2001-02-11 -- SPECIAL: US Managed Care Companies Invade Underdeveloped World


I found this a very interesting article on how managed care
organizations in the US are exporting their operations to undeveloped
countries where the opportunities of profit are greater, and how the
World Bank is forcing these countries to go along.  US Managed Care
Companies are having a persistent crisis of poor rates of profit, and
are constantly looking for new areas to exploit, such as the underdeveloped
world.


Howard Waitzkin gave a talk along these same lines at the American
Public Health Associating meeting in November, 2000.

HOWARD WAITZKIN teaches and practices medicine at the University of
New Mexico. He is the author of The Second Sickness: Contradictions of
Capitalist Health Care (Rowman & Littlefield). CELIA IRIART leads the
health policy group of the Central de Trabajadores Argentinos, an
organization of labor unions based in Buenos Aires, Argentina. She
also teaches at the University of New Mexico.

Monthly Review Volume 52, Number 1  May 2000

How the United States Exports Managed Care to Third-World Countries

by Howard Waitzkin and Celia Iriart

In December 1999, Archbishop Desmond Tutu, Nobel Peace Prize winner
from South Africa, gave the keynote address for an important
conference in Miami Beach: the International Summit of Managed Care.
The price for attending this conference, excluding travel, room, and
meals, was $1395. The conference was sponsored by the American
Association of Health Plans and the Academy for International Health
Studies, and was targeted at "chief executive officers, presidents,
board chairs, chief financial officers, directors of marketing, and
business development officers." In addition to Tutu, ostensibly
progressive participants at the meeting included former Congressman
Ron Dellums, whose legislative efforts for a U.S. national health
service have inspired health activists since the mid-1970s. Dellums
took part in his new role as president of Healthcare International
Management.

Although it received far less attention than the World Trade
Organization (WTO) events one week earlier, the Miami Beach Summit
manifested the same trends toward economic globalization to which
protesters objected in Seattle. The World Bank, International Monetary
Fund (IMF), and U.S. Agency for International Development (USAID) used
the Summit to promote an expanded role for multinational corporations
in healthcare throughout the world. Representatives of these
multilateral lending agencies emphasized the privatization of public
health systems and social security funds in Latin America, Africa, and
Asia. Participants from the World Health Organization (WHO) and the
Pan American Health Organization (PAHO) played prominent roles. Also
participating were officials from Mexico, Brazil, Argentina, Chile,
Colombia, Uruguay, Paraguay, India, Nepal, Thailand, Indonesia, the
Philippines, Singapore, Nigeria, Zimbabwe, South Africa, Cameroon,
Oman, United Arab Emirates, Romania, Canada, Germany, the Netherlands,
Switzerland, and Australia. Little dissent was expressed about
policies that call for public sector cutbacks, privatization, and
greatly expanded activities for multinational managed care
organizations (MCOs) throughout the third world.

Some Background

Managed care can be defined as healthcare services under the
administrative control of large, private organizations, with
"capitated" financing (which means that an employer-private or
public-or a public agency prepays the MCO a negotiated sum of money
per covered person per unit of time, typically a month). Copayments
are made by the insured persons. Most insured persons in the United
States are now covered by an MCO.

As proprietary managed plans grow in the United States, the rate of
profit predictably begins to fall as the market becomes increasingly
saturated. As this process occurs, corporations must develop
strategies to increase their profits. These strategies might include
raising the productivity of labor, diversifying into new product
lines, and searching for new markets. As the president of the Academy
for International Health Studies noted in 1996, "By the year 2000, it
is estimated [that] 80% of the total U.S. population will be insured
by some sort of MCO. Since 70% of all American MCOs are for-profit
enterprises, new markets are needed to sustain growth and return on
investment."1 In the United States, for example, for-profit MCOs have
entered the public-sector programs of Medicare and Medicaid. In some
geographic areas, these organizations have dismantled their programs
after three or four years, having made extensive short-term profits
from capitated patients-that is, those for whom the payer has made
per-person, per-time-period payments to the MCO. Having received the
money, the MCO can reap large profits by keeping costs (such as
services to patients) as low as possible. This rapid entry into and
exit from public markets has left patients and their public insurance
programs vulnerable and needing to scramble for new, publicly funded
alternatives.

