One recent evening in Sao Paulo, Brazil, the fresh-faced host of a local home-shopping television station breathlessly touted the merits of a health plan called Saude Unicor. The glowing spot, sandwiched between segments for upscale window treatments and fashionable men's suits, explained that for the equivalent of about $25 per month, enrollees would receive basic health coverage. Not a bad deal by most standards, but to make the proposition even more interesting, the plan included coverage for cosmetic surgery at no extra charge.
Even judged against the rough-and-tumble marketing wars for healthcare services in the United States, the plastic surgery angle seems nervy. But in Brazil, where celebrities openly brag about their latest nips and tucks, and the cult of youth rivals even the hardy strain cultivated in Southern California, the cosmetic surgery come-on helps Saude Unicor stand apart from the hundreds of HMOs angling for a share of consumers' wallets.
At the moment, nearly anything goes in Brazilian healthcare.
The market, particularly for managed care, in Latin America's most populous country is like the Wild West. At least 700 health plans, and by some estimates as many as several thousand, are jousting for the business of companies and individuals who can afford to pay for healthcare. This vibrant private sector, catering to the wealthy and the small but emerging middle class, serves about 42 million people, or a quarter of Brazil's 165 million people, according to recent government and industry estimates.
Many of the health plans, such as Saude Unicor, are owned by hospitals or groups of doctors. But any mildly entrepreneurial sort seems to have been able to launch a health plan because regulations have been virtually nonexistent and consumer demand has been high. Most of the plans remain small, however. More than 62% have 10,000 or fewer enrollees, while only 2% have more than 200,000, according to the Associacao Brasileira Medicina de Grupo, the Brazilian HMO association.
Brazil is a mishmash of publicly owned and operated hospitals, publicly financed care delivered in private settings, and privately owned facilities catering exclusively to patients who have insurance or pay out of their own pockets (See related story, p. 40).
Despite a 45% drop in the value of the Brazilian currency, 30%-plus interest rates and a deep recession that may shrink the economy by 3% to 4% this year, private health insurance and the system for delivering private medical care are growing. At the same time, the universal public system, called Sistema Unico da Saude, charged with delivering healthcare to everyone, is buckling under the strain of demand and inadequate resources to perform even the most basic services, such as providing adequate emergency room care.
Public and private. Against the backdrop of privatization of state-owned industries, such as the telephone monopoly, the financing and delivery of healthcare in Brazil is at a crossroads. Quietly, the government is re-examining its role as healthcare provider to all through a combination of public hospitals and payments to private providers. Meanwhile, the private sector is rushing to meet the health needs of a privileged minority who are dissatisfied with standard health fare and can do something about it-either through employer-financed insurance or by tapping their own bank accounts.
Brazil spends about $40 billion, or more than 4%, of its gross domestic product on healthcare, a figure many expect to climb in coming years as the country's economy emerges from recent doldrums.
For the 25% of the population that have access to private healthcare, spending is estimated at about $20 billion today, almost equal to the amount the Brazilian government pays for healthcare in the country as a whole. Clearly, Brazil presents an economic tale of two countries: One provides unlimited options for the rich, and the other offers no choice for the poor.
In Brazil, the wealthiest 10% of the population control almost half of the national income, while the bottom 50% have only 12% of the wealth.
On the same night Saude Unicor was trying to lure the well-heeled, for instance, homeless children roamed the neighborhoods around Avenida Paulista, the commercial center of Sao Paulo, Brazil's largest and most prosperous city. For those children, who are lucky to find something to eat and a safe place to sleep, even thinking about basic medical care is a luxury. The homeless and the untold millions of only slightly better-off Brazilians who populate the slums, or favelas, dotting the hillsides of cities like Sao Paulo and Rio de Janeiro, present a daunting challenge to the Brazilian health system.
About one-fifth of the country still lives in poverty, according to the most optimistic estimates.
Healthcare for a few. Although healthcare is supposed to be available to all, the sad fact is that the government's promise remains largely unfulfilled.
In 1988, three years after a military dictatorship bowed to democracy, Brazil ratified a new constitution that established universal healthcare as the right of all people. Unfortunately, the government, which is charged with carrying out that constitutional mandate, isn't up to the task.
