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Health Policy 88 (2008) 8899

Health sector reforms in Argentina and the performance of the

health financing system
Eleonora Cavagnero
Department of Health Systems Financing, Health Financing and Policy, World Health Organization,
Avenue Appia 20, 1211 Geneva 27, Switzerland

Abstract

In Argentina, health sector reforms put particular emphasis on decentralization and self-management of the tax-funded health
sector, and the restructuring of the social health insurance during the 1990s. Unlike other countries in the region, there was
no comprehensive plan to reform and unify the sector. In order to assess the effects of the reforms on the performance of the
health financing system, this study looks at impacts on the three inter-related functions of revenue collection, pooling, and
purchasing/provision of health services. Data from various sources are used to illustrate the findings. It was found that the
introduction of cost recovery by self-managed hospitals increased their budgets only marginally and competition among social
health insurance funds did not reduce fragmentation as expected. Although reforming the Solidarity Redistribution Fund and
implementing a single basic package for the insured was an important step towards equity and transparency, the extent of risk
pooling is still very limited. This study also provides recommendations regarding strengthening reimbursement mechanisms for
public hospitals, and regulating the private sector as approaches to improving the fairness of the health financing system and
protecting people from financial hardship as a result of illness.
2008 Elsevier Ireland Ltd. All rights reserved.

Keywords: Argentina; Health care reform; Health financing; Pooling; Purchasing

1. Introduction ciales, OSPs).1 Like many Latin American countries,

Argentinas health system consists of three sepa-
rate, but inter-related, subsystems: the publicly funded
sector, the private sector, and the social health insur-
ance funds. The latter are composed of about 300
sickness funds, the so-called Obras Sociales. These
funds are run at the national (obras sociales nacionales,
OSNs) and provincial level (obras sociales provin-
Argentina has a fragmented and segmented health sys-
tem [1]. However, unlike most of the countries in
the region, the Argentine social health insurance with
its Obras Sociales was never merged into a unified,
national social security institute [2,3]. Many of the
OSNs are union-managed funds associated with par-
1 There are approximately 270 OSNs and 23 OSPs one for each

province plus one for the autonomous city of Buenos Aires. OSPs
Tel.: +41 22 791 1416; fax: +41 22 791 4328. cover provincial civil servants and their dependants, totalling around
E-mail address: cavagneroe@who.int. 5 million people (15% of the total population).

0168-8510/$ see front matter 2008 Elsevier Ireland Ltd. All rights reserved.
doi:10.1016/j.healthpol.2008.02.009
 E. Cavagnero / Health Policy 88 (2008) 8899
ticular industry sectors. The majority of them do not
have their own delivery facilities and, thus, OSNs pay
for care that is provided in public and mostly in pri-
vate institutions. This has been coined the corporatist
modality within the atomized private model [2], char-
acterized by the separation of different occupational
groups into exclusive, quasi-non-competitive sickness
funds.
In Argentina, as in other countries of the region
such as Chile and Colombia, the major purpose of the
health sector reforms of the 1990s was the implemen-
tation of managed care and market-oriented policies
[47]. The Argentine reforms put particular emphasis
on the decentralization and self-management of the tax-
funded health sector and the restructuring of the OSNs.
However, unlike other countries such as Brazil, Costa
Rica, Chile, and Colombia [1], there was no compre-
hensive plan to reform and unify the sector. Therefore,
to examine the reforms, we have to look at a number
of separate documents spanning the decade [8].
International institutions, such as the World Bank
and the International Monetary Fund, actively sup-
ported and encouraged the reform of the Argentine
health sector [6,9]. The Ministry of Health and Social
Action and the insurance sector received large loans,
which were allocated quite unevenly. For example,
20% of the loans went to seven OSNs, which covered
5% of the population and channelled 9% of the system
revenues [5,10].
Towards the end of the 1990s, the Argentine
economy deteriorated, affecting living conditions and
leading to another deep economic crisis at the end of
2001. During the first half of 2002, after 4 years of deep
recession, the gross domestic product (GDP) decreased
15%. In the same period, Argentinas inflation rate
reached 70% and more than 50% of the total population
was living below the poverty line. Public spending fell
dramatically, and borrowing abroad became impossible
because the country defaulted on loans [1113].
