ECON2236: Économie de la Santé Health Care Systems of Costa Rica and Colombia Eigner Franz, SS 06

Health Care Systems of Costa Rica and Colombia

In this paper I would like to present 2 different health care systems. The first one will be the
state-dominated health care system of Costa Rica. The second one will be the health care
system of Colombia, which was transformed 13 years ago by introducing market laws for
health care.

1) State-dominated Health care system of Costa Rica:

1.1 Introduction:
The statistics show, that Costa Rica is a middle income country, but with a high human
development, including remarkable health outcomes.

Table 1
Costa Rica United States Mexico
GDP per capita (PPP US$) 9,460 34,320 8,430
Health expenditure per capita 562 4,887 544
Infant mortality rate 9 7 24
Life expectancy at birth 78.0 77.0 73.3
Gini 46.5 40.8 54.6
HDI 0.834 0.939 0.802
All data for 2001, except Gini index for 2000. UN Development Programme(2003)

Its life expectancy is second only to Canada in the Americas. Although the GDP per capita of
Costa Rica is for times lower than the US and similar to that of Mexico, the “Costa Rican
health and equity indicators rank close to the US’ and well above Mexico’s”.

Table 2
IMR1 IMR Reduction/ IMR MMR2
1970 2001 1970-2001 1985-2001
Costa Rica 62 9 :7 29
Chile 78 10 :8 23

1
The infant mortality rate, the rate at which babies less than one year of age die
2
Maternal mortality rate: The number of maternal deaths related to childbearing divided by the number of live
births

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Venezuela 47 19 :2 60
Panama 46 19 :2 70
Colombia 69 19 :4 80
Mexico 79 26 :3 55
UN Development Programme(2003)

The reason for their achievements in decreasing the “Infant Mortality Rate” can not be only
reduced to the annual growth rate of nearly 3 % between 1995 and 2001. In fact, Costa Rica’s
GDP and growth rates are pretty similar to the ones of other Latin American countries.
Interestingly, in spite of these respectable achievements, for a long time, there was a lack of
interest for researching the health care system in Costa Rica.

Table 3
Health expenditure GDP GDP per capita
per capita (PPP US$) per capita(PPP US$) Annual growth rate
2001 2001 1975-2001
Costa Rica 562 9,460 1.2%
Chile 792 9,190 4.1%
Venezuela 386 5,670 0.9%
Panama 458 5,750 0.8%
Colombia 356 7,040 1.5%
Mexico 544 8,430 0.9%
United Nations Development Programme (2003)

1.2 Health policy features:

The Costa Rican health system is dominated by the state. It is basically a compulsory social
insurance system. The CCSS, the Social Security Administration of Costa Rica (Caja
costarricense de Segura socialor), is the single, public insurer in Costa Rica. Private insurance
is practically non-existent. So there is no purchaser-provider split, which explains the low
administration costs of only 3.6%. (Chile and Colombia over 10). It once initiated the public
health insurance and began extending health coverage to low-paid workers. Now it is the
unique delivery institution of public hospital care. Moreover the CCSS is a semi-autonomous
institution in Costa Rica, this means that “its budget is separate from that of the central
government”.
In 1998 payments for private health goods account for only 26% of total health spending.
(58% among Latin American Countries), which is very low for a developing country. This

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dominant position of public hospitals doesn’t correspond with the international, market liberal
promotion of several, competing providers. However, in 1993 Costa Rica agreed on a light
form of deconcentration after some debates with the World bank, in order to decentralize their
health system and to gain users and communities’ participation. Communities’ participation
in form of elected health boards, which should represent the users, together with social
security representatives, patrons and social organizations. Health boards should oversee and
control the hospitals, however the CCSS often refuse to cooperate with them and practically
no one goes to the elections.
The CCSS also introduced ‘Contracting in’ by setting up ‘managerial contracts’ or
‘performance contracts’. They should formalize the relationship between central authorities
and operating units. It guarantees a budget in return for the ‘production’ of specified medical
services and the achievement of quality standards. If the hospitals failed to comply the
contract, they would not get a special “budget bonuses”. However they are only used to
monitor coverage progresses. Professionals’ incomes don’t depend on the achievement of
these aims.
“Contracting out to private-for-profit services was also performed – but only - to a small
extent, mainly to solve long waiting lists or access to expensive medical technology”. It was
feared that the deconcentration of purchasing will lead to corrupt practices. For example
CCSS specialists have referred patients to their own private practices for treatment. Still there
may be significant opportunity costs of concentration, in the form of forgone efficiency gains,
for not holding hospitals accountable for their budgets sooner.
Public health expenditure has been used with equity in mind. There is a high rich-poor
solidarity with progressive public spending on health. In the end of the 90s, 29 percent was
spend for the poorest quintile. against 11% for the richest. They could reduce income
inequality, in the sense that “poorest families received resources in a bigger proportion”.
The ministry of Health nowadays only “formulates policy for the sector, regulates medical
markets, monitors food and water quality and conducts public health campaigns”, and so it
tries to ensure a minimum quality in health care.