According to several Brazilian healthcare executives, the government only pretends to help the poor. Essentially, 60 million people at the bottom of Brazil's steep income pyramid have little or no access to medical services, they say.
The gap between the universal right to healthcare and the state's legal responsibility to fulfill that right has forced the government to come to grips with its inability to do the job alone.
Though the move is fraught with political risks, the state is looking for ways to tiptoe away from its expensive and nearly impossible responsibility to provide healthcare to all comers, many healthcare observers say. Instead, it is concentrating on serving those who lack the means to pay.
"We're living a little bit of a revolution," says Andre Lomar, M.D., an internist and infectious disease expert who practices at Sao Paulo's Albert Einstein Hospital, arguably the best in all of Latin America, and at Hospital Emilio Ribas, a public facility also in Sao Paulo. "The public system can't afford to treat everybody, and the private model is becoming more interesting."
Ultimately, Lomar, along with many other healthcare watchers, believes Brazil's public system will be reserved for those who can't buy out-of-pocket coverage or who lack employer-sponsored health insurance. Now the private system cherry-picks the wealthy and healthy. Community rating for health insurance remains a foreign concept. Many plans exclude AIDS or intensive care from coverage. And just because Brazilians have private insurance doesn't mean they won't tap the public system for emergency services or complex procedures.
Liegia Bahia, M.D., an official with the federal health ministry in Rio de Janeiro, says that "43% of clients with a (private) health plan eventually make use of the public system."
Bahia explained the nettlesome patient crossover to a delegation of American healthcare executives on a mission to Brazil last month, sponsored by the Academy for International Health Studies, based in Davis, Calif.
The elderly mother of legendary Brazilian race car driver Emerson Fittipalidi recently made headlines by having heart surgery in a public hospital, Bahia said. She reportedly could have had the operation in the private system, and it would have been covered by her private insurance plan.
If and how the private system will reimburse the government for public services remains a thorny subject.
Nevertheless, the mix of health services for Brazilians is expected to continue its tilt toward the private system, driven by the migration of those who can afford it and the government's retrenchment in the public system.
It's anybody's guess, however, how long a transformation to a primarily private system could take and what its final shape would be.
Private system thriving. For those with the means, the time for change is now. The market for services for those who can pay for private health plans and health services has boomed, almost doubling since 1987 (See chart, this page).
"Everybody who can afford private insurance buys it," says George Parayil Tharakam, 43, a restaurant manager and part-time coffee grower who lives in Niteroi, one of Rio de Janeiro's more comfortable precincts. Tharakam and his wife, a lawyer, pay about $125 per month for health insurance, one of their biggest expenses after the tuition for their son's private elementary school.
Although reliable figures are difficult to come by, some estimates say the private market could grow to cover 80 million people within five years. Even if that projection proves too rosy, a dramatic increase in private healthcare spending in Brazil seems inevitable.
"We're talking about a huge expansion," says Ricardo Brentani, M.D., a world-renowned research scientist and president of Sao Paulo's A.C. Camargo Hospital, Brazil's leading cancer center.
For the roughly 20 million people who live in greater Sao Paulo, the industrial and commercial capital of the country, the market for health insurance and healthcare delivery is the best in the country. "Today if you don't provide medical care for your workers, you can't hire qualified workers," Brentani says.
Yet for better healthcare to reach the masses, Brazil and its people must first prosper.
For generations, Brazilians have called their country the land of tomorrow. Blessed with tremendous natural resources, the nation, it seems, has been on the verge of breaking out of Third World status for decades, only to fall short.
Economic stability has been as elusive as snowflakes in the Amazon rain forest. Brazil has changed its currency eight times in the past 30 years, the latest to reals from cruzeiro reals. Inflation has been the Achilles' heel of the Brazilian economy, peaking at 80% per month during 1991.
But in the early 1990s, the then-finance minister and current President Fernando Henrique Cardoso crafted an economic stabilization plan that slew the hyperinflation dragon.
As a result, the economy boomed, growing by more than 7% annually for a few years in the early 1990s, and foreign investment zoomed.