Now, however, the emphasis is on the search for foreign markets.
During the late 1980s and early 1990s, Europe looked like a good bet.
Reforms in several European national health programs also introduced
principles of managed care, market competition, and the privatization
of public services. These reforms received the strong support of the
Thatcher government in Britain, as well as varying degrees of
enthusiasm from conservative parties in other countries. Alain
Enthoven and his disciples, who orchestrated the managed-care
proposals that shaped the Clinton Administration's ill-fated efforts
for a national health program, served as consultants for European
governments undertaking these reforms. However, the popularity and
successes of public-sector programs in Europe proved to be powerful
disincentives to privatization. Since the mid-1990s, European
countries such as the United Kingdom, the Netherlands, and Sweden have
reversed many policies that attempted to privatize their national
health programs. In addition, managed care has become increasingly
unpopular in the United States.

With managed-care saturation taking place domestically and with
limited prospects in Europe, the managed-care corporations have turned
their eyes toward third-world countries, especially those in Latin
America. In the tradition of tobacco and pesticides, U.S. corporations
are exporting to third-world countries-in the form of managed
care-products and practices that have come under heavy criticism
domestically. The exportation of managed care is also receiving
enthusiastic support from the World Bank, other multilateral lending
agencies, and multinational corporations. On the receiving end,
third-world countries are experiencing strong pressure to accept
managed care as the organizational framework for privatization of
their health and social security systems. Already, U.S. MCOs and
investment funds have rapidly entered the Latin American market, and
this experience is serving as a model for the exportation of managed
care to Africa and Asia.

In 1995, we initiated a study of managed care in Latin America, its
exportation from the United States, and its varying impact on
healthcare delivery and public health services. The research focused
on the exportation of managed care by investor-owned, for-profit
corporations that pass on financial risk to physicians, hospitals, and
clinics, as opposed to those that simply sell commercial indemnity
insurance.2 Our results show that the healthcare and social security
funds of third-world countries have become a major source of new
capital and high rates of profit for these corporations, especially
through the investment of prepaid capitation payments. We found that
the rhetoric for the policy changes that are occurring throughout the
third world emphasize the ideology of the private market as a route to
more efficient and accessible services (a rhetoric which, by the way,
can-along with the sizable honoraria and consulting fees-become quite
seductive for progressive leaders like Tutu and Dellums). However, the
evidence that such market reforms actually improve problems of
inefficiency, costs, and access is slim indeed within the United
States and virtually nonexistent elsewhere. That the rhetoric gains
acceptance so easily by leaders in third-world countries portends
tragedy. As public systems are dismantled and privatized under the
auspices of managed care, multinational corporations predictably will
enter the field, reap vast profits, and exit within several years.
Then third-world countries will face the awesome prospect of
reconstructing their public systems.

Managed Care as a Silent Reform

Managed-care reform generally focuses on healthcare costs as a crisis.
To enable those entities that pay for healthcare to cut costs, the
reform calls for an intermediary between providers and users, to
separate financial administration from the delivery of services.
Proposals for managed care imply the introduction of enterprises
(state, private, or mixed) that administer financing under the concept
of shared risk and that contract with managers for the inclusion of
state-supported services.

In the widely debated 1993 World Development Report, entitled Invest
In Health, the World Bank argued that inefficiencies of public-sector
programs hindered the delivery of services as well as the reduction of
poverty.3 This report advocated incentives for private insurance,
privatization of public services, promotion of market competition, and
emphasis on primary care and prevention. Through this document and
subsequent policies, according to Latin American critics, the World
Bank has promulgated an ideology that "health is a private matter and
health care a private good."4

Specifically, the World Bank has supported managed-care initiatives
that convert public healthcare institutions and social security funds
to private management and/or ownership. These initiatives entail new
loans and thus increased foreign debt for participating countries.
Access to capital held by public-sector social security funds has
become an important incentive for investment by multinational
corporations.