This paper explores the institutional changes in
the health sector in the 1990s, and their impact on
the three functions of health financing: revenue col-
lection, pooling, and purchasing/provision of services
[1417]. Focusing on these functions avoids the pit-
falls of abstract debates on alternative health financing
mechanisms and provides a useful way of critically
evaluating past, present, and future options for health
care financing.
89
Both qualitative and quantitative methods have been
used. The writer reviewed official decrees, as well
as published and unpublished literature, and inter-
viewed health financing officials in Argentina. Data
were also obtained from four national household sur-
veys [1821]. Secondary analysis of data from national
health accounts was also carried out.
2. Health nancing functions
In line with a recent World Health Assembly res-
olution [22], universal coverage2 is considered to be
a crucial aim of health financing systems. Whether a
health financing system can achieve this depends on the
way in which funds are raised, pooled, and then used
to provide or purchase health services.
The first of the health financing functions revenue
collection is the process by which the health sys-
tem receives money from households, organizations,
companies, etc. Revenues can be collected in vari-
ous ways, including general taxation, mandatory social
health insurance contributions, voluntary private health
insurance contributions, out-of-pocket payments, and
donations. Pooling of risks and revenues is the accumu-
lation and management of these revenues, with a view
to sharing the risks of the costs of health care. The third
function is the process by which the revenues collected
by private or public agencies are used to provide or
purchase services.
3. A decade of reforms (19932002)
Between 1993 and 2002, Argentina embraced a
number of health reforms, which were implemented
mainly through decrees [2327]. This section presents
a brief description of the system pre-reform and an
overview of key events during these years of reform;
the impact on the financing functions is examined in
the next section.
Before the reforms, the OSNs had monopolistic
rights over the formal labour force of each sector,
implying that different groups of workers were not
2 Universal coverage is defined as access to key promotive, pre-
ventive, curative and rehabilitative health interventions for all, at an
affordable cost, thereby achieving equity in access.
90 E. Cavagnero / Health Policy 88 (2008) 8899
allowed to choose the fund they were affiliated with.
As a result, there were important differences among the
benefit packages offered by different OSNs depending
on the average wages and number of formal workers in
each sector.
The public health sector was always known to have
well-trained human resources and overall high-quality
services despite a deteriorating infrastructure, lack of
resources and long waiting times. Those using public
hospitals are mostly the uninsured. However, insured
people also use the public hospitals, particularly for
more expensive and complex treatments, but hospitals
were rarely reimbursed for those services.
The private health insurance sector consists of
not-for-profit and for-profit organizations known as
mutuales and prepagas, respectively. Both are com-
posed of voluntary affiliates who pay monthly
premiums, and benefit packages depend on the affil-
iates contributions. There are about 196 for-profit
private health insurers [28]. Due to dissatisfaction with
the services of OSNs many formal workers sought to
supplement their coverage with a prepaga insurance
plan.
The first step of the reform, in 1993, was to allow
competition among OSNs.3 Workers were given the
option of choosing their OSN and, therefore, OSNs had
to compete with one another for members. Membership
continued to be compulsory for formal workers and
their dependants.
Also in 1993, public hospitals were given greater
financial and managerial autonomy, with so-called self-
managed status.4 Thus, they were allowed to recover
costs from health care insurers (i.e. private and social
health insurances) or those with the capacity to pay.
The principle underlying the implementation of a self-
managed hospital is that, to improve efficiency, it is
better to allocate resources to subsidize demand of ser-
vices rather than the supply. Thus, hospital financing
should not be based on a global budget but on the
services actually provided. It was expected that the
efficiency of self-managed hospitals would increase
since managers would have an incentive to increase
productivity and reduce waste.
3 However, due to long negotiations between the government and
the union managers, this was not enforced until 1995.
4 Hospitales de Autogestion, also called autonomous public hos-
pitals.
Another important reform was the modification of
the Solidarity Redistribution Fund (FSR).5 This fund
collects a percentage of all contributions, which it
redistributes to OSNs whose members do not reach a
minimum level of contributions. However, in the past,
these transfers were distributed on the basis of discre-
tionary criteria, and the FSR did not succeed in its role
of redistributing funds from poorer to wealthier funds.
