Public finance and fiscal policy

Economic Survey of Mexico 2009: Achieving higher performance: enhancing spending efficiency in health and education

 

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The following OECD assessment and recommendations summarise chapter 3 of the Economic Survey of Mexico  published on 30 July 2009.

 

Contents

 

Spending efficiency in health can be improved

Although public spending per capita on health has more than doubled in real terms since the 1995 financial crisis, it remains low by international standards. At the same time, Mexico’s health indicators lag behind those of most OECD countries. Although population health indicators have improved over the past two decades, life expectancy at birth remains lower, child mortality higher and outcomes highly uneven across socioeconomic groups. While this partly reflects Mexico’s lower per capita income, incomplete coverage and fragmentation in services provision contribute to poor outcomes. Further spending pressures will arise from the plan to achieve universal health insurance by 2011. While additional spending may help, improving health outcomes will result primarily from increasing the efficiency of spending. Although current reforms go into the right direction, better outcomes in some Latin American countries with similar per capita income and spending suggest that there is further scope for improving the efficiency of the health sector in Mexico.

The fragmentation of the health system should be reduced

The fragmentation of the health care system into several separate units that vertically integrate financing, insurance and provision functions contributes to inefficiencies, including by duplicating facilities and by increasing costs. The social security institutes cover salaried workers in the formal sector, while the “popular health insurance” scheme (Seguro Popular) covers part of the population working in the informal sector and nonsalaried formal workers. There is no split between insurer and provider functions, which has reduced quality of services and led to cost inefficiencies because money does not flow to the highest-quality and most efficient providers. To reduce administrative costs in health systems with multiple insurers, other OECD countries have introduced centralized claims management systems. While the health reform of 2004 and current policies, including the sharing of new facilities between insurers, address some of these issues, there is further scope for improving the efficiency of spending. A clear split between the functions of insurer and provider of care should be introduced throughout the system and any insurer should be allowed to contract with any provider. Administrative costs could be reduced by introducing a unified claims management system.

Universal health coverage may require making insurance mandatory

One third of the population, mostly in low-income groups, has no health insurance, which has contributed to poor health outcomes. The uninsured are less likely to receive appropriate preventive care and timely treatment when sick, which results in higher spending, often out-of-pocket, and worse outcomes. The government is aiming for universal coverage by 2011 by further expanding Seguro Popular, which has been successful in increasing coverage by about 25% of the population since 2004. However, coverage should be made mandatory to ensure nobody is inadvertently left uncovered and to contain adverse selection (the healthy may avoid paying premiums) that could undermine the finances of the programme. This is a key lesson from the experience of other OECD countries that have recently adopted universal health insurance. To achieve this, the authorities should enter discussions about making health insurance mandatory and identifying resources to finance the likely increase in public spending in a sustainable way.

Health insurance coverage by income decile

2006

Source: ENIGH Household Income Survey 2006.

Enrolment into secondary education should be enhanced through an expansion of conditional cash transfers to poor students

 Mexico’s relatively poor PISA scores and low secondary school enrolment are strongly related to socio-economic backgrounds. Less than 50% of children from households in the bottom decile of the income distribution attend secondary school, in contrast to more than 80% in the top decile. To improve coverage in secondary education, the government has recently introduced the Jóvenes con Oportunidades programme that gives cash grants conditional upon secondary school completion. Expanding the scope of this programme can be a good way of increasing coverage and spending efficiency in education.

Education outcomes would benefit from implementing the Alianza quality-enhancing programme and improving incentives in schools

Education outcomes in Mexico are also influenced by poor school and teaching quality. Until recently, the teacher selection process was not transparent, and the main teacher incentive scheme continues to put excessive weight on seniority, which lowers teaching quality. Schools have limited autonomy in budgeting, instruction and personnel and there is no national exit exam after secondary education that would make schools accountable to the government and parents. In other OECD countries greater autonomy and exit exams have been major factors in improving teaching quality. Existing evaluation programmes that focus on rote knowledge instead of analytical capabilities, and the undercapitalisation of the school system, are also likely to have contributed to poor PISA scores. Some of these issues are being addressed by recent reforms such as the quality school programme and the (voluntary) Alliance for quality education. This agreement between the government and the main teachers’ union should be implemented country-wide. In particular, the teacher selection process should be based on a nation-wide entry exam, as planned by the Alliance and implemented for the first time in 2008. Incentives for teachers should be more closely linked to teaching performance and existing evaluation schemes should be consolidated and focused on analytical capabilities instead of knowledge.

 

How to obtain this publication

 

The complete edition of the Economic Survey of Mexico is available from:

The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.

 

Additional information

For further information please contact the Mexico Desk at the OECD Economics Department at eco.survey@oecd.org

The OECD Secretariat's report was prepared by Nicola Brandt, Cyrille Schwellnus and Tonje Lauritzen under the supervision of Patrick Lenain and Piritta Sorsa. Research assistance was provided by Roselyne Jamin.

 

 

 

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