The pronouncements of the World Bank on the public sector in general
and publicly supported healthcare in particular must be seen in light
of the financial crisis faced by most Latin American governments in
the 1990s, and the desire by global corporations to convert this
crisis into money-making opportunities. As these governments turned to
agencies such as the World Bank for loans to alleviate the crisis,
they were pressured to accept certain conditions. These conditions
implied increased debt, the opening of national economies to
multinational finance capital, and the restructuring of the state via
privatization and decreased public expenditures. Access to new loans
requires acquiescence to such plans for "structural adjustment." In
the healthcare environment, structural adjustment implies the
acceptance by Latin American governments of the reform projects
initiated by these lending agencies, especially the World Bank. By
consenting to the requirements of structural adjustment, the
governments gain access to loans but also must agree to carry out
major cutbacks in public services.

Such reforms facilitate a new discourse, linked to the crisis of the
welfare state. Gradually, "common sense" is transformed, as it
concerns the conceptualization of health, illness, and healthcare
services. In the official pronouncements we have studied, healthcare
no longer remains a universal right whose fulfillment is the state's
responsibility, but becomes a good of the marketplace. This kind of
thinking makes it easier for politicians to implement healthcare
"reform."

In the construction of the public-sector budget, new policies respond
to demand rather than supply of services. In other words, healthcare
will be available only as demanded. Theoretically, this approach
allows a reduction of fixed costs and a more efficient management of
resources, since excess services are controlled and financing is
directed toward providers of presumably higher quality. According to
this logic, to obtain financing, providers are forced to lower their
costs and to offer higher quality services. Discourses supporting
these policies emphasize the assumption (following a consumer
sovereignty model) that, if purchasers feel in control of their
contribution or payment for the service, they will comprise a natural
regulator of costs and quality, since purchasers choose providers that
offer the best services at the least cost.

Managed-care reforms usually produce fundamental changes in clinical
practice. These changes involve the subordination of health
professionals to an administrative-financial logic. The same reform
proposals aim for a drastic reduction of independent professional
practice, since professionals have to offer their services to
insurance companies or the proprietors of large medical centers.

The political process that accompanies these reforms is usually a
silent one, restricted to the executive branch of government. This
process generally segments the policy-making process and therefore
reduces political conflict. The desire to achieve silent policy-making
was expressed as an explicit decision by such informants as an
official of the World Bank's delegation in Argentina and a high
official of the Ministry of Health and Social Action of that country.
Reform policies are directed sequentially toward the public sector,
the private sector, or the social security system, but they do not
adopt a unified approach to the healthcare system as a whole. In
general, policy implementation bypasses discussion in the legislative
branch.

At each stage of this silent political process, the actors involved
are only those who participate in each subsector (public, private, or
medical social security); this approach hinders a societal perspective
on reform. Within each subsector, participants try to accommodate the
reform processes, without recognizing the impact on other subsectors.
Nevertheless, the current reform processes actually achieve a profound
articulation of the three subsectors (not achieved previously in most
Latin American countries, despite a long-expressed need for this
articulation), but under the command of private interests and
especially of multinational finance capital.

Economic Motivation for Exporting Managed Care

Executives of corporations entering the Latin American managed-care
market report substantial rates of profit relative to investment,
predict strong profit margins in the next several years, and expect
high rates of return for investors. Officials responsible for the
exportation of managed care emphasize its positive financial
implications and rarely refer to preventive care or quality control,
which historically have been valued by some health maintenance
organizations (HMOs) in the United States. Support for education and
research, also valued by some HMOs, has not emerged as an explicit
goal.

In explaining their financial motivations for entering the Latin
American marketplace, managed-care executives consistently refer to
the importance of access to the social security funds within these
countries. In contrast to the United States, most Latin American
countries have organized social security systems that include
healthcare benefits as well as retirement benefits for many employed
workers in large private or public enterprises. Employers and workers
contribute to these social security funds. For workers who are not
covered by social security, and for unemployed people, most Latin
American countries also have established public-sector healthcare
institutions, including public hospitals and clinics.

