The DR-CAFTA and the Costa Rican Health Sector: A Push Toward Privatization?

Abstract

THE DR-CAFTA AND THE COSTA RICAN HEALTH SECTOR: A PUSH TOWARD PRIVATIZATION? Mary A. Clark Tulane University Introduction Since Latin American countries began to adopt outward-oriented economic reforms three decades ago, there has been concern about what exposure to international markets might mean for core welfare state functions, such as social insurance programs. Costa Rica’s welfare state has been a shining example of meaningful public social protection policies, most notably in health care. But in 2009, eighty-five years of public monopoly over insurance, including health insurance, ended when the DR-CAFTA (Dominican Republic-Central America Free Trade Agreement) entered into force in Costa Rica. The question of whether the country should adopt the trade agreement had ignited social protest and forced a national referendum in 2007, narrowly won by the yes vote.1 One issue central to the conflict had been what the DR-CAFTA would mean for the state’s future role in social service provision, such as healthcare. The national health system is the crown jewel of Costa Rica’s welfare state and, more widely, a success story among middle-income countries for its near-universal reach and low per-capita cost. Will Costa Rica’s ascension to the DR-CAFTA commence a rolling back of public health insurance and medical services in favor of greater private-sector participation? Not in the short term. While the DR-CAFTA forced Costa Rica to allow the sale of private insurance policies, it did not change the constitutional requirement that channels all obligatory social security payments to the Costa Rican Social Security Institute (Caja Costarricense de Seguro Social or CCSS). And there is currently no active political campaign to privatize the institution or its health insurance functions. In addition, the nascent private health insurance market is developing slowly. Over the longer term, however, the legalization of private health insurance could abet an emerging trend toward passive privatization. The private medical sector is growing and Costa Rican citizens are making more use of it. As long as Costa Ricans are obligated to make health insurance payments to the CCSS, the performance of this institution will largely govern the attractiveness of private alternatives. The Potential Impact of the DR-CAFTA on Costa Rica’s Health Sector Costa Rica’s inexperience with private insurance fuels concern about what the opening of the health insurance monopoly, particularly to The author would like to thank CIPR for support of a research trip to Costa Rica in June, 2010. C 2011 Southeastern Council on Latin American Studies and Wiley Periodicals, Inc. 3 The Latin Americanist, September 2011 international corporations, might mean for the local market. Firms headquartered in other DR-CAFTA signatory countries, including the United States, can compete on an equal footing.2 A search of extant literature yields limited information about the impact of foreign penetration on Latin American health insurance markets. The research we do have emphasizes the negative impact of such investment. Celia Iriart, Elías Merhy, and Howard Waitzkin (2001) report that U.S.-based multinational health insurance corporations have entered Latin American markets by purchasing established local companies, investing in joint ventures, and entering into contracts to manage public social security funds. Although they focus on causes rather than effects, the main result they discuss is a negative one: increased administrative costs (p. 1249). Rebeca Jasso-Aguilar, Howard Waitzkin, and Angela Landwehr (2004) focus on the impact of multinational investment in Latin American health insurance markets. They discuss a number of effects, all of them fairly negative. These include the footloose nature of foreign investment in health insurance markets, cream skimming, problems often associated with managed care (restrictive utilization review, increased cost sharing for patients, declines in spending on clinical services versus administrative costs), and concurrent reductions in government spending on public health services. Denis Drechsler and Johannes Jutting (2007) concur, arguing that private health insurance in Latin America (based on multinational or local capital) has resulted in predatory competition. Instead of dropping in price, premiums have remained high and only accessible to upper-income groups. Unfortunately, these studies do not shed much light on what we ought to expect in Costa Rica. They overlap in their...