Even the poor and the middle classes reaped benefits, which led to skyrocketing sales of TV sets, refrigerators and other big-ticket products. Many hope that with five or 10 years of economic prosperity, more of Brazil's citizens will finally have the wherewithal to spend on healthcare as they have on consumer goods.
But the nagging economic uncertainty in Brazil casts a shadow over the speed with which the healthcare system can be improved. Skeptics say that an annual growth rate of about 3%, expected once the current economic contraction runs its course, perhaps as soon as year-end, amounts to little more than treading water.
Pressure from foreign lenders, notably the International Monetary Fund, has forced the government to reduce spending, cutting $854 million, or about 5%, from the 1999 health budget in a broad package of controversial austerity measures.
Even funds slated for healthcare don't always wind up there.
In 1997 the federal government enacted a highly unpopular 0.25% tax on all financial transactions-from writing a check to exchanging foreign currency-with the promise that the tax would fund the nation's healthcare system. Instead, it has fattened the general treasury, and any pretense that funds were earmarked for healthcare is long gone. Furthermore, the tax, supposedly temporary, was recently raised to 0.38% to shore up the government's books in response to IMF demands.
Managed-care variations. In spite of economic adversity, the Brazilian healthcare system has nurtured an astonishing variety of managed-care and prepaid health plans.
Among the more popular are medical cooperatives, covering about 11 million people, mostly of modest means. The 370 co-ops are organized nationally through a company called Unimed, based in Sao Paulo. Dating back to the early 1960s, Unimed counts 87,000 physicians as owner-providers and has even built its own network of hospitals. These medical co-ops contract directly with employers and also offer moderately priced prepaid health plans to consumers.
Many large companies in Brazil serve as their own insurers, led by the example of foreign multinationals, especially U.S. and European automakers, that poured into Brazil during the 1950s. Aiming to offer benefits like those back home, these companies helped catalyze the rise of healthcare as a benefit of employment in Brazil. Unions, a strong force, have consistently demanded and received healthcare coverage in their contract negotiations.
Managed-care plans-some fully capitated and others similar to discounted indemnity plans-have grown like weeds since first sprouting in the 1960s. A shakeout is coming, say industry watchers like Arlindo de Almeida, M.D., president of the Brazilian HMO association. That is because most of the plans are operating in the red and regulations are on the way that will mandate coverage and ensure some basic consumer protections.
Recently the government lifted restrictions on foreign investments in Brazilian companies, and several U.S. insurance giants, including Aetna and Cigna HealthCare, have made sizable investments in Brazil as part of broader strategies to seek growth in emerging markets.
Aetna and a local insurer run a joint venture, called Sul America Aetna, covering 1.9 million enrollees. Aetna attributed surprisingly strong earnings during the first quarter in part to solid growth in the health insurance lines in emerging markets, including Brazil.
Cigna has management control of Golden Cross, a health plan in Rio de Janeiro with 1.2 million enrollees, and it bought AMICO, a 300,000-enrollee HMO in Sao Paulo. According to a local executive, Cigna is on the prowl for more acquisitions.
Health insurers are about to get their first dose of strong regulatory medicine. Early next year, the government will begin enforcing regulations that will standardize health plans, spelling out required minimum coverage, for instance, and abolishing exclusions of care for certain diseases or kinds of services, such as intensive care. In addition, the regulation will establish minimum capital requirements for all health insurance plans, a move that is expected to quickly drive weak plans into the arms of financially strong companies.
The physician factor. Doctors in Brazil are like their colleagues in the U.S. and other countries: They don't like managed care.
"Brazilian doctors don't trust the way managed care will relate to their profession," says Regina Ribiero Panzi Carvalho, M.D., vice president of the Brazilian Federal Physicians Professional Council, the quasi-government medical board responsible for licensing and ethical policing. "Physicians fear the middlemen will make them earn less and compromise their ethical codes." As it is, Brazil's 185,000 practicing doctors earn, on average, about $48,000 annually, although salaries vary widely.
