The brutal rationale of privatisation

Ana María Arteaga
ACTIVA; Area Ciudadanía, Corporación La Morada; Centro de Estudios de la Mujer (CEM); Colectivo CON-SPIRANDO; Colectivo EN-SURANDO (Valdivia); EDUK; FORO, Red de Salud y Derechos Sexuales y Reproductivos

“Beyond euphemisms, privatisation of health, social security and education operated by neo-liberals has imposed a brutal rationale: depending on the amount of money you have, you will have so much health care, quality of education for your children and pension upon retirement. If you are privileged, you will have access to privileged services. If you are poor, you will have to make do with what the public system is able to give you.” Fernando De Laire. “El discurso del 21 de mayo y los debates emergentes” Revista Mensaje, July 2002

Basicsocial benefits: a question of the market

Theparagraph quoted above is an illustration of the effects on the majority ofChileans of the wide-ranging reforms of the health, education and socialsecurity systems introduced in the eighties by the military regime (1973-1989).These changes involved breaking away from the orientation of social policiesthat had been in force since the twenties which were mainly aimed at lesseningsocial inequalities through the redistribution of income, widening of socialsecurity and extension of the primary school, secondary school and universitysystems.

Thisradical change was made by the military government based on a two-fold argument:on the one hand, attributing to the State historical inefficiency as a resourcemanagement and distribution entity and, on the other hand, maintaining thateconomic growth is the only way of improving the welfare of the population.Seeking the maximum reduction of social expenditure, cutbacks in benefits andincorporation of the market as a supplier, the State fulfilled a subsidiaryrole, only intervening in situations of structural deficiency in specificsectors left to satisfy their most basic needs by themselves. In fact, theeconomic dimension was imposed as the fundamental criteria when applying socialpolicies.

Themilitary government’s postulates resulted in two substantive actions:focalisation of social expenditure and the entry of private companies and themarket into areas that traditionally had been the State’s responsibility:education, health, social security and housing. In all these areas, funding andaccess mechanisms were changed, restoring the idea of the “consumer” as abasic element of the system, who would have freedom of choice within thespectrum of possibilities offered by the market. For this purpose it becameessential to promote individualism – a concept totally opposed to the cultureof collectivity and social participation that the previous governments hadpromoted – an objective that was made easy with the dissolution of the variousexisting organisations and the prohibition by decree of any form of socialorganisation.[1]

Education:the increase of social stratification

Duringthe eighties, adopting the perspective of a “subsidiary State”, the militaryregime handed over all public primary schools to the municipalities; promotedthe participation of the private sector through per-capita subsidies equivalentto those delivered to public schools; changed funding of higher education;facilitated the establishment of private universities; and transferred most ofthe technical education centres to business associations.[2]

Althoughthe reforms effectively managed to reduce the burden of education on governmentexpenditure and achieved a more efficient management of the system, theydramatically increased segregation and unequal opportunities for the schoolpopulation because of the difference in resources and equipment existing in themunicipalities themselves and the advantages given to private operators. Privateschools, in addition to the per capita subsidy equivalent to that awarded topublic schools, were authorised to select the type of students to be admittedand to collect part of the tuition from agents, which led to their recruitmentbeing focused on the sectors of better-off families. As a result, publicestablishments have increasing concentrations of students from lower incomesectors (87.22% of their total enrolment), while in subsidised private schoolsthis percentage is barely over 56% of their students.[3]

Infact, school performance assessments made by the Ministry of Education point tothe existence of a close correlation between the socio-economic level and schoolperformance. The assessment established that, in spite of the special programmesapplied by the last three democratic governments to improve the quality ofeducation in the low-income student population, a considerable gap remainsbetween results obtained by students from higher and lower income homes.[4]

Thesefindings may be added to those obtained this year from the Academic AptitudeTest, which secondary school students take if they want to enter university,showing that among students with the lowest results, 61% came from publicschools. This situation shows that although progress has been made in terms ofmaking basic and secondary education universal, it is not leading to ademocratising effect in higher education.

