Reform to cost $1.24 billion last year required many adjustments. In negotiating their contracts with the government in 2001, health insurers submitted to ASES proposals adding up to $1.4 billion. The government was able to reduce that to about $1.2 billion, cutting the Reform’s costs for the first time.

Among the adjustments was the initial elimination of more than 100,000 beneficiaries, whom the government argued were ineligible because the Health Reform is meant only for the medically indigent.

That isn’t necessarily true. In a July 2000 report, former Health Secretary Carmen Feliciano, who served during Rossello’s eight-year tenure, said eligible beneficiaries are veterans who aren’t service-connected, beneficiaries of Medicare parts A and A-B, police officers and their families, employees of the central government, and people with annual income of less than 200% of the federal poverty level.

Current state of the Reform

The government has continued to eliminate beneficiaries from the lists. Since 2001, the number of beneficiaries has gone down from 1.8 million to 1.6 million, and counting.

The administration also reduced the number of regions under the Health Reform from 10 to eight. In addition, regions would be assigned to particular insurance companies for three years instead of one. It was believed the longer term would allow for the implementation of disease-management programs, which would produce savings over the long run. The government was able to make ends meet with a budget of $1.3 billion for the current fiscal year (ends June 30, 2004) while satisfying health insurers participating in the Reform.

"What we have seen is a marked retrenchment in the scope of the Reform," said Rossello. "Retrenchment in the new definition of eligibility, which has left 200,000 people out. Retrenchment in the redefinition of choice, which has limited beneficiaries’ ability to choose physicians. And retrenchment in the limitations on medicines that used to be covered under the Reform."

Welcome changes

Rullan, however, stressed advances to the Health Reform. "The smart card pilot program, for example, has been a total success," he said. "We are now preparing to move on to the Mayaguez region, where the technology will connect about 10 hospitals, 300 pharmacies, 300 laboratories, and 20 primary physicians’ offices [known in Spanish as IPAs]."

He emphasized the system generates big savings, as has been demonstrated in Isabela, Bayamon, and Vieques. "This technology improves the billing process and collects data which we can use to make a better assessment of what each region needs and, in turn, to make better use of our financial resources," said Rullan.

The smart card has reportedly helped to increase billings in Isabela by $1.2 million during the past year. "In Bayamon, we have been able to bill more than $1 million in only three months," said Rullan.

ASES Executive Director Orlando Gonzalez told CARIBBEAN BUSINESS he expects a return on investment 15 months after the smart card has been fully deployed.

Rullan said the smart card would also help to keep emergency rooms open. Although he admitted that it isn’t financially feasible now to have an emergency room in every municipality (the 79th one being in the Castañer community, between Lares and Adjuntas), especially in those not densely populated, he said that is the public policy. "This is what people want, because they can’t go to their IPA in case of a late-night emergency," he said.

Executives with local health insurance companies, however, decry an overabundance of emergency rooms for contributing to the rising costs of health insurance around the world, which each year increase by more than 10%. "The more emergency rooms you make available, the more access you are providing. And this isn’t compatible with efforts that are being made to keep beneficiaries from having to visit an emergency room or being hospitalized," said Triple-C President Luis Marini.

To reduce visits to emergency rooms, only 40% of which are for true emergencies, Marini suggested making primary physicians more available to patients.

Rullan said that the 79 proposed emergency rooms would pay for themselves once the smart card is in operation throughout the island. "The facility in Isabela is already paying for itself and no longer loses any money," he said.

Rullan added that the Department of Health doesn’t assume all of the responsibility for emergency rooms’ expenses. "This is a hybrid system," he said. "Federal funds cover the daytime operation of 19 of the 68 emergency rooms currently open and the Department of Health covers the cost during the evening." He noted that the agency pays $220,000 to $250,000 a month to keep each of the 19 ERs open round-the-clock.

Some of the other emergency rooms are paid for by the municipalities or by the Department of Health alone, and these funds aren’t included in the Health Reform’s budget.

Beyond universal coverage

Rossello said he favors implementing technology such as the smart card to improve the Health Reform. "We must introduce technological elements that help us to obtain information and practice medicine more effectively," he said.

