Este informe no está disponible en español.


Prognosis: Unclear

Dark Clouds Hover Over Puerto Rico’s $1.35 Billion Health Reform


January 8, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.

Are we headed for financial disaster?

Despite some progress at curbing the growth in the health reform budget, escalating prescription drug prices, excessive use of emergency room services, and the graying population will keep pushing program costs up.

Health reform, the $1.35 billion government-paid health insurance program benefiting 1.6 million people, is sure to be a contentious issue in the coming electoral campaign.

Despite some progress at cost containment, the future of the health reform continues to be under threat.

The Calderon administration has succeeded in holding the line on the spiraling cost of the program it took over from Gov. Rossello, who is now vying to recapture the executive mansion in the November elections.

But there are many factors conspiring to escalate the cost of health reform in the coming years, and they pose a big challenge to whoever wins at the ballot box.

Among these are higher costs for medicines, alleged misuse of emergency room services in hospitals and diagnostic treatment centers and, the biggest unknown yet, the graying of Puerto Rico’s population.

"The biggest problem we face is that the population is getting older," said Luis Marini, president of Triple-C (a subsidiary of Triple-S), which covers the most people under its health reform government contracts. "This impacts health reform because it leads to increased use of services."

The government must begin planning now for the realities brought on by an older population, an issue that Puerto Rico and countries all over the world are facing, said Marini. "We project that as of 2010, one out of every four inhabitants [in Puerto Rico] will be over 65," he said, adding that this is going to create a need for more health services and spike utilization rates, which is bound to boost costs for reform. The problem is compounded by the fact that the population is growing at a slower rate, which means a reduced work force and consequently lower tax revenues.

Excessive utilization of emergency room services through misuse is yet another minefield in terms of holding down costs. Marini cautioned against the current administration’s public policy of promoting liberal access to diagnostic and treatment centers (CDTs). As part of the health reform overhaul, the government privatized public hospitals and CDTs; some of the CDTs in private hands have closed down and health officials are re-opening them. "I have 90% of CDTs open, seven days a week, 24 hours a day, and I’m happy to have done it even though it implies a cost," Gov. Calderon said a few weeks ago, noting that the availability of these clinics is especially important to people who don’t have a car.

"Promoting [easy] access to emergency rooms runs counter to preventive medicine," said Marini, noting that it is customary in Puerto Rico for people to rush to the emergency room for any situation besides a real emergency, a costly practice with serious implications on the financial stability of the reform. The next round of negotiations for premium rates is scheduled for this summer.

"More than 60% of visits are not emergencies," he claimed, going on to explain that these are "urgency" cases that can wait for the doctor’s attention the following day. The overuse of emergency rooms is also tied to many patients postponing a visit to the doctor until a condition worsens and emergency care is needed. This defeats the aim of health reform, which is to foster preventive care and help people keep their medical conditions under control through regular visits to their primary care doctors. Moreover, emergency room care is expensive and primary doctors must bear this cost, which comes out of the monthly payment (capitation) they get from insurance companies. According to Marini, this cost can consume almost half of the capitation. The government, he said, should discourage the overuse of emergency rooms, possibly through higher deductibles; it should also run a campaign to teach participants in reform that along with rights come responsibilities. This is part of empowering patients, he added.

The Calderon record

Keeping a handle on finances has been a major priority of Gov. Calderon, who won the governorship for the Popular Democratic Party (PDP) in 2000 and inherited a health program bitterly opposed by the PDP throughout Rossello’s two terms in office. Calderon administration officials say they have worked diligently to slow down the spiraling cost of the program, subsidized primarily through local revenues, in contrast with mainland states that depend heavily on Medicaid to fund their services to the medically indigent. It has managed to hold down the huge cost of health reform by reducing administrative fees and profits to participating insurance companies and, most importantly, despite it being an unpopular move, by dropping nearly 200,000 participants who were found to be ineligible for the program.

In the words of Health Secretary Johnny Rullan, the Health Department is no longer just a bystander but has become a "player" in its dealings with health insurers.

"We became sound in actuarial knowledge, which meant, I knew before I negotiated with the three companies how much they spent. Once we knew…we said, here’s 7.5% administrative fee and here’s 2.5% profit and go with that. Take it or leave it. And all three years they said yes, yes, yes," said Rullan in an interview with CARIBBEAN BUSINESS.

"For eight years, 1994 to 2001, premiums kept going up as opposed to the last three years in which the cost of insurance has held up," he said.

The Calderon administration also reduced the number of health regions to eight from the previous ten (in response to limited competition among insurers for coverage of the central region) and extended the life of health insurance contracts to three years instead of one, though premium rates are negotiated yearly. Marini said insurance premiums have gone up an average of 5% per year; but because of cost containment measures, the budget for reform has been held in check.

