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Rx For Health Care Reform; Prescription For Change

by Florencio Marina

May 18, 2000
Copyright © 2000 CARIBBEAN BUSINESS. All Rights Reserved.

The Rossello administration’s massive health service reform for the medically indigent in Puerto Rico is in guarded–but improving–condition. All vital signs indicate that with proper treatment it will survive and prosper.

Health Reform is alive and kicking, its growth "irreversible," popularity is at an all-time high. Where does it go from here?

The Health Reform introduced by the Rossello administration six years ago in the northeastern towns of Puerto Rico continues to move forward. Today, it covers 1.7 million indigent people in 77 of the island’s municipalities and is considered irreversible by most health experts and public officials.

Despite controversies–political and otherwise–polls show more than 60% of beneficiaries are satisfied with the services received. In fact, a study conducted by Estudios Tecnicos Inc. for the Health Insurance Administration (ASES by its Spanish acronym) revealed in January that 88% of reform patients were satisfied or very satisfied with the new system.

The study also found patients visited primary doctors much more than before the reform, according to 79% of doctors interviewed. Doctors noted 68% of patients were covered by the government’s plan, a number they expect to reach 74% in five years.

Pharmacy sales went up from $727 million in 1994 to $1.06 billion in 1999, and 126 new clinical laboratories have opened in that same period of time, according to Estudios Tecnicos.

The Government Development Bank (GDB) recently reported the Health Department had saved $235 million in operational costs since the implementation of the reform and the subsequent privatization of health facilities.

San Juan, the only municipality whose indigent are not covered by the governor’s health reform plan, is expected to begin participating in the reform as of July 1 this year, although the capital city is still negotiating with the Health Department to determine entry conditions that are acceptable for both sides.

The government also wants to expand the health reform this year to cover public employees, their direct dependants, veterans, and uninsured employees of private small businesses.

Despite generally favorable reviews so far, doctors and hospitals believe some adjustments to the reform process are unavoidable and negotiations should get underway as soon as possible to make the necessary changes. These include increased funding to doctors and hospitals (commonly called capitation) and a more equal distribution of risk and responsibility among insurers, pharmacies, and other components of the reform.


The Health Reform was conceived by Gov. Pedro Rossello in his first term in office as an effort to eliminate the unfairness of having, in effect, two health systems: a private medical system for those with the financial means to pay for better service and another, with substandard public facilities, for the poor.

In previous decades, healthcare took an automatic backseat to economic capability, so low-income patients all across the island were treated only according to what time would allow and public facilities could offer. Public health facilities were understaffed, lacked equipment and supplies, and were usually inadequate.

In 1993–prior to the health reform’s implementation–42% of the population had private medical insurance, 13% relied on Medicare, while the remaining 45% were uninsured and fully dependant on government facilities, according to Puerto Rico Secretary of Health Dr. Carmen Feliciano Melecio.

Government hospitals and Diagnosis and Treatment Centers (CDT by its Spanish acronym) were authorized by law to charge insurance companies or those who could pay for services received.

Feliciano said that under the reform, 38% of Puerto Rico’s population are insured by the government’s health plan, 13% are still covered by Medicare, 44% have private insurance, in most cases company plans with private medical health suppliers, while only 5% remain uninsured.

"When Dr. Rossello became San Juan health director in 1985, he realized government simply is not as good a facilitator in the area of health as the private sector is. He formed the Health Alliance in 1986 and asked Triple S, one of the island’s largest health plan suppliers, to analyze the viability of health insurance for all indigent residents in a municipality. In 1992, current University of Puerto Rico President Dr. Norman Maldonado presided over the New Progressive Party’s (NPP) Health Committee, which made the health reform part of that party’s platform for the 1992 election," Feliciano recalled.