He recalled the telemedicine projects launched during his tenure as governor. "If a patient in Jayuya needs a specialist, say, a cardiologist, he or she would have to travel to the cardiologist’s office, make an appointment, and wait," he said. "With telemedicine, however, we can offer more efficient service and also enhance cost-efficiency."

The patient’s cardiologist, in this example, would be able to offer a medical opinion or diagnosis or determine the treatment from patient data transmitted electronically, such as via video and audio. "The legal base to do this is ready," said Rossello.

He also sees the benefits of the smart card. "As a concept, it is totally necessary because it would give us more access to patients’ information in order to make decisions on the appropriate treatment and such," said Rossello. "It would also help us make decisions on public policy."

Rossello also envisions creating an Internet-based system through which patients can obtain health information based on their personal profile.

MCS President Carlos Muñoz said, "Any initiative to improve the flow of information is positive, but we need to have clear objectives and a solid implementation plan." He also called Rossello’s proposal for universal coverage interesting.

Like Rullan, Rossello believes preventive medicine will improve cost-efficiency, since a healthier person is also a more productive person. They also agree today’s leading causes of natural death (diabetes, heart disease, and cancer) are the result of unhealthy lifestyles that can be modified with educational campaigns spearheaded by the Department of Health.

Since the Department of Health would no longer be the manager or provider of healthcare under Rossello’s plan, it would assume responsibility for establishing public policy and promoting healthy living in schools, communities, and elsewhere. Rossello said he would promote immunization and early detection programs.

Can universal coverage be financially feasible?

Many physicians have harshly criticized the fact that what they are allowed to charge for certain services and procedures under the Health Reform is less than the actual costs. Rossello proposes changing the way coverage is negotiated.

Right now, physicians and insurance companies negotiate rates individually. Rossello suggests physicians band together, which would give them more bargaining power to negotiate higher rates. The government would arbitrate only when necessary.

Hospitals would also receive fairer treatment if the entire population had health insurance, said Pavia Health Executive Vice President Alfredo Volckers. "About two to three times a month we receive uninsured patients who have no money to pay for medical services, particularly emergency service, and we can’t just send them away. We have to attend to them because the law requires us to do so," he said. "Obviously, we lose a lot of money on these cases."

"This is why hospitals love the idea of having everyone insured," said Volckers. "This would guarantee that hospitals are paid for services offered to all patients." Rossello said that under his plan, Health Reform costs would increase as much as they did during the program’s implementation, or more than 20% per year. He said that is inevitable, however, since healthcare costs rise more than the general inflation rate.

Muñoz agreed that health costs must inevitably increase every year. According to Estudios Tecnicos, health costs have been mounting at an average rate of 3.5% since 2000, while health insurance costs have been rising by about 10% to 12%.

Triple-C’s Marini appeared to agree with Rossello that the Reform’s start-up costs were bound to increase as they did. "It takes years for a program like this to evolve and mature because there were no cost-containment programs in place initially," said Marini. "Once you have them, however, you are able to stabilize costs. You can’t reduce costs, but you can stabilize them."

"If the entire population has medical coverage it will be healthier and thus more productive, which will help the overall economy. We have the resources to do this and with some political will, we can pull it off," said Rossello.

So far so good for the Health Reform’s smart card


One year after the Health Reform’s Smart Card pilot program was implemented at the municipal health facility in Isabela, patients, doctors, and administrators are delighted with the results.

Centro Isabelino de Medicina Avanzada, or CIMA, as the facility is called, began issuing smart cards to Health Reform beneficiaries in August 2002. So far, 5,000 patients have registered for the program, which replaces their health reform insurance card with a smart card—a card embedded with a microchip containing the patient’s personal and medical information. When patients arrive at CIMA, they enter their card into a computer terminal that automatically registers their information and gives them a number. An electronic screen in the waiting room then tells patients where to go next. During each step of their visit to the facility, including registering, checking vital signs, billing, and medical check-up, the patient’s information is available to the appropriate staffers through an integrated network.

According to Zoila Roca, managing director of CIMA, the total time each patient spends at the facility has been reduced to approximately 30 minutes since the smart card pilot program has been in place. The reduction is a welcome change for patients who used to spend hours waiting for service at government-run medical facilities.

Beatriz Guzman, a patient at CIMA, said that in the three months she has had the smart card she has not encountered any problems. "I definitely wait less time for service than I used to, I’m very pleased with the system," she said. "In fact, my sister, who brings her kids in often to receive treatment for asthma, appreciates the change."

