Exclusion, fragmentation and lack of political will

Edgar Giménez Caballero, César Cabral Mereles
DECIDAMOS, Campaña por la Expresión Ciudadana

Four out of five Paraguayans do not belong to any health insurance scheme. The reasons for this high rate of exclusion include the fact that the system is geared to salaried workers, evasion of mandatory contributions, and inequities stemming from income levels. Meanwhile, only three out of ten older adults receive a retirement pension. The radical restructuring of the social security system requires a broad consensus among the whole population, and a series of medium-term measures are urgently needed.More than 10 years agothere were proposals to reform the social security system, and the mainobjectives were equitable access to health services, universal primary coverageand structural reforms (Barreto and Ramírez, 1997). In subsequent years aseries of reports showed that, in terms of rights, there are wide gaps caused byexclusion and inequity in the system, and by the government’s failure tohonour its constitutional and international commitments as regards socialsecurity (Amarilla, 2003).

In 2003 Holst diagnosed the main problems in the social security system, andthe list included low coverage, a poor ratio between contributions and benefits,high rates of evasion, discontinuity of contributions, increasing informality inthe labour market, the financial deficit, high costs and inefficientadministration. To a large extent this situation was rooted in both longstandingshortcomings in the local system and the problematic characteristics ofemployment and increasing poverty that are common to many Latin Americancountries.

The weaknesses that Holst identified are still with us. It is true that inrecent years the way that social security and health care provision are managedhas improved – mainly in terms of efficiency – but these changes have beenmerely parametric and not structural.

In this report we outline the problems that still need to be tackled. Our studyis based on an analysis of recent statistical data, interviews with key actorsin the social security administration in Paraguay and documentation from theSocial Security Institute (IPS).

Social security in health

Lack of protection and inequity

In Paraguay only one person in five has any kind of medical insurance. Thismeans that four out of every five Paraguayans, 78.5% of the population to beexact, have no insurance at all. In certain sectors the situation is even worse:91% of the rural population and 98% of the very poor are without coverage(DGEEC, 2005; PAHO, 2003). Data from the General Statistics, Surveys and CensusBoard (DGEEC) show that rates of non-protection have always been high, andbetween 2000 and 2005 IPS coverage increased slightly, from 10.9% to 12.5% ofthe population (DGEEC, 2005).

Coverage is low for various reasons: the system is geared to workers employed inenterprises, there are high rates of evasion of the compulsory regime, and manypeople are excluded because of inequities in society stemming from incomeinequality. Some 1.4 million Paraguayans cannot join the public health insurancesystem because they are self-employed, unpaid family workers, employers,peasants or indigenous people (DGEEC, 2005).

Domestic employees have only limited social security coverage, and in thecapital city only 10% of these workers are effectively eligible for benefits(Soto, 2005). Social security for domestic workers was initiated in 1967 butonly for accidents, illness and maternity, and coverage for long-termcontingencies was explicitly excluded. Also expressly excluded from socialsecurity are criaditos,[1]housewives, and anyone else who does domestic work within the family (Valiente,2005).

In the last three years the IPS authorities have submitted proposals toparliament for bills to incorporate central administration employees into thesystem, and also some independent employment groups including taxi drivers.These initiatives have received international recognition, but as yet thelegislature has not even considered them.

It has been estimated that some 70% of Paraguayans evade the compulsory socialsecurity regime (Holst, 2003). In the last three years direct contributions tothe IPS increased by 33%. This rise might be partly because the records are nowbeing kept more correctly, but there is no doubt that it is mainly due to theeffective incorporation of new contributions, and this is confirmed by theincrease in IPS income and the IPS budget (IPS, 2006).

Another factor here is that at no time since the IPS was set up in 1943 has thestate made its full financial contribution to the system, so in fact, althoughit might seem paradoxical, the worst offender when it comes to evading IPScontributions is the state itself.