The idea sounded simple. Here’s how it would work:

  • The government would provide the same level of healthcare to all through a private medical insurance plan paid by the government and available to all in need of it.
  • The government would negotiate lower rates with the insurance companies based on the large numbers of new members it would bring into the plan, a process analogous to larger employers being able to negotiate better rates than smaller ones.
  • In order to pay for the medical insurance, the Commonwealth was to redirect money spent on public health facilities and proceeds from their sale to private hospitals.
  • The privatized health facilities, in turn, would have better equipment and additional funds to provide the attention patients deserve. Just as employees of a private company had private, well-staffed, well-equipped facilities available, the indigent would also have access to the same facilities.
  • Patients would in turn pay for services with the government’s medical insurance plan, popularly known as la tarjetita (the little card).
  • Who eventually pays the bills? Health insurance companies competed and were contracted by the government through a bidding process, in the same manner that private corporations get bids on plans for their employees. All aspects of the contract between insurers and the government would be supervised and regulated by ASES.

Between the thought and the action

The process of granting insurers the responsibility for people’s health is, by obligation, a delicate one requiring careful planning, said ASES Executive Director Guillermo Silva Janer.

The agency publishes a Request for Proposals to attract health insurance companies licensed by the Insurance Commissioner’s Office. The submitted proposals are analyzed by external-evaluation and administrative-evaluation committees made up of doctors, lawyers, and other professionals.

These committees make sure proposals live up to basic requirements, which are essentially a managed care model, financial strength (necessary to assume economic risks), cost of plan (funds directed at health services and administration), and extended providers’ net (which translates into a wider choice of physicians for beneficiaries).

The ASES Board of Directors eventually examines both committees’ findings and determines what company is chosen to cover which region. Once the company is established, those eligible subscribe to become beneficiaries of the government’s health plan and receive their tarjetita.

So far, contracts between insurers and the government have a duration of one year, after which they are renewed every July 1. Triple-S, Cruz Azul, Humana, and MCS/HMO (the product of a recent alliance between MCS and Wellpoint to enter the local health reform) are currently competing for contracts to serve the west, east, and north-metro regions as well as San Juan, which is expected to enter the reform on July 1. Silva said the ASES Board of Directors will reach its determinations by mid-May.

Silva also explained the different insurance companies’ coverage only differs in distribution of risk between insurers, doctors, and pharmacies and premiums, which depend on the area, population, and use of services. "In general terms, everyone has equal access to the same services all over the island," he said.


More than 50% of the island’s 84 CDTs and public hospitals–not including those in San Juan–have been sold to private hospital operators and other entities (See chart). Prices of the facilities range from $750,000 to $32 million, according to Government Development Bank (GDB) Privatizations Director Myrna Losada. The GDB has functioned as the Health Department’s financial consultant through the privatization process.

Losada said 38 CDTs and eight public hospitals have been sold so far (See chart). Various companies have been awarded 18 out of the remaining 38 medical facilities and 20 (19 CDTs and 1 hospital) more are yet to be sold.

Lozada explained that institutions interested in buying public health facilities must be financially sound. They must also conduct employee-performance evaluations in good faith when deciding which employees to keep. She said proposal evaluations are conducted by committees named Groups A and B and made up of four to five GDB, ASES, and Health Department employees, the identities of whom are concealed from bidders.

"The whole process usually takes between 30 to 60 days before closing," Lozada said. "So far, we have generated sale proceeds of $186.6 million. Furthermore, the companies have pledged to invest $42.3 million in the facilities, which totals $228.9 million."

Lozada mentioned that the unsold facilities are located in remote areas or have the poorest infrastructure. "It’s like everything else in business, the best stuff sells quickly and the rest takes longer," she said.

In reference to how these facilities are functioning under the new system, Feliciano added that the investment in equipment, upgrading of facilities, and availability of specialists have made them much more efficient. "CDTs used to have only generalists," she said. "And people have the option of going to far more doctors and hospitals if they wish to. They are no longer limited by geography or bureaucracy."