Henceforth, the FSR was to function on the basis of
pre-established criteria. Also in 1995, health payroll
taxes payable by employers were lowered from 6% to
5% with the view of cutting labour costs.
In 1996, the OSNs had not yet defined a basic ben-
efit package; there were thus wide variations in the
amount and quality of health care offered. Therefore,
an important change was the introduction of a standard
benefits package, the Obligatory Medical Programme
(PMO),6 to be provided by the OSNs and private health
insurance.
In December 1999, a bill to regulate private insurers
was approved. However, it has never entered into law.
At the end of 2006, a new bill was sent to the Congress
but it is yet to be implemented.
Following the economic crisis, in 2002 the National
Health Emergency Decree7 introduced some modi-
fications. The employer contributions were restored
to 6% (as in 1995), and the percentage of contri-
butions channelled to the FSR was increased.8 In
addition, the Emergency Obligatory Medical Pro-
gramme (PMOE)9 replaced the PMO and the National
Policy on Medicines10 was implemented. The latter
included the law entitled campaign for the utilization
of generic name medication11 and the public provi-
sion of basic medicines though the programme called
Remediar.
5 Fondo Solidario de Redistribucion, created under law 18.160,
which was enacted in 1970.
6 Programa Medico Obligatorio.
7 Emergencia Sanitaria Nacional (decree 486/02).
8 The proportion channelled to the FSR increased from 10% to
15% of contributions for those with wages lower than 1000 pesos,
and from 15% to 20% for those with wages higher than 1000 pesos.
9 Programa Medico Obligatorio de Emergencia.
10 Poltica Nacional de Medicamentos.
11 Promocion de la utilizacion de medicamentos por su nombre
generico (law 25,649 of 2002). This law required the name of the
generic form of the medication be indicated instead of just the brand
name.
Table 1
Overview of Argentine health reforms
Financing functions
Revenue collection
Self-managed hospitals
Reduction of payroll taxes
Increase of payroll taxes
Pooling
Allow competition among OSNs
Modification of FSR
Increased funding to FSR
Purchasing/Provision
Implementation of PMO
Replacement of PMO by PMOE
Generic medicines and Remediar
Source: Authors own construction based on Sections 3 and 4.
Year Pre-reform
1993 Unwanted subsidy from public
hospitals to social and private health
insurance
1995 Payroll taxes were seen as
contributing to the rising
unemployment
2002 The crisis brought many OSNs
almost to bankruptcy
1993 OSNs had monopolistic rights over
the formal labour force of each sector
1995 Funds were discretionary distributed
and this was shown to be regressive
2002 Due to the deficit of the FSR the
health emergency decree increased
its revenues
1996 Important differences among benefit
packages offered by different
schemes
2002 Difficulties (for OSNs and private
insurers) in providing PMO due to
the economic crisis
2002 A rise in the prices of medicines,
particularly during the crisis,
produced a lack of access to basic
drugs
Reform
Hospitals could recover costs from
insurers or those with capacity to pay
The payroll taxes were reduced from
6% to 5%
The payroll taxes were restored to
6% as in 1995
Workers were given the option of
choosing their OSN
Henceforth the FSR was to function
on the basis of pre-established criteria
Contributions to FSR rose to 15%
and 20% for wages lower or higher
than 1000 pesos, respectively
Establishment of a single basic
benefit package for OSNs and private
insurance
PMOE prioritized basic services and
increased co-payments for drugs
from 40% to 60%
Use of generic name medication and
public provision of basic medicines
through Remediar
Post-reform
Cost recovery continues to be low,
accounting for 3.5% of the budget of
public hospitals
The reduction of payroll taxes meant
a significant loss for OSNs
OSNs revenues rose; however, they
E. Cavagnero / Health Policy 88 (2008) 8899
remained at a lower level than in
2000
As transfers allowed between
different OSNs were limited, the
system remained fragmented
The FSR guaranteed that each OSN
would receive a minimum amount
per worker
This reform reversed the fall in
annual revenues FRS had
experienced since 1997
Improved equity and transparency,
although various modifications of the
PMO were needed
PMOE was enlarged (in 2004) and
co-payments for specific diseases
were diminished or removed
Improved access to basic drugs and
strengthened CAPS. Concerns about
sustainability and financing of
Remediar
91
92 E. Cavagnero / Health Policy 88 (2008) 8899

Table 2
Insurance coverage in the Argentine health system (in number of persons and % of total population)
1997 2001 2002
Public coverage 11,227,019 (38) 13,889,702 (43) 14,685,825 (44)
Social health insurance (SHI) 15,010,371 (50) 14,873,864 (47) 13,884,897 (41)
Private health insurance (PHI) 2,367,242 (8) 2,878,974 (9) 4,516,504 (14)
Both (SHI and PHI) 1,246,069 (4) 316,885 (1) 387,335 (1)
Total 29,850,701 (100) 31,959,425 (100) 33,474,561 (100)
Source: [18,20,21].

