1 TARGETING HEALTH INSURANCE TO THE POOR IN COLOMBIA By Tarsicio Castañeda Reaching the Poor Conference The World Bank, February 18-20, 2004

2 Contents of Presentation Colombia’s Health Sector Reform Colombia’s Health Sector Reform Created to regimes in 1993: --Contributory Health Insurance Regime (Formal workers) --Subsidized Health Insurance Regime (Poor families- PMT) Also created a targeting systen: SISBEN Also created a targeting systen: SISBEN Targeting outcomes Targeting outcomes Concluding comments Concluding comments

3 Colombia´s Health Sector Reform The New Reform created two regimes and a transition scheme: The Contributory Regime for Employed Workers; The Contributory Regime for Employed Workers; The Subsidized Regime (SR) for the Poor; The Subsidized Regime (SR) for the Poor; A transition regime for poor not affiliated into the SR and the Near Poor. A transition regime for poor not affiliated into the SR and the Near Poor.

4 The Contributory Regime for Employed Workers Paid for by workers and employers. Paid for by workers and employers. Total: 12 percent of salaries: percent to fund system percent (to pay for Subsidized Regime. Insurance provided by private companies (EPS) and public insurance institute (ISS); Insurance provided by private companies (EPS) and public insurance institute (ISS); End of 2003: 15 million people (34% of population) End of 2003: 15 million people (34% of population)

5 The Subsidized Regime for the Poor To cover primary health care package (plus high cost illness) for eligible poor families: Paid for with subsidies from public funds: Paid for with subsidies from public funds:  Part comes from municipalities using transfers;  Part comes from Solidarity Fund (FOSYGA)  Part comes from states using own funds and transfers, Affiliation is made by municipalities to private insurance companies (ARS) that contract provision of services with private and public hospitals. Affiliation is made by municipalities to private insurance companies (ARS) that contract provision of services with private and public hospitals.

6 The Subsidized Regime for the Poor (Cont.) Eligibility of families is decided with SISBEN: A point score system based on 14 socio-economic variables; A point score system based on 14 socio-economic variables; Information collected from families living in poor rural areas and neighborhoods, by municipalities; Information collected from families living in poor rural areas and neighborhoods, by municipalities; Central level audits information and creates a central data base; Central level audits information and creates a central data base; By end of 2003, nearly 12 million affiliated (27% of total population, or about 65 % of poor). By end of 2003, nearly 12 million affiliated (27% of total population, or about 65 % of poor).

7 Transition Scheme for Poor Not in SR and the Near Poor Eligible families receive discount fees in public hospitals. This applies to the poorest still not affiliated into the SR (because of budget reasons) and the near poor: Eligibility decided with SISBEN: Poorest (SISBEN levels 1-2) receive discounts between percent of hospital fee: Poorest (SISBEN levels 1-2) receive discounts between percent of hospital fee: Near poor (SISBEN level 3) also receive significant discounts on hospital fees. Near poor (SISBEN level 3) also receive significant discounts on hospital fees.

8 What is SISBEN? SISBEN is a system for selecting beneficiaries for social programs in Colombia. SISBEN is a system for selecting beneficiaries for social programs in Colombia. It has a statistically derived proxy means test index that serves as an indicator of households’ economic well- being. Variables determining welfare include: It has a statistically derived proxy means test index that serves as an indicator of households’ economic well- being. Variables determining welfare include:  availability and quality of housing and basic public services,  possession of durable goods,  human capital endowments System includes a set of norms and procedures defined at central level and operated at municipal level to gather information to calculate welfare index and select beneficiaries for social programs. System includes a set of norms and procedures defined at central level and operated at municipal level to gather information to calculate welfare index and select beneficiaries for social programs.

9 How were variables and weights obtained  Variables should be easily observable, not easily manipulated  Variables decided on the basis of their statistical power to discriminate poverty in econometric models;  Self-reported income is not considered in weighting system for lack of reliability of indicator;  Health variables are not included for difficulty to get information and temporary nature of variables.

10 Targeting Outcomes Targeting outcomes depend on: Targeting accuracy of instrument, in this case of SISBEN system; and Targeting accuracy of instrument, in this case of SISBEN system; and Targeting accuracy of Program—that is, the subsidized health regime, and this depends on the procedures for application, outreach, etc. Targeting accuracy of Program—that is, the subsidized health regime, and this depends on the procedures for application, outreach, etc. A way to assess both of these effects is through incidence analysis derived from a random sample of families (beneficiaries and non- beneficiaries). A way to assess both of these effects is through incidence analysis derived from a random sample of families (beneficiaries and non- beneficiaries).

11 Targeting Outcomes (Cont.) A study based on a Living Standard Survey concluded: Target Accuracy of SISBEN System: Target Accuracy of SISBEN System:  Error of exclusion (under coverage rate) is about 19%  Error of inclusion (leakage) is about 30% (but that’s ok because these don’t necessarily get benefits, they were just interviewed and registered in the system as part of a normal filtering process) Overall Target Accuracy of Program: Overall Target Accuracy of Program:  Coverage of poorest quintile with health insurance increased from 3-8% in 1993 to 47% in 1997;  In health and social assistance share received by poorest quitile was 35%, and that of bottom 40% was 65% in 1997.

12 Concluding Comments Targeting of health sector resources has improved substantially in Colombia with use of SISBEN; Targeting of health sector resources has improved substantially in Colombia with use of SISBEN; The poorest of the poor appear to have benefited the most in municipalities that have mounted an aggressive strategy to register people in rural areas and in poor areas in the cities; The poorest of the poor appear to have benefited the most in municipalities that have mounted an aggressive strategy to register people in rural areas and in poor areas in the cities; Implementation problems have resulted from the use of a multitude of financing sources— municipalities, states, central govt. Synchronizing those sources has been a difficult task, and significant delays in payments to insurers and hospitals have resulted. Implementation problems have resulted from the use of a multitude of financing sources— municipalities, states, central govt. Synchronizing those sources has been a difficult task, and significant delays in payments to insurers and hospitals have resulted.

13 Concluding Comments (Cont.) Although the targeting system SISBEN is perceived as objective and transparent, there have also been allegations of manipulation by municipalities and measures should be taken to address this issue; Although the targeting system SISBEN is perceived as objective and transparent, there have also been allegations of manipulation by municipalities and measures should be taken to address this issue; Additional advances in the operation of SISBEN needs to be made in updating, cleaning up of databases and the integration of a national data base; Additional advances in the operation of SISBEN needs to be made in updating, cleaning up of databases and the integration of a national data base; Also, the SR needs to be improved to make the system portable across municipalities to address needs of migrants and the displaced. Also, the SR needs to be improved to make the system portable across municipalities to address needs of migrants and the displaced.