Public employees

Silva said central government employees in Puerto Rico would be given the option of entering the reform on July 1. The Treasury Department calculates this sector comprises approximately 120,000 people, according to payroll processes. Municipal and public corporation employees will not be included yet, but their entry could occur before the year’s end.

Workers from 86 to 88 government agencies and their dependants will be able to choose between various individual plans and the government’s plan represented by ASES. Silva added the inscription process would begin in June. "After that, we will know how many people will join the plan," he said.

Veterans and small business employees may enter the reform later this year, although insurers are cautious about the latter because an estimated 90% of businesses on the island qualify under that category, according to Small Business Administration (SBA) standards.

For that reason, veterans and small business employees, unlike other beneficiaries around the island, would pay a monthly $60 for a wide coverage including pharmacy and dental services. Negotiations in this area are still underway between ASES and insurers to determine how exactly to structure this portion of the health reform’s expansion.

San Juan

The central government is committed to include San Juan in the Health Reform by July 1, a date Mayor Sila M. Calderon is also committed to. This would add about 128,000 medically indigent citizens to the program. When this happens, a total of 1.8 million people in Puerto Rico will participate in the Rossello administration’s health care reform. That could very well reach 2.1 million if most public employees and their families join in.

Nonetheless, the capital city has been negotiating the terms of its inclusion to the reform for months. San Juan Health Department Executive Director Ibrahim Perez said the current system has great potential, but should be implemented in each municipality according to its particular situation.

Perez said the sale of CDTs and other public health institutions has cost many jobs and unnecessary closings. "Mayors in Isabela, Añasco, Aguas Buenas, and Cataño, among others, are trying to buy back some CDTs because those are the most important health centers in many towns and many privatized emergency rooms do not open after certain hours."

The most notable disagreement between San Juan and the local Health Department, however, is the amount of money the capital city is expected to pay in order to enter the reform. The total contribution of all other 77 municipalities participating thusfar, including Medicaid and State Children Health Insurance Program (S/CHIPS) added by the central government, is $270 million, which represents some 26% of their combined operating budgets of $ 1.05 billion.

San Juan is the only municipality that has funded its own health infrastructure throughout most of last century. It currently spends $110 million, 35% of its overall $310 million budget on health. This includes the $23 million it is annually granted in Medicaid funding by the federal government, and is the only municipality in Puerto Rico to receive these benefits directly.

Silva said the central government is offering to cover $44 million and expects the municipality to contribute $43 million from its budget, plus the $23 million it receives in Medicaid, a total of $66 million.

The $66 million contribution would represent approximately 21% of San Juan’s total municipal budget, which according to Silva, compares favorably with the 26% other municipalities now have to contribute to the reform.

As of press time, the capital city’s final offer was $23 million, plus the $23 million in Medicaid funds, which the central government rejects because the total of $6 million would represent only 15% of San Juan’s total budget, proportionately much less than the average municipality.

"San Juan manipulates real numbers to hold an unsustainable position when the reality is, if we use strictly equal bases and apply 26%, then they must contribute the sum of $80 million," said Silva. "What we are requesting is only $43 million, plus the $23 million in federal Medicaid funds, which totals $66 million."

Silva believes San Juan fears the new arrangement will no longer allow it to properly run its public medical facilities. Perez added both the reform and San Juan’s health system should complement each other, not let one replace the other.

Although negotiations have yet to reach an agreement, Perez said San Juan is still preparing in good faith to enter the reform on July 1, something the central government has guaranteed will happen with or without the capital city’s consent.

And just how may the future of health services look for San Juan? The candidates for mayor of the city in the upcoming November elections give their viewpoints. (See separate story.)


San Juan’s municipal government is not the only party expressing disagreement with aspects of the health reform’s implementation. Insurers, doctors, and hospitals agree patient education is an issue that must be attended.