The government also centralized drug purchases into a pharmacy benefit manager (PBM), a move that increases the government’s negotiating power with pharmacies, reduces duplication in the prescription of medicines, and creates a valuable database, among other benefits. "One of the big problems is the lack of information," said Health Department official Wendy Matos, noting how important it is to keep on top of an operation of the magnitude of health reform.

And then there is the Smart Card, a little plastic card with a storage capacity of 32K, which contains the patient’s medical history for quick access by doctors, labs, hospitals, and other medical services. The card includes information on a person’s medical conditions, outcome of recent visits to the doctor, and medicines prescribed.

Originally, it was scheduled to be in place islandwide by 2003 but, so far, only 6,000 cards have been distributed to health reform enrollees in Isabela, Vieques, and Bayamon. In April, another 275,000 cards will be handed out in Mayaguez. Who will follow next is still a question mark. The price tag of the card to the government is now up to $80 million, double the original estimated. But that is only one side of the picture. The infrastructure required to use the card is not available to all doctors, and it is unclear who will pay for this cost, adding another note of uncertainty to the execution of this project.

Luis Benitez Hernandez, president of the Puerto Rico Economists Association, said the Smart Card, which the Rossello administration also considered, offers many benefits in terms of improving care and developing a database necessary for cost projections, which is why he thinks the next governor will pick up where Calderon leaves off. "I don’t think that any new administration will ignore something that is to the benefit of the people," he said.

But not everyone is gung ho about the idea. "People don’t care if the card is smart or dumb," said Enrique Vazquez Quintana, former president of the Puerto Rico College of Physicians. "What they want is to get medical services when they need them."

To fix the health reform, he said, it is necessary to eliminate the way doctors are compensated under the healthcare delivery system that underscores the health reform. The Rossello administration, which took up health reform as a rights issue for the island’s medically indigent, chose managed care as the preferred healthcare delivery model but it has proved a problematic choice since its very beginning. To this date, it remains a contentious issue among patients enrolled in the program and the doctors who serve them. This continued dissatisfaction is bound to spill over into the administration that wins at the ballot box in November.

Managed care

Managed care gained ground on the mainland in the 90s as a way to contain escalating medical costs. In managed care, patients gain access to medical services through a primary doctor who acts as a gatekeeper to more specialized and therefore costlier health services such as specialists, laboratories, and hospitals. Doctors provide services and assume certain expenses, such as the cost of laboratories and medicines, in exchange for which they receive a fixed monthly payment per patient known as capitation.

Ten years into reform, patients continue to complain of deficient services, particularly in mental health, and of difficulties getting referrals and obtaining medicines and other services. Doctors, for their part, are unhappy with the low capitation or payments they receive from insurance companies, a situation that critics claim is resulting in the rationing of services.

"A doctor should not have to think whether or not to send a patient to get a test based on what that study is going to cost him," said a doctor who spoke on condition of anonymity. Another doctor who also asked that his name not be used said that physicians in health reform are being asked to assume too much risk for the capitation they are receiving and this encourages the withholding of care.

Vazquez Quintana believes eliminating the capitation, and the health maintenance organizations (HMOs) through which patients access the primary care doctors of their choice, is the best answer. He suggested that the government negotiate with doctors directly and pay them a reasonable amount based on a fee-for-service, as in commercial health plans. Doctors can earn as much or as little as they wish, depending on the amount of work they perform. "Free capitalism at its highest expression," he quipped.

Ibrahim Perez, a doctor who has openly questioned the lack of information on the impact of health reform on the health of its participants, agrees that HMOs are a worn-out idea. If the government is to continue with managed care and truly wants to improve services, he suggested trying out a different alternative: the preferred provider organization. The PPO, which is growing in popularity on the U.S. mainland, is a network of doctors, hospitals, and other providers who offer services to enrollees on a fee-for-service basis. According to Perez, PPOs place less restriction on the utilization of services and offer greater access to specialized services.

The Calderon administration has examined the Rossello model of healthcare delivery and found it lacking. Rullan said the problem is free choice or the ability of patients in reform to select their primary doctors and other services.

"Free choice and managed care are incompatible," he said. "What they [the Rossello administration] did here is a managed care system with free choice and that’s incompatible. You can’t do it. You either have a number of hospitals you go to...or a number of labs, a number of pharmacies but…the way we have right now, you can go anywhere…. it’s incompatible."

In response, health officials last year came up with a pilot project in Guayama in which a group of doctors was contracted directly to give services to 23,300 patients within a closed but integrated system. The aim: to find out if direct contracting results in better care for patients and a lower price for the government than the outright buying of medical coverage from health insurers, as at present. The pilot did not completely eliminate the insurer: the government selected Cooperativa de Seguros de Vida (Cosvi) to act as the third party administrator in charge of processing claims, case management, and gathering data for actuarial analysis.