Throughout Latin America, the social security systems have become very
large funds, which are managed by government or publicly regulated
agencies. North American executives see these Latin American social
security funds as a major new source of finance capital. For instance,
a managed-care executive-whom the EXXEL Group, a multinational
corporation based in Argentina, recruited from Indianapolis-has noted:
"It's a very lucrative market. . . . The real opportunity here for an
investor-owned company is to develop tools in the prepagas [prepaid]
market in anticipation of the obras sociales [social security]
market."5

Privatization of government health programs and social security
systems has permitted major capital expansion for MCOs and investment
funds. Public-sector programs in such countries as Colombia and Argent
ina previously have suffered from inefficiency, escalating costs, and
corruption. Arguments supporting privatization that cite such problems
have resembled those favoring managed care within the U.S. Medicare
and Medicaid programs. As an example, the Chilean constitution of
1980, initiated by the Pinochet dictatorship, permitted the diversion
of government healthcare and social security funds to privatized
managed-care institutions (Instituciones de Salud Previsional,
ISAPREs), which then could be bought by multinational insurance
companies. Access to privatized social security funds-recently termed
"the mañana pension bonanza" in a trade journal-creates
multibillion-dollar capital pools available for reinvestment by
participating corporations.6

Economic globalization also has facilitated multinational investment
in managed care. Previous trade barriers have fallen, through such
treaties as the General Agreement on Trade and Tariffs (GATT), the
North American Free Trade Agreement (NAFTA), and the Common Market of
the South (MERCOSUR), covering the southern cone of South America. The
global operations of multinational corporations have led them to seek
managed-care benefits for employees based abroad. For example,
corporations with Mexico City operations, including IBM, Johnson &
Johnson, Bristol-Myers Squibb, and Hewlett-Packard, have formed a
consortium to enhance managed-care efforts.7

Impact on Healthcare and Public Health Programs

As in the United States, concerns about managed care in Latin America
have focused on restricted access for vulnerable groups and reduced
spending for clinical services as opposed to administration and return
to investors. Copayments required under managed-care plans have
introduced barriers to access and have increased strain on public
hospitals and clinics. In Chile, approximately 24 percent of patients
covered by ISAPRE MCOs receive services annually in public clinics and
hospitals because they cannot afford copayments averaging 8.6 percent
of ISAPRE's overall collections. Self-management (auto-gestión) in
Argentinian and Brazilian public hospitals requires competition for
capitation payments from social security funds and private insurance,
as well as patient copayments. To apply for free care at these public
institutions, indigent patients now must undergo lengthy
means-testing; at some hospitals, the rejection rate for such
applications averages between 30 and 40 percent.

Public hospitals in Argentina that have not yet converted to
managed-care principles are facing an influx of patients covered by
privatized social security funds. For instance, in 1997, public
hospitals in the city of Buenos Aires reported approximately 1.25
million outpatient visits by patients who were covered by the
privately administered social security fund for retired persons.
Before turning to public hospitals, these elderly patients had
encountered barriers to access due to copayments, private
practitioners' refusal to see them because of nonpayment by the social
security fund, and bureaucratic confusion in the assignment of
providers.

Latin American MCOs have also attracted healthier patients, while
sicker patients gravitate to the public sector. In Chile, ISAPREs have
aimed to capture capitations for younger workers without chronic
medical conditions. As a result, only 3.2 percent of patients covered
by ISAPREs are over sixty years old, in comparison to 8.9 percent of
the general population and 12 percent of the patients seen at public
hospitals and clinics.