Julia Velez, executive director of Dr. Susoni Hospital in Arecibo, said too many patients seek treatment at emergency rooms when their conditions don’t warrant this type of service. While screening processes are relatively quick to determine the true nature of a patient’s illness, patients often refuse to wait for a family doctor’s care the following day and remain in the emergency room until treated that same evening. This, she explained, overburdens hospitals financially.

Velez added that under the reform, insurers pay hospitals $90 dollars per emergency patient, and only half of that if the case was not an emergency. However, federal law prohibits medical institutions from refusing to treat any patient in an emergency room, regardless of their condition.

Nonetheless, Velez, like insurers and most health professionals, believes the reform is irreversible and expects to negotiate proper adjustment to this situation.

Triple-S Inc. President Miguel Vazquez Deynes said the reform is too advanced to fall apart, but should still undergo changes and fine tuning, including better communication between insurers and service providers (hospitals and specialists) as well as three-to-five-year contracts with insurers to allow more time for economic recovery in the case of possible loss during the course of a year.

Triple-S earned a total of $1.1 billion in underwritten premiums in 1999. About 37% ($407 million) of their earned premiums are a direct result of the health reform and they expect it to eventually become more than half.

Humana, Inc. President Victor Gutierrez said doctors are concerned with overcrowded emergency rooms and patients’ lack of concern with scheduled visits to specialists. He added that premiums would need to be increased to deal with rising hospitalization, drug, and technology costs.

Nonetheless, Gutierrez is convinced the reform has drastically improved people’s overall health in the last few years by allowing them to visit doctors for prevention, rather than solution.

Puerto Rico Medical Association President Dr. Luis Pares agreed doctors are not getting enough capitation per patient and carry the responsibility and risk of serving patients, since insurers, pharmacists, and others refuse to accept any part of it. "Doctors have become constantly preoccupied businessmen considering the money they have available for their work," he said.

Puerto Rico Hospital Association President Milton Cruz agreed with Dr. Pares, adding that insurance companies are not paying their fees on time. Both organizations recently submitted a list of proposals to improve the Health Reform. (See box.)

But government officials like Feliciano and Silva insist most of these issues are overblown. Both agree doctors are responsible for educating patients on how to properly use their health cards. According to them, doctors should also keep their offices open long enough during the day for patients to receive primary services. This, they say, will result in fewer nightly visits to emergency rooms.

"If people think emergency rooms are crowded now, they should have seen emergency rooms in public hospitals when they were the only service available for low-income patients," said Feliciano. "It’s just a matter of logic."

Feliciano and Silva also say capitation is not an issue either. "Primary care doctors with 2,000 patients will receive a $72,000 a month for their needs, which includes pharmacy, emergency room visits, and so forth," Silva said "All patients [of the primary care doctor would] have to become ill for that [amount of money] not to be enough."

Silva is optimistic about the development of the reform. He said there is no evidence of financial stress for the initiative or of rationing services. He said there is better access to pharmacies and free selection of medicine. "This is social justice that has benefited many and there is no turning back," he said.

The San Juan mayoral candidate’s proposals

With San Juan’s expected entry in the Government of Puerto Rico’s Health Insurance Plan this coming July–and the economic controversy still surrounding it–the main candidates in the race for mayor of the capital city have published the health programs they intend to implement if favored in the November election.

Eduardo Bhatia (PDP) has expressed satisfaction with the municipal government’s management of San Juan’s public health facilities. He proposes to establish a new model for the implementation of the reform that:

  • Provides incentives for doctors offering effective preventive services
  • Fosters better distribution of economic risk and premium distribution between doctors and insurers
  • Sees municipal government as a facilitator in the acquisition of medicine by beneficiaries
  • Ensures prompt payment for doctors’ services
  • Establishes evaluation committee formed by the different sectors most affected by implementation of the reform
  • Reinforces the Capital Medical Emergencies System by establishing better coordination between 911, the State Medical Emergencies System and private systems to better cover the city
  • Launches pilot program to provide medical emergency personnel and potential resuscitators like the police with modern technology like automatic or semiautomatic defibrillators, all under the strict supervision of expert doctors

