What next for Brazil’s healthcare experiment?
Dilma Rousseff’s impeachment and the healthcare experiment
May 2016
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It is impossible to tell whether the current debate in the Brazilian Senate will open the door to the impeachment process or not. With much more confidence can arguments be made that the crisis that has engulfed the Brazilian executive is a political manoveur – not even a very sophisticated one at that – to end PT’s (Partido dos Trabalhadores) hold on power. Those interested in the various levers that have been pulled to set in motion the impeachment process can do worse than read Perry Anderson’s excellent “Crisis in Brazil”, turn to David Miranda Guardian article for a shorter, journalistic piece, or to Armando Boito and Alfredo Saad-Filho’s article in Latin American Perspectives for a more scholarly piece.
My intention here is not to reiterate these arguments, but to raise questions about the consequences of Dilma Rousseff’s possible impeachment on one area of social and economic policy I have been following for some time and for which I am in São Paolo. This is what Brazilian policymakers have called the health-industrial complex since 2003. This can be seen an effort to emulate the economic effects of the US military-industrial complex in Brazil, that is to say in a country with negligible security issues, but daunting social ones. The most obvious of these is inequality. It is true that Brazil is no longer at the top of the inequality league table as in the late 1980s. But years of social policies targeted towards the poor, especially those under the PT that have so enraged the pro-impeachment camp, have yet to resolve this crucial problem. Although during the first decade of the new century poverty levels fell and the Gini coefficient was reduced for the first time in decades, income inequality remained stubbornly high: in 2007, for instance, the income shares of the poorest and richest 10% were 0.9% and 44%, respectively.
Building a health-industrial complex in Brazil is not entirely a new aim or idea, having manifested itself in various policies and institutional forms before, none of which had managed to create a strong health-pharmaceutical industrial base, or improve the health of the population. The fortunes of the Brazilian pharmaceutical sector had perhaps never been as bad as in the mid-1990s, when only one of the top 20 pharmaceutical companies was nationally owned. With regard to healthcare, a modern but private healthcare system co-existed with a much meager public one, but neither was available to the vast majority of the population who, by virtue of not being formally employed or not having the means to buy private healthcare insurance, relied on a mixture of familial or philanthropic care, if it existed.
Having been one of the most organised social movements that lead to the official overthrow of the military regime in 1984 and to the new 1988 Constitution, the movimento sanitário (healthcare movement) achieved perhaps the most radical institutional rupture in Brazil’s social policy design: universal and equitable healthcare for all (Art. 196). For the first time, the Brazilian state was called upon to guarantee free and universal healthcare for nearly 200 million Brazilians through the Unified Health System (Sistema Único de Saúde, SUS). The immediate aim of the health-industrial complex initiative was to improve the productive capacities required to keep afloat the SUS that accumulated ever-growing (trade) deficits as it was rolled out. But its aims went beyond this. It was an industrial and economic strategy that put the social unashamedly at its core: to provide free and universal healthcare to all Brazilians regardless of their origin – racial, economic or otherwise - in a way that was sustainable and made economic sense. Developing productive capacities in the health-pharmaceutical sector meant not only the strengthening of this particular industrial (and service) domestic sector, but also the creation of various backward and forward linkages, ‘virtuous circles’ that would improve Brazil’s economic fortunes.
What have been its successes to date? Healthcare has improved and the SUS has a number of notable achievements to be proud of. The most important are in primary/basic healthcare, prenatal care, vaccination and the free-for-all National AIDS Programme, referred worldwide as the ‘Brazilian AIDS model’. Given the enormity of the SUS, it is not surprising perhaps that it should still suffer from a number of persistent problems, such as gaps in coverage, regional disparities and barriers to accessing specialist and high-complexity care. The domestic health-pharmaceutical productive capacities have also improved. Having been singled out as a strategic sector in each of the industrial policies of the PT government from 2003 onwards, and benefiting from a number of financial support measures, most notably the BNDES Profarma Programme, its fortunes changed in the late 2000s. In 2008, for instance, the share of generics markets in Brazil grew to 17% of the total, of which 88% was controlled by Brazilian firms.
Despite these cautiously positive indicators, the Brazilian health-industrial complex experiment is likely to fail if the president is impeached and her deputy, now turned chief accuser, Michel Temer, becomes president. The programme Un Puente al Futuro (A Bridge to the Future) launched end of last year made clear what the economic platform of the government in waiting would be: a return to the neoliberal policy menu of the 1990s.
Of the many problematic policies adopted in that decade, those most likely to damage the health-industrial complex experiment, should it somehow survive the change in government, are the underfunding of healthcare and the de-universalisation of social rights. Both these trends, which were not significantly reversed during the PT administrations, took root during the 1990s.
Underfunding became a problem as soon as the ink on the new Constitution dried. Despite the constitutional principle of integrality of the social security system, in practice, healthcare, social assistance and social insurance (pensions) were separated and, apart from pensions, underfunded as debt repayment took precedence overall. Having already been significantly reduced between 1989-1992, healthcare funding remained woefully inadequate during the 1990s. The main social contributions - payroll taxes – were earmarked for pension payments. Moreover, up to 20% of taxes/contributions were regularly (but unconstitutionally) channeled towards debt repayment, and only about a third of the new tax levied on financial transactions in 1996 (CPMF) to deal with funding shortage in healthcare was actually used for this purpose. Many of these problems were not resolved under the PT administrations. The result has been that federal spending on healthcare has remained practically unchanged from 1995 onwards at around 1.8% of the GDP, whereas total public healthcare expenditure was less than half the 8.3% average in countries with a similar commitment to universal healthcare in 2012.
That the financial base of the Brazilian healthcare system is incompatible with the constitutional commitment to universality is also visible in the high share of private healthcare expenditure: less than 30% of Brazilians who continue to use private health insurance and facilities constitute anywhere between 55-65% of the total healthcare expenditure in Brazil. These indicators point to the wider problem of the de-universalisation of social rights, a trend that was also set in train during the 1990s. Although social spending grew during that decade it remained inadequate to support the universal social security rights guaranteed by the Constitution. Social policy was in practice one of ‘inclusive liberalism’ whereby various conditional cash transfer programmes targeting the poorest sabotaged the achievement of universal social rights guaranteed by the Constitution, including that of health. Despite the success of PT administrations in social policy areas, the tendency of social spending to reinforce in some respects the de-universalisation of social rights has not been reversed. On the contrary, the strong expansion of private social services and the continued preference for conditional cash transfers targeting the poorest continued to compromise the constitutional universality of social rights. SUS thus risks becoming an inferior subsystem that caters predominantly to the needs of the poorer segments of society. Should this occur, the rationale for supporting an experiment like the health-industrial complex will be significantly weakened, if the idea of having an industrial policy like this survives the change of government at all.