Table 3
Financing agents in the Argentine health system (millions of Argentine pesos and % of the total health expenditure)
1997 2001 2002
Government health expenditure 5173 (22) 5705 (22) 5892 (22)
Social health insurance 8100 (34) 8020 (31) 8060 (30)
Not prepaid (including out-of-pocket payments) 7061 (29) 8182 (32) 8645 (32)
Prepaid and risk-pooling plans (private health insurance) 3537 (15) 3693 (15) 4200 (16)
Total health expenditure 23,871 (100) 25,600 (100) 26,796 (100)
Note: Financing agents correspond to National Health Accounts definition, i.e. agents are entities that pool health resources collected from
different financing sources (such as households, government, external agencies, firms and non-governmental organizations) and pay directly for
or purchase health care. Source: [57].

4. Impact of reforms on the health nancing
functions
This section describes how the reforms affected the
health financing functions during the last decade. For
an overview of the impacts of the changes on each of
the functions see Table 1.
4.1. Collecting revenues
4.1.1. Level of funding
The first impact of the reforms was on the level
of funding for health services. The introduction of
self-management status meant that hospitals could be
reimbursed for services offered to the insured popula-
tion; the resources thereby generated by the hospitals
were supposed to help subsidize the delivery of ser-
vices to the poor. However, the public hospitals argued
that the administrative procedures established to claim
payments from the OSNs were complex, and OSNs fre-
quently refused to pay the public hospital bills. Some
studies have shown that cost recovery by public hospi-
tals from third parties is minimal [29]. More recently,
the World Bank [30,31] has documented that reim-
bursements to public hospitals received from OSNs
continue to be very low compared to the level of sub-
sidization from the former to the latter. In 2002 it was
estimated that between 20% and 30% of the population
that uses public hospitals has some form of formal cov-
erage; however, cost recovery accounted for just 3.5%
of the budget of provincial hospitals.
Self-managed hospitals were also allowed to intro-
duce user fees for those with the capacity to pay, mainly
to help with their maintenance expenses. These user
fees were collected in an individual hospital fund,
referred to as a cooperadora. Although these user
fees have been in place since 1993 there was neither
official oversight by the Ministry of Health nor an
explicit exemption policy.12 Therefore, there is no data
regarding the sums these payments generate or how
many people received free services [32,33]. However,
the programme Remediar, which dispenses free basic
drugs in the primary health care centers (CAPS),13 bans
CAPS from charging a fee for consultation, a practice
that was common in some of them before Remediar
[13,34].
Although total health expenditure has remained
around 89% of GDP, the contributions made by differ-
12 Those modifications were made at a lower level than the ruling
law, approved in 1984, which banned user fees in public facilities.
Thus, co-payments were in theory voluntary and there was no need
for exemptions.
