What Makes Brazil’s Healthcare system so different? Prof. Maureen Lewis of FGV-EAESP shares her take on the unique mixed public and private health system in the country.

At a glance

Brazil, a country adored all over the world for its coffee, samba, football and Jiu-jitsu, is certainly not just another ‘BRIC’ in the wall. With a population of roughly 200 Million, the country is unique not only through its inclusion into the OECD club and economic tug-of-war between boom and recession, but also by its distinct Healthcare sector. Composed of around 6,800 public and private hospitals, 195,000 service units and almost 500,000 hospital beds (Industry Report, Healthcare: Brazil, The Economist Intelligence Unit, September 2014), the health sector counts for ~9% of Brazil’s GDP (2015), with a health expenditure per capita of almost USD 705 (OECD). Divided into private and public components, the healthcare system consists of everything ranging from small, low quality hospitals to world-class research hospitals.

To cover the costs incurred by the citizens at these units, the Federal, State and Municipal governments have put into place the Single Unified Health System (SUS), the funding for healthcare facilities is provided via the federal prospective reimbursement system, the AIH (Authorization for Hospital Admission). Moreover, there are 6 private high-complexity Centres of Excellence all over the country which provide free health care to the citizens in return for tax breaks from government.

Caught between private and public funding

Lately, a trend has been observed in the spending of the SUS – an increase in funds for public-owned facilities and a sharp decline in funds in privately owned hospitals. The SUS under-reimburses for care for non-public providers, leading to the closure of several philanthropic facilities. This has generated increased demand for private insurance for people to benefit from care at public hospitals.

Such divergence runs a risk of reducing engagement and support for improved healthcare performance by the growing middle and upper-class population who are increasingly relying on private insurers and providers.

As such, middle and upper-class citizens are benefiting from private insurance through their own pockets or those of their employers and at the same time paying for the SUS through taxation.

The economics of healthcare

What makes things even more interesting is that a rise in chronic conditions and diseases across Brazil has influenced a shift in the demand for hospitals towards more specialty care than general hospitalization. This is costing the average Brazilian more than the traditional remedies at hand. As suggested by a private sector report, a decline in the mortality rate can be seen for several diseases and illnesses credited to improved living conditions, rising levels of education and improved preventive measures. The same cannot be said for illnesses such as cancer, cardiovascular disease and perinatal disorders which seem to have replaced the more easily treated illnesses. This has, in a way, led to a sharp increase in the average costs to state for diagnosis and treatment.

But not all of this cost expense can be attributed to the change in disease complexity. An argument can be made towards the heavy investments that Brazil is making in technology in healthcare. Interestingly, Brazil has more MRIs and CT Scanners than several of the developed countries such as the UK and almost three times more than Mexico.

Another factor that can be attributed is the demographic of the private insurance enrolees. It is seen that that over 45% of the age groups that use this type of insurance hail from either the under 18 or the over 59 categories, both of which are generally non-performing categories that are highly susceptible to illnesses. The increase in life expectancy rates of the country is ironically, only adding to its woes.

In the face of these high costs and expenditure, it has been imperative for the Brazilian healthcare industry to keep its revenues high. But the recent trends discussed above have led to a reduction in hospitalisations, pushing the healthcare industry towards a risk of loss. Loss ratios have been increasing substantially over the past few years. To gain control over spending and to improve the overall efficiency of the healthcare industry, financing seems to pose a challenge for the Brazilian administration for the years to come.

Complex problems – simpler fixes

The picture is clear. Despite having made efforts to establish a single healthcare system, Brazil’s can at best be described as mixed and fragmented. The government funded SUS finances less than half of all healthcare, with the balance being covered by private insurers and through self payment.

Despite financial malpractices and several other irregularities associated with it, the AIH remains the preferred method of hospital payment, which suggests the need for drastically improving and optimizing its application. In the same vein, amends need to be made towards the cross disparity between public and private sectors of insurance and healthcare providers to ensure that the services are rightly paid for.

The imbalance between inflation rates will eventually become an issue for insurers and the insured, the implications of which could inflict damage to the image and economic health of private hospitals.

A part of the solution could be to close low-volume, high-cost small hospitals. Brazil should further focus on improving management, efficiency and added value, and also adhere to protocols in order to boost productivity and enhance quality. Stricter accreditation norms and keen oversight could help identify waste and promote improved performance, which in turn could lower costs.

Finally, the consumers and patients should be given bigger roles to play in order to facilitate improved hospital function and network performance as part of the country’s agenda for the future. It cannot be denied that the healthcare system is going through a rough patch, but it is certainly worth saving. As the saying goes – it’s always darkest before dawn.