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The
Uruguayan case
shows the benefits of state perseverance and public assets and
the adverse effects of privatisation by default. Although an attempt
has been made to attribute the crisis to this statist emphasis,
the present collapse of the economy and its social effects are
basically the result of a financial
system
that lacks adequate monitoring, a marked deterioration of industry,
a foreign exchange rate that damages the country's competitiveness,
and the vision of a country regarded as a financial and service
market.
Social security: the costly defence of the old system and
subsequent turn to privatisation
In 1995, Uruguay reformed its social
security system. It changed from a system of state allocation
to a mixed system including private agents and obligatory levels
defined by individual contributions. The rights and benefits of
pensioners in the previous system were not affected, and from
1985 to date, the quality of the benefits has improved.[1] The first pillar
of the new regime is not a system of capitalisation but of allocation;
everybody has to contribute with part of their income and the
system remains a state monopoly. While the social security law
enables the administration of capitalisation funds through the
Social Security Investment Fund Administrations (or AFAPs) to be in the hands
of private agents, the State is also present with its own AFAP
and presently holds over 50% of market participation. Furthermore, 80%
of AFAP capital must be invested for a certain length of time
in state treasury bonds. Finally, this reform includes retirement,
disability and pension benefits alone. The Social Security system
also includes unemployment benefits, family
allowances, and non-contribution pensions that remain within the
state administration, financed as before. Although this reform
shows a clear departure from the old system, it remains statist
and committed to some objectives abandoned by some other countries,
where governments have abdicated their social responsibilities.
Education: the stubbornness
of public assets
On the return
to democracy, state education, once the pride
of the nation, was rightly seen to be faltering. Meagre salaries
for teachers, unsuitable facilities, large classes, curricula
not adapted to the needs of the market, and a considerable number
of parents who had chosen to take their children out of the system
and seek private alternatives-these were some of the most salient
symptoms of a sweeping crisis.[2] In 1995, one year after the last
election, the most ambitious reform project was launched. The
main features of this reform were:
· The attempt to extend universal
coverage to five-year-old children and progress towards universal
coverage for four-year-olds;
· Drastic changes in secondary
school curricula, removing emphasis from humanities and arts and increasing practical
content, to
prepare students for the labour market rather than for university;
· The expansion of the
number of full-time schools in socially deprived areas;
· The
recovery of an institutional dimension for middle-level state education (grades 7 to 9), lost for over 25 years due
to many factors (including the shrinking of timetable modules,
mass enrolment, and the frequent rotation of teachers).
Health:
privatisation reform by default
The Uruguayan health system is a complex linking of public and
private agencies. Historically, one may distinguish the private
system (mutual
medical benefit funds) that provided health care to the middle
and upper classes, and with time, to part of the working class;
and a public system, covering those who could not afford the
mutual medical benefit funds. During the 1960s and the 1970s,
through bilateral agreements between state agencies and mutual
benefit funds, a system was created whereby civil servants could
become members of a private healthcare system by means of a small
salary deduction. In this way, the state started subsidising
the mutual benefit funds and the healthcare costs of its employees.
During the 1970s, some laws and agreements opened the door for
the first category of private workers to enter a similar agreement.
In 1984, the mechanism became universal when the last category
of workers in the formal sector (rural and domestic workers) acquired the
right to subscribe to a mutual benefit fund. This obligatory
health insurance was managed by a new state office, the Board
of Social Security for the Sick (DISSE), which played the role of mediator between
the worker and the chosen fund. By 1988, according to the Minister
of Public Health, 1,400,000 people were members of the mutual
system. The public system continued to attend to approximately
one million people and with the addition of some private or public
institutions (the
military hospital, medical services of state companies) coverage of
the Uruguayan population was practically complete.
The implementation of agreements between the state and the mutual
benefit funds and the establishment of DISSE increased healthcare
coverage, with a strong redistributive inclination: the amount
of money paid out from the
salary to belong to a mutual benefit fund is proportional to that
salary. However, given the increase in costs for the user in the
co-payment established to control consumer use, it is less clear
what proportion of the lower-income sectors incorporated in the
system were able to make use of it.
Moreover, this process of incorporation of new sectors introduced
tension in the mutual benefit funds. These funds were already
suffering from financial problems before the system was implemented
and the mass incorporation of new members through DISSE exacerbated
them. The solution was a strong state subsidy to sustain the
operation of the mutual fund system. Although coverage in the
better quality services increased, their quality dropped on increased
enrolment and loss of resources. Some costs were passed on to
the members of the mutual benefit funds in terms of increases
in medical fees.
During the 1980s, a third form of medical service appeared on
the scene: the private medical emergency units. These services
used a pre-paid monthly fee, enabling them to have very low registration
costs while redistributing costs and risks. A large proportion
of the middle classes and practically all the upper-middle and
upper classes became members of these services.[3]
The final result is a stratified system of three layers: those
who cannot pay health care or who can pay very little and end
up in a stagnant or declining public system; those who only pay
for a mutual benefit fund system that is in clear deterioration;
and those who are members of a mutual benefit fund but can also
afford the new emergency and medical assistance services. The
continuous deterioration in the quality of the public health
system and in the mutual benefit fund system has recently generated
a fourth layer of care: private insurance and purely private
health care.