Inequality and exclusion from coverage stand out more starkly when we considersocial security contributions by level of income. In the lowest income quintileonly 3.1% of working people contribute to the system, while in the highestincome quintile the figure is 22.7% (ECLAC, 2006). The fact that a person haspublic or private medical insurance does not necessarily mean that they make useof it. The extent to which services are utilized in the case of illness differdepending on the kind of insurance in question, income level and geographicalarea, and rates of inequality and exclusion differ not only between differentsectors but within sectors. Thus, although people in the rural sector and in thepoorest population quintile are in greater need of medical attention, theirlevels of insurance and the rate at which they consult medical services (whenthese are available) are considerably lower.

There is no doubt that the pressing need in the field of health care provisionis to remedy this situation.

The fragmentation of the system: a structural problem

The social security organizations and their service providers tend to be ratherfragmented, and there is little coordination among the institutions or the mainactors involved (Flecha et al, 1996).

Explicit insurance is mainly handled by the IPS in the public sector and bypre-paid medical care enterprises in the private sector. Only 21.5% of thepopulation has health coverage, and this is divided between the IPS (12.5%) andother kinds of insurance (9%) (DGEEC, 2005). It is estimated that in the lattercategory, 7% have private medical coverage and the rest are in variousinstitutional systems like the military, the police, cooperatives and communityinsurance schemes (Holst, 2003).

Medical attention for population sectors with lower purchasing power and withoutaccess to the IPS is provided by the Ministry of Public Health and SocialWelfare (MSP) as an implicit insurance mechanism. However, up to 40% of theuninsured population do not consult the public medical care services in the caseof illness (DGEEC, 2005).

In recent years there have been several community insurance initiatives in areasof the country outside the capital, and some have been successful, like the Framcommunity insurance and Caazapá integrated health insurance schemes. This is anencouraging trend, but these initiatives have very limited scope in the contextof the country as a whole (Güemes et al, 2005).

The IPS is by far the most important social security system in Paraguay. It isthe only organization whose provision model covers the whole range of healthservices with medicines, pensions, retirement pensions, and payments forillness, maternity and workplace accidents. What is more, when it comes tocertain illnesses, the IPS range of benefits is seen as the most viable optionin economic terms among the explicit insurance systems, and in some cases as theonly possible option.

The IPS insurance model is financed by tripartite contributions from salariedworkers (up to 9% of pay, depending on the employee’s profile), employers(14%) and the State (1.5%). Private insurance coverage is more limited andgeared to the population with greater purchasing power. To bring it up to abenefits level similar to the IPS, people would have to pay the equivalent of20% or even 50% of the current minimum wage, depending on the insurance companyand the kind of insurance plan acquired. This contrasts with the 9% mentionedabove in the public social security system.

Unlike the IPS, private insurance schemes do not provide coverage for epidemics,congenital conditions, pre-existing illnesses, alcoholism, psychiatric illnessor accidents. Nor do they cover haemodialysis. Intensive therapy can beprovided, depending on which plan is chosen, but coverage is rarely total. Theprovision of medicines and disposable supplies is very limited; it variesdepending on the plan and there is a period in which payments must be made butthe user is not yet eligible for the service. Chemotherapy, immunosuppressantsand other high-cost medicines are not included. All this means that, for someillnesses, the people insured still have to meet high hospitalization chargesand pay for very expensive medicines (PAHO, 2006).

It is common for workers to contribute to both the IPS and a pre-paid medicalsystem because they have more than one job, or a preference for the perceivedquality of the care provided, or because treatment for certain illnesses islimited in the private sector. However, when this is the case no compensation ispaid for services used.

Health insurance is also unsatisfactory in Paraguay when it comes to globalhealth problems. Neither the IPS nor the private insurance schemes treat peopleliving with HIV/AIDS. This is handled exclusively by the PRONASIDA programme,which is run by the MSP with support from international cooperation agencies andcivil society organizations.

Only one organization, the MSP, plays a role in preventive health care. Theexplicit insurance systems take no practical measures to promote prevention fortheir members. For example, the IPS only recently undertook to purchasecontraceptives for 2007. It also transfers 1.5% of its income to the MSP forpreventive programmes and for the fight against malaria. Between 2003 and 2006the amount involved came to around USD 12 million (IPS, 2006).