Jorge Santini (NPP) unveiled his Impulse to Medicine Plan in March, proposing the following:

  • Creation of a special medical council presided by the Mayor, to evaluate every aspect of the health reform and administer a fund to provide the medically indigent with services that may not be covered by the reform
  • Fostering of conditions so doctors spend less on medical services provided
  • Creation of a tax incentives program for doctors
  • Guarantee on commercial loans to doctors through the Economic Development Corporation of the Capital City
  • Acquisition of medicine and equipment with discounts for doctors negotiated through the Municipal Health Department.
  • Modernization of CDT’s.
  • Improvement the internship program in medical facilities.
  • Remodeling the Municipal Hospital and insure its re-accreditation and licensing
  • Professionalization of medical emergency system
  • Acquisition of fast response vehicles (4x4, motorcycles, bicycles)
  • Acquisition of 15 new Type 3 ambulances
  • Reduction of ambulance response time to less than 15 minutes since the call is received
  • Relocation of rescue units, according to the needs of different sectors of society
  • Creation of Golden Relief Program to allow people over 65 years of age who are not eligible for the reform to acquire brand medication through a prescription by the doctor for a smaller fraction of the actual cost.
  • Rolling clinics in rural and marginal sectors.
  • Aggressive vaccination plan and intensification of maternity and prenatal care programs
  • Creation of transportation services program for subscribers with special medical needs
  • Establishment of patient follow-up program, as contemplated by the Health Reform
  • Transformation of Las Antillas Social Medical Complex.
  • Strengthening and development of programs directed at HIV and AIDS patients

* * * * * * * * *

Beneficiary rights & obligations

The Government of Puerto Rico Health Reform, in a nutshell:

Who qualifies as a beneficiary?

  • Individuals or families properly certified by the State and Federal Medicaid Programs as totally or partially medically indigent, and whose domicile is in areas or regions where the Government of P.R. Health Insurance is operating.
  • Members of the Puerto Rico Police Department and their direct dependants (spouses and children).
  • Veterans and their direct dependants, certified by the Federal Medicaid Program.

How do you obtain la tarjetita?

To obtain the Government of Puerto Rico Health Insurance Card, properly identified applicants must initiate case evaluations at their nearest Medicaid office. Insurance carriers will mail those eligible a letter indicating where and when the enrollment process will be completed so they may receive their insurance cards.

What are the benefits of coverage?

  • Preventive services
  • Hospitalization services
  • Medical services
  • Surgical services
  • Maternity services
  • Mental health services
  • Diagnostic examinations
  • Clinical laboratory tests
  • X-rays
  • Ambulatory rehabilitation services
  • Emergency room services
  • Dental services
  • Pharmacy services
  • Ambulance services

What preventive services are offered?

  • An annual physical evaluation that includes eye and ear examination, nutritional evaluation, laboratory, and all other examinations, diagnostic tests, and vaccinations according to age, sex, and health condition.
  • Tests for prostate cancer (PSA according to age and medical necessity), gynecological examinations, mammographies, and an annual Papanicolau test.
  • Test for colon cancer screening (sigmoidoscopy) for people over 50 years old.
  • Care for the first two years of a child’s life.
  • Vaccinations for children up to 18 years of age; influenza and pneumonia vaccinations for beneficiaries over 65 years of age; and vaccinations for high risk children and adults suffering from conditions like heart disease, pulmonary, renal, and diabetic afflictions, among others.
  • Education and counseling in nutrition, physical, mental, and oral health.