Thedramatic differences existing in the quality of education have increasinglyresulted in families avoiding public education as an option for their children(in spite of the fact that it is the only free education available), as it isconsidered to limit access to higher education and, therefore, the possibilityof the social mobility this usually entails. This is shown in a survey carriedout among parents of school-age children faced with the alternative of having tochoose, in which 60% declared that they preferred a private, subsidisedestablishment rather than a public school.[5]This option has led to private, subsidised education increasing its enrolmentfrom 15% in 1981 to 35.8% at present, while public education has decreased itscoverage from 78% of total enrolment to 53.7%.[6]

Chart1.- Secondary and higher education coverage per income quintile (%)

Althoughsince the mid-nineties public expenditure on education has doubled and importantreforms have been introduced in the educational system, in practice, policiesexplicitly aimed at achieving greater equity have been scant and the resultsfairly poor. Therefore, the central problem no longer resides in the coverage ofthe school system – for decades now quite satisfactory concerning basiceducation (98.6%) and secondary education (90%).[7]The major challenge that the authorities must face today consists of revertingsomething that global coverage rates do not fully show: an increasingsegregation and inequality of opportunities generated by the system due to thedifferences in the existing quality of education. Definitively, the modelcontinues to be deficient regarding the criteria of equity, as so far it hasbeen unable to prevent the worst provision of education being found in thesectors of greatest material and cultural poverty.

Healthsystem: private interests for public services

Theinsecurity and mistrust regarding the educational system is shown equally forthe health system that together with the pension system comprised the so-called“modernisations” of the social area introduced at the end of the seventies.This was seen in a national survey on Human Security, showing that the majorityof the population is neither confident it will receive timely attention nor in aposition to pay health care costs in the event of a serious illness.[8]

Untilthe reform, the country had a national health service managed by the State, onwhich the most important health establishments and facilities depended. Thesystem – recognised for its competence – provided a wide coverage to thepopulation while a small number of private services and clinics were aimed atthe higher income sectors.

Thereform carried out at the end of the seventies essentially consisted indecentralising the official system and in privatising an important part of theservices. Following the reforms in the system, each wage-earning person had tochoose between the official system or entering some Health Insurance Institution(ISAPRE), where he/she was obliged to pay a percentage (7%) of his/her totalremuneration and freely contribute additional resources according to eachperson’s capacity. In practice, each health plan is unique, and the quality ofbenefits and coverage largely depends on the insured person’s level of income. In fact, the ISAPRE is not a healthinsurance system – although it has this status – but a system of privatehealth insurances where the variables of sex, age and state of health determinethe price of the premium.[9]

InChile where a high percentage of the population lack resources to personallyface the costs of health care, the ISAPRE system has proved to be particularlydiscriminatory against women.[10]Firstly, access to the system depends on the income of each individual, and thuswomen are manifestly in a situation of inequality due to their lower earningcapacity (in proportion they earn 40% less than men); also, the majority ofwomen are outside the remunerated workforce and therefore excluded from a directrelationship with the social security system.[11]Secondly, the system significantly increases the cost of health care for allbenefits associated with pregnancy, childbirth and maternity.

Infact, the insurance policy for a woman worker of childbearing age may costbetween 3 and 4 times more than a man’s policy at the same age. That is,women’s reproductive life is penalised.[12]The discrimination is of such magnitude that some ISAPRE have even reached thepoint of proposing “without uterus plans,” urging women to avoid pregnanciesand thus not increase their health costs.[13]Discrimination is not limited to women: it also affects people over 50. Thus,people with over 20 years of contribution to the same ISAPRE will progressivelysee the cost of their premiums increase as they grow older, and their plan canbecome 8 times more expensive than when they entered the system.[14]