"There has been a significant reduction in the time it takes for patients to receive a diagnosis and begin treatment," said Roca.

The smart card pilot program has allowed CIMA to run more efficiently because the computerized system speeds up the billing process, reduces the possibility of billing errors, and cuts back the time and paperwork needed to process a bill. "From an administrative point of view, the system provides us with a tool that allows a smoother flow of bills issued to health insurance companies. This also accelerates the process of sending out bills and a more effective recovery of funds," said Francisco Rivera, CIMA’s medical director, in a report sent to the House of Representatives.

Rivera also reported that the number of patients and the revenue have increased at CIMA since the pilot program has been in place. "The greatest growth CIMA has experienced has been in the area of invoicing and collections, from 80% to 90%. Although the increase isn’t totally attributable to the smart card system, it has been a fundamental part of this achievement, "said Rivera.

The smart card system has also helped reduce the misuse of health reform benefits, said Roca. Since the cards include the patient’s photo and specific information, it is virtually impossible for anyone to use it fraudulently, she said.

William Miranda Marin: Services under the healthcare reform deteriorating

Caguas mayor says universal health coverage must be evaluated for its cost efficiency, should not be ruled out


According to Caguas Mayor William Miranda Marin, a recent survey conducted among healthcare reform users in his city revealed that 61% of them classified the services as excellent. He said, however, that prior to the health reform, which in Caguas was implemented four years ago, as many as 80% considered the old system excellent.

"The healthcare reform has its problems, but not enough to be considered a crisis," Miranda Marin told CARIBBEAN BUSINESS. "As time goes by, people’s perception of the healthcare reform is that it’s deteriorating."

At the same time, said Miranda Marin, the cost of the healthcare reform has been increasing. Caguas contributes nearly $8 million to the healthcare reform, a whopping 60% increase in four years.

"When the healthcare reform began, Caguas contributed about $5 million to it. Our contribution has increased by $3 million in four years," noted the Caguas mayor.

The city owns the only diagnostic and treatment center in the municipality, called a CDT by its Spanish acronym. As soon as the healthcare reform was implemented in Caguas, Miranda Marin converted the city’s CDT into a preventive medicine center called Ciudad Saludable.

"At the time the healthcare reform was implemented in Caguas, the city operated the CDT. It ceased being a CDT [a provider of primary healthcare services] to become the offices of Ciudad Saludable, a preventive health program. Additionally, we leased space to a group of doctors to provide primary care services to 10,000 [medically indigent] Caguas residents," explained Miranda Marin.

He said when the CDT was the city’s primary healthcare services provider, it provided excellent services.

Miranda Marin believes it’s irrelevant whether a CDT is in the hands of the municipality, the central government, or in private hands, as long as first-rate primary healthcare services are guaranteed to residents. He noted, however, that there are instances where the municipality does not have the financial resources to run a healthcare facility, as it should.

Commenting on Gov. Pedro Rossello’s recent proposal for a universal healthcare coverage, the Caguas mayor said the idea should be evaluated in terms of its cost efficiency and should not be ruled out.

"If what we are talking about is a universal healthcare coverage where those who can pay for it do so, then it could work," said the mayor who is also a former Puerto Rico Electric Power Authority executive director. "We must first look at the numbers and see what the formula is. I’m one of those who do not believe in absolute dependence. I think we should charge healthcare reform users something to help the program."

Miranda Marin said the healthcare reform’s main problem is its lack of financial resources, and if what we want is first class healthcare services for the population, then those that can pay for it should.

"There is nothing wrong with that. But we have to look at its financial reality," the Caguas mayor added.

In theory, said Miranda Marin, when there is a greater number of users, there’s better distribution of risk, which should bring the cost to a financially feasible level. But, he cautioned, the government should take care of those individuals who are truly indigent, while those who can pay should do so to keep the system alive.

Miranda Marin noted the idea of a universal healthcare coverage is not new, since former Gov. Rafael Hernandez Colon proposed it during his first term in office during the 1970s.

"Medical groups at the time were vehemently opposed to it and the idea was abandoned," recalled the Caguas mayor. "Since then, things have changed and we should not rule anything out."

This Caribbean Business article appears courtesy of Casiano Communications.
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