1.3 Health services characteristics:

The most important publicly outpatient facilities are the EBAIS:

- EBAIS (Equipos Básicos de Atención Integral de Salud). These are Basic Teams for Integral
Assistance in Health. They should provide public health services, especially integral care, that

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is “services attending to communities’ physical, social, and psychological health needs”, in

form of health care teams. These are health centers with a general practitioner, an assistant
nurse, a pharmacy assistant and a primary3 health technician. If necessary, they can be mobile
and travel around their territory.
Private care is also promoted by the system, but only to a small extent, especially when
public facilities are overloaded they send patients to the private sector. Or if patients (richer
ones) may want to avoid long waiting lists. “Many of the country’s highly trained physicians
work in the mornings for the CCSS and have their own office and clinic hours in the
afternoons”. So they provide both, private and public care. Payments for private health goods
account for 26% of total health spending. Furthermore it is not uncommon to find a Costa
Rican doctor speaking several languages, all learned while pursuing advanced degrees in
foreign countries. Health professionals are in general well motivated, on account of high
social prestige and high incomes.
Health cooperatives were contracted out since 1988 but to a small extent. For example the
CCSS worked together private doctors’ cooperative, which should run and maintain a clinic.
People were satisfied with the services, however it was argued that “cooperatives’ per patient
costs were much higher than those of the traditional clinics and so they stopped the project”.

1.4 Health services outputs:

“The CCSS’ health insurance enrol 89 percent of the total population. Uninsured people, (self
employed workers, business owners) live without public health insurance. However they can
use public health facilities, especially hospitals”. Utilisation of medical health services is
relatively high, although sometimes there are problems with accessibility. Program coverage
rates are also high, for instance in 2002, 96% of Costa Rican women used some form of
contraception”. “Coverage of chronic patients in first-line structures was 73% for
hypertensive disorders and 61% for diabetes”.
Improvements are still needed:
The CCSS is still too hierarchical and centralized and individual worker’s authority is very
limited, because merit-based performance incentives don’t exist.

1.5 Human Development

3
In medicine, primary care is a term used for a health care provider who acts as a first point of consultation for all patients.
Generally, primary care physicians are based in the community, as opposed to the hospital. Alternative name for this field is
general practice. Examples of diseases managed in primary care are: Services provided by medical specialists who generally
do not have first contact with patients (eg, cardiologist, urologists, dermatologists)

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with 40% of its population remaining rural, the achievements of Costa Rica are even more
remarkable.

Table 4:
Costa Rica Columbia Mexico
Below 1 $ a day 2 8.2 9.9
Below 2 $ a day 9.5 22.6 26.3
Literacy rate in % 95.8 92.1 90.5
Gini 46,5 57,6 54,6
GEM 0,664 0,461 0,563
IMR per 1000 9 19 24
HDI 0.834 0.773 0.802
Data for 2002, United Nations Development Program 2003

Because Costa Rica doesn’t have armed forces, high social investments in public expenditure
on health and education could be made to achieve better development indicators than other
Latin American countries. Of course, these developments can not be traced back only to
health achievements. Economic growth and other social policy measurements like education
play an important role here.
But several other specific indicators suggest an impact directly attributable to health services.
However we have to notice:
Income inequality rose in the last years, the HDI staggered highly between 0.889 and 0.797 in
the last years. Moreover the management of the CCSS was accused of corruption several
years ago and the executive officers of the CCSS are often selected on a political ground.

Remarks on the Costa Rican health care system:

- a unique, unified public system, which permits integration
- publicly oriented services as dominant delivery institutions of care
- main principle is contracting in (within publicly oriented services) (opposed to
contracting out to private-for-profit services)
- users’ and communities’ participation in health services management
- government expenditure representing the bulk of total expenditure
- no real purchase – provider split, nor hospital managerial autonomy
- a single, public insurer (CCSS)
- high rich-poor solidarity with progressive public spending on health

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1.6 Final words:

Costa Rica established a unified system of social insurance, provided by the state. With its
remarkable results, it seems to question the market liberal theories of international aids.
Similar to Cuba, where advisors of Wolfensohn, the former head of the World Bank, noticed
in 2001, that the “Cuban policy is not exportable, at least not without its authoritarian
regime”. However this would not hold for Costa Rica, which is a democratic country.