Costsin the private health care system have been critical in the evolution of theISAPRE system, and membership has decreased consistently from 1.7 million peoplesince 1977, to 1.3 million people in June 2001. The participation of women was34.4% of the June 2001 total, a figure very similar to the rate of women’sparticipation in the workforce. It should also be noted that the growth rate innumbers of women beneficiaries has consistently dropped over the past decade,going from 20.8% in 1991 to 1.7% in 1997, and has even shown a significantpercentage of withdrawals from the system, which in June 2001 reached 5.5%.[15]

Chart2.- Female population in the health insurance system

Recently,the discussion on gender discrimination in health care systems has taken onparticular relevance – and placed the women’s movement on maximum alert –because of the government’s proposal to fund part of the AUGE Plan (UniversalAccess with Explicit Guarantees) for health care reform with resources that theState uses to pay maternity leave.[16]In active rejection of the proposal, the movement has insisted to theauthorities and the public on the error committed by confusing labour rightswith health rights, due to the fact that the wrongly called “maternalsubsidy” is no more than a maternity salary allocated to pre- and post-natalleave, a right consecrated in Chile since 1924 and internationally recognised ininternational conventions on workers’ rights.[17]As declared by specialists from the Centre for Studies on Women (CEM), “…thecountry needs a reform of the health system. The main objective in terms ofgender equity is to eliminate the various discriminations women are subject toin the ISAPRE system.”[18]


[1] See: Javier Martínez and Margarita Palacios. Informe sobre la Decencia, Ediciones SUR, Santiago, Chile, 1996.

[2] Among other measures, registration fees were substantially increased, students were granted loans and a system of competition for state funds was created. Until the reform, only state bodies provided higher education.

[3] Ministry of Planning, CASEN Survey, 2000, Santiago, Chile.

[4] The MECE Programme (Improvement of Quality and Equity in Education), which focused on all public schools, has been the most successful so far. Current programmes “900 Schools” and “High-School For All” aim at improving school performance and access to higher education for poor students.

[5] CEP (Centre for Public Studies) Survey, Santiago, December, 1996.

[6] Ministry of Education, Compendio de Información Estadística 2000.

[7] Ministry of Planning, CASEN Survey, 2000, Santiago, Chile.

[8] CEP-PNUD 1997 Survey, in: Desarrollo Humano en Chile. Las paradojas de la modernización, UNDP, 1998.

[9] See: Apolonia Ramírez C. “Situación de la mujer trabajadora en el sistema de ISAPRES”, in: Economía y Trabajo en Chile, Annual Report No. 7, Labour Economy Programme (PET), Santiago, Chile, 1998.

[10] In Chile, 20.6% of the population (3.81 million) lack the monthly income necessary to buy a basic food basket. Ministry of Planning, CASEN Survey, 2000.

[11] According to INE (National Statistical Institute) only 36.1% of women belong to the economically active population (EAP) compared to 74.9% of men.

[12] The public health care system is not exempt from this type of situation. For example, it does not allow the woman partner of a member to be a dependent, demanding that the couple be legally married, nor does it allow a woman to have a man as family dependant.

[13] Centro de Estudios de la Mujer (CEM). Argumentos para el Cambio No. 52, June, 2002, Santiago, Chile.

[14] Newspaper El Mercurio, 19 October, 2002.

[15] Apolonia Ramírez. “Género y Sistema de ISAPRES”, in: Género, equidad y reforma de la Salud en Chile. Voces y Propuestas desde la Sociedad Civil; OPS, MINSAL, SERNAM, Santiago, March, 2002.

[16] The AUGE Plan is an important part of the reforms being promoted by the government to broaden the right and access to health care.

[17] See: “Propuestas para la Reforma de la Salud en Chile”, Parlamentos de Mujeres por la Reforma de la Salud, 28 May 2002.

[18] Argumentos para el cambio, CEM, op. cit.

The autor is thankful to Josefina Hurtado (Colectivo CON/SPIRANDO) and Lorena Fríes (Programa Ciudadanía, Corporación La Morada) for their collaboration.