Thepoor quality of public services

Reports in the local press and complaints from users suggest that the perceivedquality of public sector services is inferior to that of systems geared topopulation sectors with more purchasing power.

A recent World Bank study (2005) showed that there are no significantdifferences between the rich and the poor on an index to evaluate doctor-patientinteraction (duration of consultations, questions, checks). But on the otherhand, the same study reveals that IPS doctors perform more poorly, withapproximately five minutes, five questions, and two checks less in socialsecurity system centres than in MSP health centres.

To improve its organizational quality, the IPS has taken a series of measuresthat include strengthening outlying clinics, incorporating more human resources,setting up a computerized management system with a single registration using theidentity card, and a new scheme to make appointments by telephone. Thisinitiative began in 2004 and was consolidated in 2006, and it covers around 13%of all appointments made (IPS, 2006). The real impact of these innovations onprocesses and results has not yet been evaluated.

Retirement and other pension systems

Segmentation, non-reciprocity and inequality in contributions

In Paraguay there are at least eight contributory schemes working alongsideeach other. The most important are the retirement scheme for public officialsemployed by the central administration and the IPS system for private sectoremployees and people working in decentralized organizations.

This loose and uncoordinated structure makes for inequality. For example, thereis great variation in the time period of contributions to qualify for aretirement pension, from 10 years in the pension scheme for members ofparliament to 30 years in the general IPS regime for all workers. The agerequirement also varies: women teachers can retire on a pension when they are 40years old but men and women in the general IPS regime can only do so at 60.

Very often people will work for different employers during their active livesand move from the public system to the private or vice versa. However,contributions to different systems are not recognized under the current law, soa sector of workers who are helping to maintain the system with their paymentswill not receive the corresponding retirement pension even though they have beenmaking contributions for the required number of years or more.

To tackle this problem, and in line with ILO recommendations and the MercosurSocial Security Agreement, a bill to reform the current legal framework has beensubmitted to parliament. This is aimed at establishing reciprocity among thevarious pension schemes and giving a worker who is 65 years old the right to aretirement or disability pension that is proportional to the number of years ofcontribution (Frutos and Ferreira, 2007).

Lowcoverage: exclusion from the model

Only three out of ten older adults are covered by a retirement pensionsystem. In 2005 there were only 93,000 people in the country receivingretirement or other pensions, and only 22% of the economically active populationis contributing to this segmented system (Frutos and Ferreira, 2007).

There are differences in access to retirement pensions that depend onsocioeconomic level and geographical area, and these follow much the samepattern as in the case of health service provision.

However, the main determinant of exclusion is that the social security model isexclusively geared to salaried employees, which automatically excludes 60% ofthe economically active population (DGEEC, 2005).

In the last three years the IPS has undertaken administrative and legalinitiatives aimed at widening the coverage it provides, not only by reducingevasion from the compulsory contribution regime in the private sector, but alsoby incorporating into the system excluded sectors of the population. However,these initiatives have not led to any legislative changes and in some cases theyhave not even been considered.

Conclusions and suggestions

The government has made and reaffirmed commitments to the universal right tosocial security, but in practical terms very little has been achieved.Retirement pensions and health services are still fraught with low levels ofcoverage, exclusion and inequity.

To rectify this situation there will have to be structural reforms in the socialsecurity system. This is easy to say but it will not be a simple process; itwill call for policies that are based on a wide consensus among citizens of thecountry at all levels.

While this major process of change is taking shape, there is no reason topostpone intermediate measures like the different pension schemes granting eachother reciprocal recognition, excluded groups being systematically incorporatedinto the system, the legislature dealing with the dozen or so bills on thesematters that have been shelved, the state meeting its financial obligations tothe social security system, the coordination of services between sectors, andthe implementation of policies to cater to lower income sectors and unpaidworkers.

For the system to really serve the whole population there will have to be acomplete change of approach.


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[1]Adolescents who do domestic work in exchange for board and lodging and (in somecases) education.