13 Centros de Atencion Primaria de la Salud.
 E. Cavagnero / Health Policy 88 (2008) 8899
Table 4
Catastrophic health expenditures and impoverishment (% of total households)
Catastrophic payments (OOP as a share of the total expenditure less an average food expenditure)
20% or more
30% or more
40% or more
Impoverishment (those crossing the poverty line due to OOP)
Note: OOP = out-of-pocket health expenditure and standard errors in brackets. Source: [19,21].
ent groups have changed. Table 2 shows that, between
1997 and 2002, 9% of the population lost its social
health insurance coverage. This decrease was due to
people purchasing private health insurance, and mainly
to people shifting from OSNs to public coverage as
a consequence of unemployment or informal occu-
pation. However, as shown in Table 3, government
expenditure did not increase accordingly. Thus, the
higher number of users in the tax-funded subsystem put
additional pressure on the underfinanced sector, which
was already facing a significant deterioration in the
quality of care provision, poorly maintained buildings,
and low salaries [35,36]. The reform allowed many
management-level employees to have private insurance
schemes through their OSNs. This caused a reduc-
tion in the supplemental coverage with the prepagas
and, therefore, the percentage of the population cov-
ered with both social and private health insurance fell
from 4% to 1% (Table 2).
During the 1990s, the OSNs suffered a critical
shortage mainly because of an increase in informal
occupation and the reduction in the employers contri-
bution from 6% to 5% of workers wages. Although
in 2002 the payroll taxes from employers were re-
established at 6%, the revenues collected were not
sufficient to reach the level they had been in 2000.
4.1.2. Extent of risk protection
The second impact on revenue collection concerns
the extent of risk protection. While a certain level
of co-payments is desirable to reduce moral haz-
ard, generally speaking, the higher the proportion
of prepaid contributions, the higher the protection
against catastrophic payments. Catastrophic expendi-
ture occurs when households need to spend a large
93
1997 2002
13.697 9.709
(0.00012) (0.00010)
8.577 5.936
(0.00010) (0.00008)
5.531 3.598
(0.00008) (0.00006)
1.92 1.33
(0.00005) (0.00004)
proportion of their capacity to pay on out-of-pocket
health expenditures. Different authors have used dif-
ferent cut-off points to define catastrophe and there
are slight differences in measuring capacity or ability
to pay. Some have used the non-food expenditures of
individual households [3739] and some others have
used subsistence expenditure, which is based on the
total expenditure less the average food expenditure
of households whose food expenditure share of total
expenditures is in the 4555 percentile range [4044].
The latter option is used in this paper. Some studies
have shown that, in 1997, 5.5% of Argentine house-
holds spent 40% or more of their capacity to pay [40].
In this study different thresholds have been used for
1997 and 2002. As can be seen in Table 4, catastrophic
payments independently of the threshold used were
lower in November 2002 compared to 1997. Impover-
ishment, which represents those crossing the poverty
line due to out-of-pocket expenditures, also fell from
1.92% to 1.33% of households.
This fall in catastrophic expenditures and impover-
ishment may be explained by at least two reasons. The
first reason is the successful implementation of the pro-
gramme Remediar [34]. This programme was launched
in October 2002 to provide 36 multi-source medicines
at no cost to the estimated 15 million Argentines who
are using public sector facilities and are unable to afford
medicines. Currently, each kit provides 46 presenta-
tions and would address about 80% of the therapeutic
needs of the CAPS [13]. This programme is particu-
larly relevant since expenditure on medicines is a major
share of household out-of-pocket expenditure; in 1997
this proportion was 68% and it reached 87% in 2002.14
14 Authors own calculations using the survey called Encuesta
Nacional del Gasto de los Hogares (ENGH) [19] for 1997 and World
94 E. Cavagnero / Health Policy 88 (2008) 8899
Table 5
Use of health facilities, conditional on self-perceived need (% of total
households with perceived need)
Outpatient facilities 1997 2001 June-02 November-02
Public facilities 26.4 24.4 17.1 21.4
Private (or SHI) facilities 49.8 52.8 48.8 55.3
Other facilities 3.0 1.4 1.2 0.7
Non-use of health care 20.8 21.4 32.9 22.7
Total 100 100 100 100
Source: [18,20,21].
The second reason is the reduction in the use of
health care services when needed during this period.
Table 5 shows the use of health facilities, conditional
on self-perceived need. Although self-perceived need
is a complex function of several factors that affect per-
ception of health and the potential of health services to
improve health [45], these questions can provide useful
insights into the mechanisms through which the eco-
nomic crisis has impacted on health care utilization and
on the choice of outpatient facilities. As in June 2002
the recall period was longer than in 1997 and 2001,15 it
would have captured delays in seeking care due to the
economics crisis. Still, non-use of health care condi-
tional on perceived need increased considerably during
this period; 32.9% of those self-reporting need did not
get any health care. However, by November 2002 non-
use had receded to levels closer to the pre-crisis values.
