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Column 110810 Thompson

Monday, November 8, 2010

Looming Social Security and Healthcare Problems in Mexico

By Barnard R. Thompson

For some time there have been growing signs of trouble, not the least being serious financial problems, in the Mexican Social Security Institute (IMSS).  Still, it's hard — nearly impossible — to imagine the government not bailing out its long trumpeted state-funded healthcare, pension and social security system.

As to the problems, here is how Carlos Marín put it in his "El asalto a la razón" column (Milenio, Mexico City) on November 4:

"Pre-bankruptcy of Social Security

"The presidential diagnosis of the financial situation of Social Security (the most noble of Mexican institutions and the leader in public health in Latin America) is ... hopeless!

"It is of little use that [IMSS] director general Daniel Karam acknowledged to Congress approval of the transfer of surpluses (disability, life, and workers compensation insurances) to the needy to 'gain time and operational capability' in attention to beneficiaries.

"As absurd as pretending that chronic diseases might be cured in the emergency rooms, fantasizing that administrative juggling might solve the most dramatic IMSS problem.

"'The use of the reserves, that is now indispensible in order to guarantee the operation of the [IMSS], is not nor can it be the way out of the circumstances faced,' Felipe Calderón warned yesterday, [and] he said that the reserves 'are not enough, now we are not saying to meet their intended purposes but not even [enough] to deal with the operation of the institute….'

"And making one shudder: it will be Congress that determines the IMSS rescue."

During the General Assembly of the IMSS, held on November 3, in Mexico City, and with President Felipe Calderón in attendance, a report titled "IMSS Financial Situation 2009-2010" was presented.  According to news articles, the study notes that the Social Security Institute's workers comp, disability and life insurance programs have had surpluses since 2002, which now amount to nearly [US$5.723 billion].  And from those so-called reserves, in 2011 IMSS officials will draw needed funds to cover shortages in healthcare and maternity insurance services that, by the end of 2010, will have total shortfalls of [US$16.352 billion].

In addition to the report, IMSS director general Daniel Karam called for all concerned to engage in a dialogue with the purpose of finding in-depth solutions to the "decapitalization" of the institute.  Especially, he said, in that IMSS service demands continue to grow in spite of the institute's difficult financial situation, which puts it at risk as a service provider.

The IMSS situation "is the most delicate of its entire history," Karam said, adding that it is facing a "threat to its operations and existence."  This insomuch as costs for medical services, and receipts from those entitled to services, are such that current resources will cover services and pensions only until 2012, he said.

The IMSS, which depends on funds from the government, employers and workers, in addition to the insurance programs operates its own hospitals and clinics; day care centers; vacation centers; and large retirement and pension funds.  Many of these requisite services are in accordance with workers' rights as enshrined in lengthy Article 123 of the Mexican Constitution.

The IMSS is the largest social security institution in Latin America, covering 49.1 million Mexicans who receive services and benefits (source: IMSS).  Mexico's estimated population, as of July 2010, was 112,468,855 (source: CIA: "The World Factbook").

It should be noted that healthcare, quality of services and finances that are part of Mexico's national and public health systems, and that are the more direct responsibility of the Secretariat of Health, are not included in this particular IMSS discussion.

Recognizing the pressing need to improve general health services and research — and in addition to the Calderón administration's "National Health Program 2007-2012," the government initiated an assessment by health experts in late 2006 that produced "Vision 2030," and what the health ministry and its system should be by that year.  The report addressed elements that inhibit development of Mexico's health system, including "political, legal, financial, organizational, and educational" factors.  And it calls for a system that will guarantee healthcare to all, with services that include efficient and sensible health insurance, and sustainable financing.

The proposed IMSS reforms include, among others, increases in the amounts paid by employers and workers; family healthcare plans with fees paid for all covered (there are also deficits in these funds); and for the federal government to cover at least one-half of the costs for certain "expensive" illnesses, such as diabetes and AIDS.

Solutions must also be found to cover healthcare services for retired workers, with the suggestion that the federal government pay these medical bills.  A further recommendation is for the federal government to contribute more in order to increase IMSS reserves.

Speaking before the assembly, a somber President Calderón called for new IMSS reforms that will bring about fundamental solutions to the "very delicate" financial situation the institute faces.  The time has come for employers, unions, government and Congress to explore alternatives and make decisions, Calderón said, steps that are needed to provide IMSS with the financial strength it must have to meet its obligations to beneficiaries, the retired, and the pensioned.

With the IMSS matter becoming so public, the Mexican Congress at long last is moving to address its connected spheres of responsibility — albeit maybe at first indirectly.

In the upper house Manlio Fabio Beltrones (PRI), president of the Senate, said that the federal government must immediately send Congress reform legislation that will bring IMSS out of its financial crisis.  "It is not enough to present diagnoses and to sound alarms; solutions must be provided," he pressed.

Senator Francisco Labastida (PRI, Sinaloa), who also chairs the Energy Committee, announced that the Senate will review the financial situation of IMSS in January — "along with that of Pemex" (Petróleos Mexicanos).  Labastida added that an agreement has already been reached with the Secretariat of Finance and Public Credit, to analyze the financial crisis of IMSS so as to find solutions to the same.

In the Chamber of Deputies, Francisco Rojas (PRI, State of Mexico) called for a full report from the executive branch of government on the IMSS situation.  As well, he summoned those responsible to prepare a resolution proposal that can be discussed and acted upon in Congress.

Deputy Carlos Alberto Pérez (PAN, State of Mexico) stated that IMSS is in need of "major surgery," and he called on opposition Members of Congress to work together for integral reforms.  Alejandro Encinas (PRD, Federal District) acknowledged the IMSS problems, along with the need for reforms in order to avoid its bankruptcy.

Members of three of the minor parties in Congress, Pablo Escudero (PVEM, Federal District), Pedro Vázquez (PT, Nuevo León), and Pedro Jiménez (Convergencia, Tabasco), also spoke of the risk of a financial crisis in IMSS.  And they said they are prepared to discuss reforms to assure the institute's sustainability.

Still, what comes next is yet to be seen.

Nationally, what might the reactions be should the IMSS collapse?  Will those primarily affected be too stoic, old or infirm to rise up?

What's more — and as unlikely as it may seem, if Mexico's premiere healthcare, pension and social security provider fails, or if its services become more deficient, just where might the sick, the disadvantaged and the destitute go to meet their needs?

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Barnard Thompson, editor of MexiData.info, has spent 50 years in Mexico and Latin America, providing multinational clients with actionable intelligence; country and political risk reporting and analysis; and business, lobbying, and problem resolution services.

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