Resistance to Managed Care and Alternative Proposals

The exportation of managed care is encountering opposition, which
varies among countries. In Ecuador, a coalition comprised of unions,
professional associations, educators, and Native American
organizations is resisting the introduction of private managed-care
operations within public services. During 1995, this coalition
organized voters in preparation for a national plebiscite that
elicited the population's preferences concerning the privatization of
eleven sectors of the economy, including healthcare, petroleum,
transportation, and public utilities. For all eleven propositions in
the plebiscite, approximately two-thirds of Ecuadorian voters opposed
privatization. Since the plebiscite, the coalition has continued to
work actively to resist privatization and has organized educational
sessions concerning managed care as a component of initiatives to
privatize healthcare and public health services.

In Brazil, physicians and public health activists have resisted the
introduction of managed care. For instance, activists affiliated with
the Brazilian national Workers Party (Partido dos Trabalhadores) have
opposed privatization of public services under MCOs. Government
officials representing this party, elected in Brasilia, Santos, Rio de
Janeiro, and other cities, have worked to oppose privatization
policies and to implement alternative proposals that strengthen public
services at the municipal level. Members of the Workers Party and
other political activists have emphasized that the revised Brazilian
constitution of 1988 specifies access to healthcare as a right of
citizenship, to be provided through a "unified health service."
Organizing in the national and state legislatures has called attention
to the contradiction between the constitution's mandates and
privatization policies that encourage the introduction of managed care
under for-profit corporations. In addition, large organizations of
physicians have challenged managed-care principles and have worked
together to enhance their power to bargain collectively with MCOs. One
example involves UNIMED, an organization of health professionals which
has established itself as an economic "cooperative" whose members
include thousands of physician practitioners. UNIMED has succeeded in
limiting the control of large MCOs over the conditions of medical
practice and also has tried to oppose some of the initiatives that
would privatize public-sector services under the auspices of managed
care.

MCOs have encountered less-organized resistance in other countries
like Argentina, Chile, and Colombia, where prior dictatorships or
authoritarian governments have facilitated the privatization of public
services. On the other hand, professional associations and unions have
organized campaigns against the entry of MCOs into public systems. In
Chile, the national medical association (Colegio Médico) has resisted
the expansion of the ISAPREs through the use of the public national
health fund (Fondo Nacional de Salud, FONASA). In Argentina, health
professionals have collaborated with a national organization of labor
unions (Central de Trabajadores Argentinos, CTA) in educational
efforts to encourage debate concerning privatization and managed care.
As result of these efforts, an intense social movement in the
Argentine province of Córdoba has impeded the privatization of public
health and social security services. An international coalition of
unions representing public-sector workers, Public Services
International, also has helped organize opposition to managed care in
several countries.

The Political Reconstruction of Common Sense

As their expansion slows in the United States, MCOs predictably will
continue to enter new markets abroad. Investors view the opening of
managed care in Latin America as a lucrative business opportunity. As
public-sector services and social security funds are cut back,
privatized, and reorganized under managed care, with the support of
international lending agencies, the effects of these reforms on access
to preventive and curative services will hold great importance
throughout the third world.

Ideologically, there is an attempt to forge a new "common sense" which
will become a socially shared truth. Many of those referred to as
experts in the healthcare environment contribute to the construction
of this new common sense by promoting the following eleven
fundamentals from which to rethink the system:

 1.the crisis in health stems from financial causes;   2.management
introduces a new and indispensable administrative  rationality to
resolve the crisis;   3.clinical decisions should be subordinated to
this new rationality if  cost control is desired;   4.efficiency
increases if financing is separated from service delivery,  and if
competition is generalized among all subsectors (state, social
security, and private);   5.the market in health should be developed
because it is the best  regulator of quality and costs;   6.demand
rather than supply should be subsidized;   7.making labor
relationships flexible is the best mechanism to achieve  efficiency,
productivity, and quality;   8.private administration is more
efficient and less corrupt than public  administration;   9.payments
for social security are each worker's property;  10.deregulation of
social security allows the user freedom of choice, to  be able to opt
for the best administrator of his or her funds;  11.the transition of
the user/patient/beneficiary to client/consumer  assures that rights
are respected.