Beneficiary Bill of Rights:

  • To receive quality medical access when needed.
  • Easy access to medical services.
  • Freedom to select a primary care physician.
  • Choice of medical specialists.
  • Freedom to change the selected primary care physician or center.
  • Option to select a pediatrician for minors under 18 years old.
  • Option for adult females to select an Ob/Gyn as their primary physician.
  • Covered benefits cannot be denied.
  • Easy and immediate access to emergency services.
  • To receive all the needed information about the plan’s benefits.
  • Means to file, if necessary, about services related to the Government of P.R. Health Insurance Coverage.

Beneficiary obligations:

  • Keep eligibility records at the Medicaid Program updated.
  • Respond to the eligibility notice from the insurance carrier by going to the site indicated so you can receive the Government of P.R. Health Insurance Card.
  • Notify Medicaid about any changes in address, family structure, income, or other pertinent family data, which may affect insurance coverage.

Where may beneficiaries direct complaints?

ASES states all beneficiary complaints must be submitted to the insurance carrier (company), who is supposed to follow up until reaching an agreement. Should dissatisfaction persist, cases may be appealed before ASES.

* * * * * * * * *

Curing the Health Reform

The Puerto Rico Hospitals Association and the Puerto Rico Medical Association brought forth the following suggestions to improve the Health Reform at Senate hearings in February.

P.R. Hospitals Association:

  1. Create a top-level, multidisciplinary work committee to evaluate the health reform’s status and determine what aspects of it need improvement to inure its success. The reform should not be expanded until these findings are evaluated and proper action is taken.
  2. Amend Law 72 of Sept. 7, 1993, Article 6, Section 9 to allow hospitals with medical plans or health insurance direct or indirect participation as insurers in the health reform. Allow established providers with infrastructure capacity to provide health services to be directly contracted, as is the case of the Provider Service Networks currently growing in the U.S.
  3. Amend ASES law to prohibit medical plans from refusing to contract with primary groups affiliated or belonging to qualifying hospitals.
  4. Increase uniformity in health services.
  5. Increase license and certification requirements for primary groups (IPA, HC, CCSCA) with their various modalities under the health reform (economic solvency, minimum operation hours, offered services, emergency room requirements, staff, and equipment). Law 101 of June 26, 1965 requirements and Rule 52 of the Secretary of Health should be applied to primary groups regarding ambulatory services.
  6. ASES should require primary center staff to have privileges in hospitals that have contracted with insurers.
  7. Insurers should contract with hospitals first, due to their organized medical faculty.
  8. Payment for emergency room visits should be the same for every patient, regardless of later categorization. Hospitals are legally bound to assist any patient who attends an emergency room, regardless of risks and costs.
  9. Use of auditors (to determine if patient conditions justify length of stay) should be independent from the primary centers that refer patients to a hospital. Their recommendations should be part of the patients’ files.
  10. Hospitals should be sold to entities with evident experience, reputation, and economic solvency.
  11. Centers or health plans should pay hospitals no later than 15 days after bills are received. The law permits interest payment to apply otherwise.
  12. The impact of public and small business employees in the health reform should be evaluated before incorporating them.
  13. ASES should establish a mechanism to make beneficiaries of all those eligible for the health reform or make the government responsible for payment.
  14. Once the health reform is established throughout Puerto Rico, a mechanism to provide coverage to those who remain uninsured must be established, since the government will no longer be a health services provider.
  15. Supra-tertiary centers currently belonging to the government should not be privatized.
  16. Any improper intervention or influence by insurers in the treatment of patients that may cause them any damage will make them legally responsible for possible claims by those patients.

P.R Medical Association:

  1. Provide organized medicine (private physicians) with representation in the ASES Board of Directors.
  2. Promote the study and early publication of vital health statistics for Puerto Rico.
  3. Create an independent entity to be the final appellate forum for all health reform conflicts.
  4. Increase capitation.
  5. Regulate patient ability to continuously change from one Health Management Organization (HMO) to another in order to maintain steady course in treatment and avoid duplication of costs.
  6. Seek alternatives for better access to mental health services.

These Caribbean Business articles appear courtesy of Casiano Communications.
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