2) Colombia: Health Care System and Privatization

There was a lack of empirical evidence for the use of privatization of health care, when
Colombia reformed their health sector in 1993 with the Law 100. However, “seductive
theoretical arguments” promised to improve health care in Colombia.
The main objectives were:
• improving insurance coverage (universalize)
• improve the health status of the population
• improve access to and utilization of health services
• control health expenditure growth

2.1 Colombia’s Reform:

The Law 100 created a new system for the financing and delivery of health care. It established
a system of social health security, which based on purchaser-provider split and contracting-
out. The program was financed by petroleum discovery and based on the principles of
decentralization, which should guarantee efficiency, solidarity, equity and community
participation.
The new system is characterized by universal health insurance coverage with two regimes:
- The contributory regime: mainly for the employed people who can afford giving
contributions to the social security system. Contributions are collected by the insurer of
choice.
- The subsidized regime: aimed at people who cannot afford to give contributions and,
therefore, must be subsidized. It’s financed by some contributions of the contributory system
and by (supply-side) government subsidies.
Every insured individual chooses freely an insurer and selects providers within the insurer’s
network. The Hospitals must be efficient and competitive, in order to achieve their income
from the selling of services to several administrators of the subsidized and contributory

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regimes. Both regimes have access to a basic benefit package, but the one for the contributory
regime includes all levels of care, while the subsidized system only included the most
essential care, which has to be complemented with services provided by public hospitals.
Overtime those supply-side subsidies should be transformed into demand-side subsides in
order to achieve universal insurance coverage with the same health package in both regimes.
The state itself didn’t offer any health services, but kept a steering role, this means:
monitoring and evaluation. Excepted for activities with large market imperfections like
disease control programs (externalities) and health care delivery for the uninsured (the
vinculados), who - when they use health services - had to pay 30 percent of the actual cost .

2.2 Insurance Coverage:

Graph 1

The official numbers showed an improvement of the health care system.

Before, less than 30 percent were covered by the Social Security Institute or by private health
care. This was one of the lowest rates in Latin America and was basically limited to the labor
force. In 2001 the number of persons enrolled in a health insurance scheme is about 55
percent and this number is quite constant through the last years, with huge regional
differences. Social insurance coverage increased, for the rich as well as for the poor people.
Especially for the poorest 10%, coverage rose from 4 to 41 percent. The richest 10%, the
number increased from 65% to 80%.
However you have to read these data carefully. The reform changed Columbian’s supply
oriented system into a demand-oriented system. Before, under a supply oriented system, you
didn’t need to register. As a consequence, if people before didn’t have any insurance, it
doesn’t mean that they did not receive medical treatment. However, most of the available data
suggest that before the reform only 20 - 30% of the population had access to health care.
Interestingly, about two-thirds of the poor people, who are eligible to enrol in the subsidized

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regime are uninsured, although signing doesn’t cost anything. The failure to interest the
poorest people for this regime seems to undermine the quality and the affordability of this
care. It must be also noted that the difference of the coverage between rich and poor is still
large.
Graph 2

We see in Graph 2: Vinculados are especially the poor people, the difference between the
number of uninsured people between the income percentiles didn’t change much between
1992 and 1997. There were respectable achievements, especially for the poor people, but it
seems that Colombia still has a long way to go to reach equity in insurance coverage.
Some rich people avoid this insurance scheme, because they also have the possibility to join
‘special’ private health care, and by this they avoid paying direct contributions for the
subsidized regime. Furthermore these contributions seemed to be too low to guarantee that
“all inhabitants should be provided equal quality of health care, independent of their capacity
to pay”. The subsidized regime only provided a health package which is only about 50% of
the reference standard. For example, hospitalization in an internal medicine station or the
after-treatment for chronic diseases were excluded from the subsidized package. It consisted
mainly of essential clinical services, some surgical interventions and the treatment of
catastrophic diseases. All in all, it seemed that the 2 system scheme countered the objective of
equity.

2.3 Access to and use of health services:

Data on real utilization are difficult to obtain. It can be assumed after the National Household
Survey (1992-1997) that in absolute numbers more people have access to care (50-60% ?).
But: Other data suggest a deterioration: Yearly doctor utilization rate decreased from 61.7%
to 51.1%. High percentages of death without diagnosis especially in poor regions, which is
typical of high prevalence of unsatisfied basic needs.

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Copayments can also limit access to health care, especially for the poorer people. For
uninsured people, finance was the first obstacle to consulting a doctor, for insured people it
was second.