Achievements and constraints of social reforms
The three models of reform in these sectors show three different
results. Education chose a statist and redistributive model. Social
security was ambiguous: defending the public system in 1989 and
then partially accepting the privatisation model in 1994. Health
chose no reform or more strictly, a privatisation reform by default.
Uruguay as a whole was a rebellious reformer.
Achievements are positive in the state model (education), ambiguous in the mixed model (social
security) and clearly negative
in the model of reform by default (health).
In terms of education, enrolment in early education rose from
30% at the beginning of the 1990s to 80% at the end of the decade.
Those who most benefited from this expansion were the poorest
40% of the population. The learning levels in full-time primary
schools in the most underprivileged social contexts improved
significantly above the national average, and the degree of repetition
in all the grades dropped. Finally, the most criticised point
of this reform, the change in secondary education, shows a 10%
lower drop-out rate than the old model, achieving a greater degree
of retention of young people from the most underprivileged social
sectors.
Regarding social security, the adoption of the constitutional
amendment of 1989, made it possible for the real value of pensions
to double in a decade, taking almost 35% of the people of 65 years
of age and over out of a situation of poverty and reducing poverty
among older people to a minimum level.[4] However, this increase in pensions
was given to all the sectors in equal proportions, making it an
enormous drain on public expenditure and limiting other types
of spending, in particular programmes geared for children. Finally,
the 1994 reform with the system of allocation and capitalisation
will further increase inequality and cause serious problems in
covering the lower income sector, informal or part-time employment
and women. Although the reform that defends the old system, shows
problems of inefficiency, inequality and negative effects on the
treasury, the major risks for the social future of pensioners
are to be found in the second reform wave, where the greatest
risks to
social integration and protection of the most vulnerable sectors are appearing.
Finally, health shows the worst results. The system ended up
by being subsidised by the State in its private dimension, without
this implying an improvement in the quality of service. The medical
corps and the laboratories are those who have most benefited
from the considerable expansion of public and private expenditure
on health. In the meantime, the poor sectors have seen the deterioration
in the quality of their public service, while the middle and
upper sectors buy a new range of stratified health services on
the market.
The evidence available over a decade shows a widening gap between
expenditure on public health and subsidising of the mutual benefit
fund system, more disparity between the salary of a public system
doctor and one in the mutual benefit fund system, a significant
increase in private health expenditure, a mass exodus from the
mutual system due to the loss of formal employment that had previously
generated the membership benefit and an increase in the cost and
use of the fee system (for
check-ups, appointments and drugs) whereby the mutual benefit funds limit the
use of the system and finance their chronic deficit.
The absence of a basic national health insurance for the whole
population, debated but never implemented, has led to an increase
in expenditure, with no improvement in quality but with an increase
in inequity. Recent events support this diagnosis. Recently, a
measure was approved whereby those who are members of a mutual
benefit fund through DISSE cannot receive care in the public health
hospitals. In many of these cases, the beneficiaries cannot afford
the price of the fees in the mutual system; thus, the system leaves
them without a real right to any health coverage. Furthermore,
the mutual benefit funds have entered a spiral of increasing indebtedness
and have threatened bankruptcy, demanding more money from the
system, which despite its own indebtedness, has been cannibalised by other state
treasury requirements.
Conclusion
Defence of public assets and of the state as guarantor of these
assets has shown itself to be socially more effective than privatisation
alternatives. In a context of economic collapse, the fault is
placed on the old welfare state and privatisation winds are again
blowing, as observed in the privatisation of basic services such
as water in some sectors of the country. However, the reform
of the social sector, particularly through statist and non-privatising
options, is the only buffer remaining to help the humblest people
face the economic collapse of the past two years. If a market
option had been chosen for the social sector, the abandonment
of the lower income sectors would have been much more dramatic.
Notes:
[1] A
social movement made up of pensioners was able to gain citizen
support and in 1989, by means of a plebiscite, achieved an amendment
to the constitution whereby in future pensions would be adjusted
in accordance with the salary increments of state employees and
would be increased in the same proportion as the mean salary
index.
[2] During the first administration, no attempts were made at
structural reforms beyond increasing attention to schools in
poor neighbourhoods. The Lacalle administration (1990-1995) followed
this trend and developed a system whereby some schools in neighbourhoods
where basic needs were not satisfied were defined as "priority
attention" schools and the teachers' salaries were increased
as an incentive.
[3] The mutual benefit funds were particularly slow and inefficient
in terms of minor emergencies and treatment and in general with
services unrelated to hospitalisation. In fact, all those who
could afford it, paid double health care (or were subsidised
in one system and paid for the other): the mutual benefit fund
and the mobile emergency service.
[4] Between 4% and 6% according to the Economic Commission for
Latin America and the Caribbean (ECLAC).
*One version
of this article was published in Social Watch 2003
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