These ideological claims represent a profound reconstruction of common
sense. Diagnoses that speak of inefficiency in the management of state
institutions and social security, of shortages in resources that
restrict access, of excessive bureaucratization, of limited capacity
to respond to the population's demands, of escalating costs-all become
self-evident truths increasingly shared by users and healthcare
workers as part of their lived experiences. They are then turned into
justifications for reform proposals. This makes possible the
transformation of common sense concerning the processes of health,
illness, and services-little by little, making the commercialization
of all the relationships established in these processes appear
natural. Assumptions that were sustained during many years, especially
for public health advocates, and that conveyed the idea that the
health was a state responsibility and a public good, have given way to
the "complex" discourses of privatization, economic restructuring, and
fiscal conservatism. Would-be progressives often come to accept these
discourses even while trying to distance themselves from the
neoliberal project.

Against these discourses, it is important to show that such
interpretations do not constitute truth, but rather the imposition of
views defined by financial interests. Reform, as sought by official
discourses, is not the only option, nor the best, from the perspective
of a population's health. Many groups are working on alternative
projects which defend health as a public good. These movements are
stronger in some Latin American countries than in others. Similar
movements have begun in Africa and Asia. Increasingly, this struggle
is being recognized not only as a class struggle, but also as a part
of the struggle against imperialism-which has now taken on the new
guise of rescuing third-world countries from rising healthcare costs
and inefficient bureaucracies through the imposition of neoliberal
managed-care solutions exported from the United States. In this realm,
as in many others, the need for international solidarity among those
resisting the logic of the global system is paramount.

NOTES

 1.J. C. Lewis, "Latin American Managed Care Partnering
Opportunities," paper presented to the Eighth Congress of the
Association of Latin American Pre-paid Health Plans (ALAMI),  Sao
Paulo, Brazil, November 8, 1996.

2.The institutions and investigators participating in the World Health
Organization-sponsored study of managed care in Latin America  were
the University of Buenos Aires, Argentina (Celia Iriart, Silvia
Faraone, Marcela Quiroga, and Francisco Leone); the University  of
Campinas, Brazil (Emerson Elias Merhy, Florianita Coelho  Braga
Campos); the Group for Research and Teaching in Social  Medicine
(Grupo de Investigación y Capacitación en Medicina  Social), Santiago,
Chile (Alfredo Estrada, Enrique Barilari, Silvia  Riquelme, Jaime
Sepúlveda, Marilú Soto, and Carlos Montoya);  the Center for Research
and Consultation in Health (Centro de  Estudios y Asesoría en Salud),
Quito, Ecuador (Arturo  Campaña, Jaime Breilh, Marcos Maldonado,
Francisco Hidalgo);  and the University of New Mexico (Howard
Waitzkin, Karen  Stocker). The study's overall coordinators were Celia
Iriart and  Howard Waitzkin. An earlier report on this work appeared
in K.  Stocker, H. Waitzkin, and C. Iriart, "The Exportation of
Managed  Care to Latin America," New England Journal of Medicine 340
(1999): 1131-1136. The U.S.-based research was also supported  in part
by the Agency for Health Care Policy and Research (1R01  HS09703).

3.World Bank, World Development Report 1993: Invest in  Health
(Washington, DC: World Bank, 1993).

4.A. C. Laurell and O. Lopez, "Market Commodities and Poor  Relief:
The World Bank Proposal for Health," International  Journal of Health
Services 26 (1996): 1-18. For a critique of  World Bank policies in
the context of India, see M. Rao, ed.,  Disinvesting in Health: The
World Bank's Prescriptions for  Health (New Delhi: Sage, 1999); for
Africa, see M. Turshen,  Privatizing Health Services in Africa (New
Brunswick, NJ:  Rutgers University Press, 1999).

5.L. Kertesz, "The New World of Managed Care," Modern  Healthcare
(November 1997): 114-120.

6.M. Tangeman, "The Mañana Pension Bonanza," Institutional  Investor
31, 2 (1997): 69-72.

7.R. Ceniceros, "Managed Care Makes Inroads in Latin
America,"Business Insurance (October 6, 1997): 3-6.