The pilot, originally slated to begin in 2002 but postponed by one year, is set to be expanded this year with another two groups coming on board very soon. "The data will show us which is the right decision to make," said Rullan, adding that even though results may come late in the game, they could be helpful to the next government in power. "An administration of whatever party would have the data to make decisions."

Still, these are costly experiments ($17.9 million in Guayama alone) and the next administration is not bound to act on the findings. Benitez Hernandez questioned expanding the pilot project without first examining initial results. "It might be risky because, in that case, you could be squandering money," he said. Health officials, for their part, claim the Guayama pilot so far is a success and in any case, they need to expand the project so as to have a larger representative group for a more accurate assessment of the direct contracting model.

The uninsured

Triple C’s Marini believes a health program cannot be based exclusively on cost but must also provide quality care and services. "If you save at the expense of quality, then it’s not an effective saving," he said.

While supporters and detractors of health reform may differ on whether the program is fulfilling its aims, the fact remains that the program continues to evolve. It remains to be seen what model of healthcare delivery will ultimately prevail.

Meanwhile, Ibrahim Perez said the issue the government should address next is the lack of medical coverage faced by 400,000 people, or 11% of the population. "It’s unfair they are not being taken care of since most of them are marginally medically indigent," he said, going on to make a case for universal insurance as the answer to providing health coverage to this group.

He may get his wish. Former Gov. Rossello has promised to provide universal insurance if he retakes Fortaleza (CB Aug. 9, 2003).

Are health reform enrollees better off?

Ten years into health reform, its impact on public health remains unclear. Participation in health reform has always been "a dynamic process," with people coming in and exiting as their economic situation improves.

"The medically indigent come in and out of the program all the time," noted Health Secretary Johnny Rullan. "It’s a dynamic process, people who were unemployed get jobs, people with jobs become unemployed."

Still, it is fair to assume that many enrollees have been in the program for an extended period of time, especially those who came on board at the beginning (health reform started out in the Fajardo area); other enrollees have been in the program much less time since it wasn’t until four years ago that reform extended to the entire island.

With 1.6 million currently enrolled, either on a permanent or temporary basis, questions arise as to whether the medically indigent are getting as good a level of care as people enrolled in private plans. Critics of the program are dissatisfied with the lack of hard evidence to support whether such the case.

"Are results, outcomes, any better than for those in private plans?" asked Ibrahim Perez, a doctor and columnist.

A doctor who did not wish to be identified said that indicators like life expectancy, infant mortality and cardiovascular disease are good measures of the quality of a health system but, as he noted, these statistics have not been made public. Demographic data available from the Health Department indicates that overall infant mortality on the island has continued to drop between 1994 and 2001, from 738 to 515 infant deaths, with the exception of two years when deaths rose slightly 1997 and 1999). This is less than half the infant deaths reported in 1983 and previous years when they were well above 1,000. Figures for life expectancy and cardiovascular disease were not available at press time.

Perez cautioned, however, that overall statistics won’t do for an accurate assessment of the success or failure of reform to improve public health. Separate statistics are needed for people covered by reform—about 43% of the population—and those in private plans, about 46%, for an accurate comparison between both models of care.

The lack of a report card proving the overall impact of reform does not mean there is an absence of measures to assess the level of care patients are receiving. In fact, the Health Department monitors medical services contracted by health insurers using standardized performance measures known as Hedis (Health Plan Employer Data & Information Set), which are used by the National Committee for Quality Assurance (NCQA), an independent organization that monitors healthcare services, to accredit health plans.

Here are some findings made public by the Health Department last year based on a 2001 assessment of Hedis indicators:

A significant proportion of patients with persistent asthma were not receiving appropriate medicines.

Patients recuperating from a heart attack were getting the indicated medicines but were not being monitored nor their LDL cholesterol kept under control.

The number of diabetic patients checked for retinopathy was very low.

Rullan said that, overall, there has been an improvement in the level of care given to patients in reform but much work remains to be done to reach full compliance with Hedis standards. Luis Marini, president of Triple-C, said that on the whole, "we are better off than when we started the reform in preventive medicine." The best example of that, he said, is that more women are getting mammograms and receiving prenatal and postnatal care. Moreover, disease management programs set up by insurers, unavailable before the health reform, are helping people to control medical conditions that, if left unchecked, can result in major health expenditures, he said. The goal of Triple-C this year is to reach 20% of patients suffering from four of the most prevalent conditions which can be controlled for a better quality of life: hypertension, asthma, congestive heart disease and diabetes mellitus.

Health Reform Financing Sources

Central Administration 75%

Medicaid 12%

Municipalities 10%

State Children’s Health Insurance Program 3%

Source: P.R. Department of Health

This Caribbean Business article appears courtesy of Casiano Communications.
For further information please contact

Self-Determination Legislation | Puerto Rico Herald Home
Newsstand | Puerto Rico | U.S. Government | Archives
Search | Mailing List | Contact Us | Feedback