In other countries such as Indonesia, studies have also
shown reductions and delays in seeking care during
periods of economic downturn [46].
4.2. Risk pooling
4.2.1. Level of fragmentation
With regard to risk pooling, one of the main
goals of the reforms was to reduce the level of frag-
mentation among OSNs. The government and the
international organizations expected that a combina-
tion of competition and stronger regulation would lead
to a consolidation of the social health insurance sub-
system by eliminating small, uneconomical, and poorly
Bank Survey [21] for 2002.
15 The recall period in 1997 and 2001 lasted 1 month. In 2002
the World Bank conducted two surveys, one in June and the other
in November. In June 2002 the self-reported illness and utilization
referred to October 2001 and in November 2002 it referred to June
2002.
managed funds. It was expected that, after several years
of competition, the number of funds would decline
from over 300 to fewer than 50 [47]. Although some
OSNs have disappeared mostly those having small
client bases and relatively high-administrative costs
the sector remained highly fragmented. The number of
funds was reduced from 312 to 275 in 1999 [48] and
to 268 in 2003 [30].
The reforms did not lead to a substantial degree of
risk pooling since transfers were not allowed between
union-related OSNs and OSNs for management-level
employees. Thus, large union-related OSNs were the
ones that lost the most affiliates as workers with
higher wages moved to more attractive OSNs for
management-level employees. The number of workers
who moved from one OSN to another represented only
3.7% of all beneficiaries and 5% of all contributions.
There is also evidence of cream-skimming attempts
to attract a wealthier and healthier population. For
instance, the proportion of people who switched from
one OSN to another was twice as high among those
with a high salary (more than 1000 pesos) [49]; and
the average contribution among workers who switched
(93 pesos) was 60% higher than the overall average
contribution per worker (58 pesos) [5,10].
4.2.2. Risk adjustment
Generally speaking, there are two main means of
risk-equalization, namely risk adjusters and ex-post
risk sharing. The former uses patient characteristics
to estimate likely health expenditures.16 The latter
involves retrospective reimbursements to cover indi-
viduals whose health expenditure turns out to be
particularly large. In Argentina, the ex-post risk sharing
within OSNs is done through the Special Programme
Administration (APE)17 fund and, as in the case of the
FSR, it is financed by a percentage of all contributions.
An efficient ex-post risk sharing would take the bur-
den of covering high-cost and low-probability health
events off the OSNs and other insurers. This is known
as truncating the risk pyramid as it moves the risk bur-
den of multiple smaller insurers to a single pool. This
aggregation of catastrophic risks should help reduce
16 Possible characteristics are demographic variables, such as age,
sex and geographical factors, chronic or acquired medical conditions,
disability status and socioeconomic factors.
17 Administracion de Programas Especiales.
 E. Cavagnero / Health Policy 88 (2008) 8899
the cost of contributions and risk selection, promote
competition and improve the financial protection of all
citizens [1]. AEP has been facing financial deficits; in
2003 it had accumulated a debt with OSNs of about
200 million pesos [30]. A large part of this debt was
incurred prior to the crisis and reflects structural prob-
lems relating to the definition of the list of interventions
covered by the fund and the mechanisms to do so. Some
countries in the region, such as Mexico, have estab-
lished in their recent health reforms this kind of fund
for catastrophic illnesses [45,50,51].
In the past, FSR distributed funds on a discretionary
basis and this was shown to be quite regressive, as those
receiving more contributions were also those receiv-
ing more subsidies [5]. One of the important steps of
the reform was to introduce pre-established criteria for
distribution of the subsidies. Thus, the FSR guaranteed
that each OSN would receive a minimum of 40 pesos
per month per worker. In 2002 through the health
emergency decree the contributions to the FRS were
increased. This measure together with the increase in
employer contributions reversed the fall in annual rev-
enues this fund had experienced since 1997.
The FSR can be seen as an income adjuster rather
than a risk adjuster as it equalizes the different income
levels of the OSNs independently of the risks of
their affiliates. A risk-equalization fund would imply
that pooled funds are redistributed according to the
risk profiles of the participating risk-pooling schemes.