2.4 Disease Control and Health Indicators:

Some key health indicators and disease control programs have deteriorated. One important
Health Indicator is the infant mortality rate, which is “known to reflect general social and
economic conditions” and not just only access to medical care. However child mortalities like
respiratory infections and other diseases are considered as avoidable mortality and they are
increasing in Colombia in the last years. Furthermore we can find a decline of vaccination
coverage. The national coverage between 1990 and 2000 for total vaccination of children
below 1 year of age dropped from 67.5% to 52%. Malaria transmission was on the increase.
The low Tuberculosis notification rate deteriorated further.
Reasons:
- excessive emphasis on programs that hold on to an explicit demand
- Difficulties in accessing the services, excessive procedures
- A decline of protective measures due to the decentralization process and fragmentation
of responsibilities of the different aspects of diagnosis, treatment and contacts.
- Insurance companies and private health care providers are not encouraged to spend
time on activities that are not rewarded financially

2.5 Financing:
Health expenditures increased rapidly, in public health expenditure as well as in private health
expenditure. Private expenditures reached 45 percent of total health expenditures (60% out-
of-pocket payments, the rest mainly employers’ contribution). It is assumed that measures as
choice of insurer increased cost sharing at the point of use. Also on theoretical grounds, a
demand oriented model generally increases the expenditures.
Especially the costs for the 2 regime system, contributory and subsidized system increased
tremendously (80%), whereas for the vinculados, who are served by the state (a supply-
oriented model) the cost increase was significantly smaller (40%).
There was a tendency to contract general practitioners on salary and to reimburse specialist
and hospital services and procedures on a fee-for-service basis, which led to
overconsumption. Finally also the administrative structure was costly and amounted to 52%

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of the capitation fee in 2001. In Canada, with a system of a single purchaser these costs
amount to 16.7%, in the USA with multiple purchasers 31%.

2.7 Final words:

Despite of the achievements, higher coverage and access of health care for a larger part of the
population, it’s obvious that Colombia failed to reach their ambitious objectives of equity and
full coverage. It seems that the Colombian state was not able to regulate and control the
private sector. It is the question if in general low or middle income countries are not able to
deal with privatization successfully. In European countries, contracting out was thoroughly,
successful, (Germany or France). But in these countries the public expenditure as a percentage
of total expenditure on health is much higher (about 80%). In contrast to 54,5% in Colombia,
48,7% in Brazil 24.9% in China or only 13% in India. Also in richer countries powerful
workers’ parties and mutual aid association were able to secure social standards. Furthermore,
these countries could control medical costs by using a supply-side cost sharing.

Figueras and Saltman supposed that the management skills, which are required for
contracting-out are “well beyond the capacity of many developing countries”. These
management skills consist of providing availability of public health skills to assess health
needs, evaluate interventions and monitor outcome. Public authorities in less developed
countries often remained inconclusive in setting care standards among private providers. “The
choice of insurer could lead to an increased cost sharing at the point of use and to removing
services from the publicly financed package of care” undermines equity objectives.

Research suggests that Contracting-out can be successful, when following conditions are met:
- Real competition exist between competent and substantial private providers
- Adequate government capacity to assess needs and to negotiate and monitor contract terms.
- Legal and political environments exists that can enforce regulations and resist patronage and
corruption.

3. Conclusion

After all, it looks as if it would be difficult to figure out which health care system should be
recommended to developing countries. Also the World Bank plays an ambiguous role,
claiming for market liberalization, but warning at the same time against market imperfections.
Costa Rican and Cuban health care achievements show, that a comprehensive, adequate

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health coverage can also be achieved by a unified, state controlled system. However these
achievements in Costa Rica could be made within a special socio-economic context, after a
gradual process of nationalization of its system, beginning in the 1940s. It’s difficult to
imagine that an export of this system to other countries will lead to the same success. The
liberalization of the Colombian health care system showed improvements as well as
deteriorations of health care so far. Therefore new empirical studies about experiences of
developing countries with market liberal reforms will be necessary to strengthen the evidence
of World Bank’s health care recommendations.

Sources

Costa Rica:

A different spotlight on Costa Rica: a politically incorrect and healthy miracle

Clark, Mary A.: Health Sector Reform in Costa Rica: Reinforcing a public system. Tulane
University. 2002.

http://www.cocori.com/library/life/med1.htm
Ed Underwood: To Your Health in Costa Rica. 1996.

Colombia:

Tony De Groote, Pieree De Paepe, Jean-Pierre Unger: In vivo Test of health sector
privatization in the developing world. In: International Journal of Health Services, Volume
35, Number1, 125-141, 2005.

http://bmj.bmjjournals.com/cgi/content/full/315/7107/501/h
Richards, Tessa: Colombia struggles with health reform. In: BMJ. 1997.

http://www1.worldbank.org/devoutreach/may05/article.asp?id=295
Escobar, María-Luisa: Health Sector Reform in Colombia. May 2005.

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