Like doctors almost everywhere, physicians in Brazil work long hours. But in a particularly Brazilian phenomenon, doctors work many jobs to make ends meet. More than 57% have two or three jobs, while only 17% have only one. Doctors, like other Brazilians, covet government jobs because civil service offers security and cushy pensions. The average day finds doctors shuttling between morning jobs at government hospitals or clinics, afternoon hours at private hospitals or other facilities, and early evenings in their own offices.
Take, for instance, Marcos Ferraz, M.D., a rheumatologist and healthcare economics expert. Ferraz, 41, splits his time between research and running a clinic at Hospital Sao Paulo, a 650-bed tertiary-care teaching hospital, and a partnership with Fleury Laboratories, a chain of posh all-in-one diagnostic centers catering to private-pay patients.
"It's time to wake up," Ferraz says of the Brazilian healthcare system.
More private care, particularly managed care, could be part of the answer to Brazil's quest to make the most of its limited financial resources, he says. Regardless of the exact system, the challenge for all of Brazil's providers is to become more efficient, he says.
The shifting sands of the healthcare system in Brazil can be seen at Hospital Sao Paulo, where ambulances from all over the city and even the state of Sao Paulo routinely line up overnight, carrying patients who need scarce specialty care. Gurneys line both sides of the halls inside the emergency department. Patients often wait 12 or more hours, sometimes as long as two days, before making it to a ward or being transferred.
Still, the quality of care delivered at the public facility, one of Sao Paulo's best teaching hospitals, is good, Ferraz says. Even privately insured patients are drawn to the specialists who practice there, though the specialists are rarely paid except by government health plans.
But the hospital is trying to change that. The facility is upgrading a few floors in the newest building on the sprawling campus to appeal to private-pay patients, who will be charged separately for the privilege. The move is controversial, and some members of the medical staff oppose it on principle, Ferraz says, despite the cash infusion it would bring.
Struggling hospitals. By U.S. standards, Brazilian hospitals are mostly a sorry lot. Of the nearly 7,000 scattered across the country, which is larger than the continental U.S., about two-thirds have fewer than 70 beds. And staffing is woefully inadequate in sheer numbers and quality of training. Half of all hospitals operate with fewer than one employee per bed.
"It's very difficult to talk about quality, with less than one employee per bed," concedes Luiz Plinio Moraes de Toledo, M.D., president of Hospital Assuncao, outside Sao Paulo, and a former delegate to the Brazilian Hospital Association.
Hospitals that take public patients are paid only a fraction of the cost of providing their care, typically as little as $2 per day.
As for private patients, most insurers pay according to a discounted fee-for-service schedule.
Overall, the Brazilian hospital system strains to provide basic services. Inefficiency is rampant, a product of hospitals' small size, lack of networks and shortage of adequate human and financial resources.
Change must come, nearly everyone agrees.
As Brazil's healthcare system matures, hospitals are bound to form networks and consolidate. Ownership is also likely to be revamped. As in the U.S. earlier this century, many doctors in Brazil raised money to build hospitals where they now practice and own a piece of the action. Quality improvement may also be on the way, though almost everyone agrees that cost management and access to healthcare for the tens of millions without it must come first.
A home-grown movement, building on standards from the Pan American Health Organization, an affiliate of the United Nations, is afoot to begin accrediting hospitals later this year. Meanwhile, the U.S. Joint Commission on Accreditation of Healthcare Organizations has a competing effort under way.
Nevertheless, cost, more than quality, is driving healthcare decisions in Brazil for now.
Across the board, more money is needed to improve access to and quality of healthcare. As the government struggles to find its way, private enterprise is stepping in, at least where money can be made.
"The private sector exists because the government sector is unable to provide the quality of service that different segments of society demand," says Paul Gruppo, an associate partner with Andersen Consulting in Sao Paulo.
Although free-market forces can be harsh, Albert Einstein's Lomar is counting on them, and on democracy, to speed up the healthcare system's transformation.
Regarding how fast the system can change, Lomar says, "I don't know how fast but much faster than the public system" would change on its own. He says he believes the government's role will eventually be confined to public health programs and finance rather than the first-line responsibility for delivering care. Sure, there will be problems, he admits, but adds quickly: "I'm optimistic. People in Brazil learn fast."