Colombia and Mexico are examples of countries in the
region that have implemented a form of this kind of
risk-equalization.
4.3. Purchasing and provision
4.3.1. Benet package
Finally, the reforms have also affected the third
health financing function, purchasing and provision,
through the imposition of a benefit package in 1996.
The PMO included primary and secondary care as well
as preventive and mental care. In 2000 it was expanded
to include some high-cost and low-probability treat-
ments [52].
The cost of the benefit package was set initially at
40 pesos per household. Subsequently, it amounted
to 20 pesos per beneficiary. However, this cost was
not based on sound cost-accounting and modifications
were therefore needed. An exhaustive study in 2000
95
showed that the average cost of the PMO was 24.03
pesos per person [53]. At the end of 2002 it was about
31 pesos per person per month.
The PMOE was implemented in 2002, after the
devaluation and the economic crisis. During the eco-
nomic crisis the prices of pharmaceuticals especially
imported proprietary drugs skyrocketed. In 2002,
the prices of 250 medicines were on average 170%
higher than in 2001 [31] and a sample of 26 frequently
used medicines revealed a 55% price increase (reach-
ing 130% in some cases) [13]. The crisis also affected
health service provision. At the end of 2002, 160 OSNs,
covering 86% of the system affiliates, could not assure
the PMO to their affiliates. This was due not only to
an increase in health prices but also to a decrease in
revenues caused by the rise in informal employment.
Therefore, the replacement of the PMO by the PMOE
aimed at prioritizing basic services in accordance with
the countrys economic situation; some services were
suspended and co-payments for pharmaceuticals were
increased from 40% to 60% [14].18
In 2004 the PMOE was expanded; for instance, co-
payments of medicines for chronic diseases were cut
to 30% and other drugs such as those used in the treat-
ment of tuberculosis, some oncology drugs and insulin
started being covered 100%. In the future it will be
extremely important for the package to be broadened
and to include more cost-effective interventions espe-
cially those dealing with major causes of the burden of
disease.
Regarding the publicly provided health services,
there exist large differences in the services provided
across the provinces. However, the nation-wide pro-
gramme Remediar delivers an explicit kit of basic
drugs to the primary health care centers. Before this
programme, public services did not include drugs for
outpatient services as part of the benefits, except for
some municipalities/provinces and those in special
programmes [48] such as the Maternal and Child Pro-
gramme, which is also part of PMOE and covers 100%
18 This increase in co-payments was not reflected in an increase in
out-of-pocket expenditures (Table 3). One of the reasons could be the
fall in the purchase of medicine [13] and also in the use of health care
when needed (Table 5) during the economic crisis. Another reason
could be the fact that the programme Remediar, which provides basic
medicines at the primary health care centers and banned user fees in
these institutions, was launched also in 2002.
96 E. Cavagnero / Health Policy 88 (2008) 8899
of drugs for children up to 1 year of age and their
mothers up to 1 month after the delivery.
The Remediar programme was successful in pro-
viding basic drugs to those more vulnerable while
strengthening primary health care utilization [13,34].
However, there are some concerns about its sustain-
ability. This programme is financed by loans from the
Inter-American Development Bank (IDB) and funds
from the national government (40%). Some critics
have argued that in a highly indebted country such
as Argentina this programme cannot be institution-
alized if it continues to depend on loans from IDB.
Also, the programme has been criticized for buying
from for-profit-oriented pharmaceutical firms instead
of stimulating national production in public laborato-
ries and for delivering kits that are adjusted neither
by size nor by content. Thus, some of the drugs are
not consumed and stockpile while others are deliv-
ered in insufficient quantities to satisfy the demand
[34].
4.3.2. Quality and efciency
One of the goals of the reforms, especially for the
OSNs, was to improve efficiency and quality through
competition among the different funds. However, due
to the lack of regulation and information, some stud-
ies have shown that, instead of improving efficiency,
competition increased overall complexity creating dis-
turbance and resistance from inefficient funds and the
ill-informed insured population [10,54,55]. Currently,
consumer associations deal with patients complaints
and Argentina is considered to have a quite developed
legal framework for consumer rights compared to other
countries in the region [56].
The purchasing capacity of the OSNs from private
providers is not strongly regulated and it has been
argued that the inefficiency and high cost of health care
in Argentina are largely explained by not always honest
purchasing practices [30]. It is calculated that up to 90%
of the contributions collected by the OSNs go to private
providers [10]. In Table 5 we can see that more than
55% of those that have self-reported need have gone
to private facilities. Not only those covered by social
or private health insurance but also the uninsured often
prefer to use private providers, especially for inexpen-
sive outpatient services, and pay out-of-pocket rather
than endure queues and waiting times in the public
sector.
The private sector in Argentina is weakly regulated,
not only with regard to its role of provider but also
in its role of insurer. Regulating the private sector is
extremely difficult and countries that have attempted
to do so have not always been successful [1,4]. Table 2
shows that private insurers covered around 15% of the
population. As in 1999, at the end of 2006 another bill
to regulate private insurers was proposed; however, the
regulation of the private sector remains a pending task
for the Argentine health sector.
5. Discussion and conclusions
This paper has examined the Argentine health
reforms and their impacts on the three inter-related
financing functions. Regarding the level of funding, the
reforms aimed at introducing reimbursement mecha-
nisms for services offered to the insured population
in self-managed hospitals. However, hospitals bud-
gets increased only marginally. One of the reasons for
that was the complexity of the administrative proce-
dures for claiming payments and the lack of regulation
and enforcement by the Ministry of Health. Strength-
ening reimbursement mechanisms for public hospitals
will lead to an increase in their revenues as well as
an improvement in the fairness of the health financing
system.
In relation to the reduction of catastrophic health
expenditures and impoverishment two possible expla-
nations were discussed. The first one could be the
positive impact of the programme Remediar on reduc-
ing out-of-pocket payments. However, an overall
decline in the use of health services could have also
contributed to this reduction. Thus, it is critical to fur-
ther evaluate the impact of the this programme as well
as its sustainability since it is currently funded through
external debt.
The reforms did not reduce the level of frag-
mentation of the OSNs as expected. Competition
among social health insurance funds was incomplete
since transfers were not allowed between union-related
OSNs and OSNs for management-level employees.
This weakened the already fragmented equity of
the system as those with higher wages shifted to
more attractive OSNs for management-level employ-
ees.
 E. Cavagnero / Health Policy 88 (2008) 8899
Reforming the FSR was a noteworthy step toward
improving solidarity within this subsystem; however,
there is still room to extend risk pooling. The exten-
sion of risk pooling, together with the implementation
of risk adjusters, should be considered in order to
counteract cream-skimming. The APE, which cov-
ers low-prevalence and high-cost interventions, should
be strengthened, especially with regard to the def-
inition of the list of interventions covered and the
mechanisms to do so. Although the reforms did not
aim at unifying the sector, alternatives about how
to improve risk pooling in the system as a whole
should be considered in order to reduce fragmenta-
tion and segmentation and increase risk protection and
equity.
The imposition of a single basic package for OSNs
and private insurance was an important step towards
equity and transparency in the system. However, fur-
ther revisions or extensions of this package need to
have a clear definition process that takes into account
efficiency and equity criteria. And, differently than in
the past, this should be based on a sound costing anal-
ysis.
The private sector in Argentina is weakly regulated
in its role of provider as well as in its role of insurer.
The private sector grew considerably during the 1990s;
however, the regulation of the private sector remains a
pending task for the Argentine health sector.
To sum up, extending risk-pooling mechanisms,
improving the benefit package and its sustainability,
and regulating the private sector are approaches that
should be considered in order to improve fairness of
the health financing system and protect people from
financial hardship as a result of illness.
Acknowledgements
I would like to thank especially Guy Carrin for
his contribution and helpful comments throughout the
preparation of this paper. I am also grateful to David
Evans, Xu Ke, Ole Doetinchem, Taghreed Adam, Patri-
cia Hernandez, Amit Prasad, Daniel Albrecht and
Jerome Lahaye for their comments in early meetings
and internal discussions. Thanks are also due to two
anonymous referees for their helpful suggestions. All
the views expressed in this document are solely the
responsibility of the author.
97
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