This chapter reviews healthcare financing in Paraguay and assesses policy options to improve its sustainability. It analyses the contributory health insurance system administered by the IPS, identifies key financing challenges and outlines options to strengthen revenue mobilisation. The chapter also examines the financing structure of the non-contributory public health system administered by the MSPBS.
Financing Social Protection in Paraguay
The Role of General Revenues and Social Security Contributions
Abstract
Paraguay’s health system is characterised by institutional fragmentation, with multiple public and private actors delivering overlapping services. The principal providers include the Ministry of Public Health and Social Welfare (MSPBS), the Social Security Institute (IPS), private health insurers, and smaller public health systems operated by the military, police, and national universities.
The MSPBS delivers basic health services free of charge to the entire population, with a particular focus on vulnerable and uninsured individuals. Nonetheless, access is not restricted by insurance status, and individuals with private or public insurance may also utilise MSPBS facilities, which are geographically more widespread across the country (see Figure 2.1).
The IPS offers a broader range of services, including both basic healthcare and highly specialised treatments, and provides health insurance to formal private sector employees and their dependants, but also employees of certain state-owned enterprises and certain public sector workers, such as teachers.
The military and police operate their own hospitals, which provide services exclusively to their officials, retired personnel and family dependants. However, the MSPBS and the Ministry of Defense have an agreement allowing the use of military hospitals for surgeries and hospitalisation of non-military patients, in order to enhance public health care services for the broader population. The hospital of the National University of Asunción provides medical services to the general public and is not limited to serving university personnel.
Private insurance providers collectively represent the third-largest source of healthcare services in Paraguay. Private insurance plans provide coverage to the majority of public sector employees, who either receive who either private health insurance directly paid by the government or receive government subsidies to obtain such coverage.
Note: There is an agreement between the Ministry of Health (MSPBS) and the Ministry of Defence to use the military hospitals for hospitalisation and surgery of public patients in need.
Source: OECD, adapted from World Bank (2018[1]).
To strengthen access to basic healthcare services and complement existing public health infrastructure, Paraguay has expanded the deployment of Family Health Units (Unidades de Salud Familiares, USFs). In response to gaps in universal healthcare coverage, the government introduced USFs in 2008 as a means to improve outreach, particularly in underserved and rural areas. These units continue to be highly operational, with 937 USFs in place by the end of 2024, collectively serving an estimated 3 million individuals, according to data from the MSPBS. The core objective of the USF model is to enhance access to public health services, reduce waiting times, and decentralize primary care delivery. Their continued expansion reflects a strategic shift toward more inclusive and preventive healthcare provision. Nonetheless, in 2025, hospitals accounted for 40% of all healthcare services provided (MSPBS, 2025[2]), consistent with trends observed over the past decade (World Bank, 2018[1]).
On the expenditure side, procurement processes are largely centralised, while the pricing of healthcare services remains highly decentralised. The MSPBS conducts centralised procurement of pharmaceuticals and medical equipment at the national or regional level. In addition, the MSPBS and the IPS started cooperating on joint procurement, which is a welcomed step. On the contrary, the pricing of healthcare services is rather decentralised, with significant variation across hospitals and no unified framework or guidance on pricing methodologies. This lack of standardisation complicates cost control and transparency across the system (World Bank, 2018[1]).
Paraguay has defined a long-term strategic vision for its public health system. The government has articulated a strategic vision to shift towards a more integrated, preventive, and equitable healthcare model. The Política Nacional de Salud 2015-2030 outlines a strategic objective to increase and allocate financial resources based on population health needs (MSPBS, 2015[3]). To achieve this long-term vision, greater public investment, more transparent and efficient management, and effective coordination between all health subsystems is needed (World Bank, 2018[1]).
The absence of forward-looking expenditure planning is particularly problematic in light of the country’s demographic trends and evolving health needs. The slowly ageing population and increased utilisation of preventive care services in Paraguay are likely to increase health expenditures in the future. Long-term projections of spending capacity and costs are essential to ensure fiscal sustainability and equitable access to healthcare. Strengthening data infrastructure to collect detailed expenditure information is therefore essential for both MSPBS and IPS, particularly for estimating health costs by age group in the context of an ageing population (see Box 2.1).
Health expenditure increases with age, with particularly sharp rises observed among individuals aged 65 and over in OECD countries. A recent OECD study finds that health spending per capita rises significantly in older age groups, with the 65–84 age bracket accounting for 2 to 2.5 times the average per capita expenditure in most countries (Figure 2.2). For individuals aged 85 and above, spending varies more widely, from 2.2 times the population-wide average spending in Hungary to 7.3 times in Colombia. These differences may reflect variations in the inclusion of long-term care services in national health expenditure data or the availability of formal long-term care systems (Morgan and Mueller, 2023[4]). As with other OECD countries, Paraguay is expected to experience demographic ageing in the coming decades. The associated increase in health costs for older populations will place growing pressure on the public health system. Therefore, Paraguay needs to anticipate these challenges by reviewing the financing of health insurance.
Average per capita health spending for each age group relative to the overall per capita spending for each country
Note: The average line represents the average value for 15 OECD countries (Australia, Austria, Canada, Colombia, Estonia, Finland, Germany, Hungary, Italy, Korea, Latvia, Luxembourg, Netherlands, Sweden, Switzerland).
Source: Adapted from Morgan and Mueller (2023[4]).
Per capita health spending in Paraguay varies substantially across scheme types, with significantly lower spending levels in public contributory and non-contributory health schemes compared to those covering public sector workers (Figure 2.3). In 2023, the MSPBS spent an estimated USD 287 per capita on individuals receiving care in its facilities. Regional disparities in per capita health spending by the MSPBS are also evident, with the highest levels recorded in Asunción (World Bank, 2018[1]). In contrast, the IPS reported an average annual expenditure of USD 391 per beneficiary, including both contributors and their dependants. The highest per capita health spending is observed for civil servants, which either are granted private health insurance with an average annual cost of USD 1587 or benefit from a subsidy of USD 476 per year to cover healthcare expenses, with the exact amounts varying by public institution.
Annual health expenditure per capita in USD by health scheme, 2024 or latest year
Note: The per capita expenditure of the MSPBS represents total expenditure divided by the number of uninsured individuals in 2023. Potential users of MSPBS facilities who are insured under the IPS are not considered. For the IPS, the per capita expenditure in 2024 represents total expenditure divided by the number of all beneficiaries (contributors and their dependants). Some public institutions provide for private health insurance healthcare for civil servants at a per capita cost of PYG 100 000 per month while other public sector institutions grant subsidies of approximately PYG 300 000 per month.
The IPS provides health insurance coverage to private sector workers, as well as to certain public sector workers and pensioners from these sectors, and their dependants. Eligibility is governed by the national social security legislation (Law No. 17071/1943) and has progressively expanded to include additional professional categories, such as private school teachers, domestic workers, and part-time employees. The IPS operates two distinct schemes: a general regime that offers both health insurance and pension benefits, and a special regime that provides health insurance only.
The IPS health fund does not only cover health insurance but also income insurance against sickness, maternity and work-related injuries. In-kind health benefits (e.g. medical care) and cash benefits (e.g. sick pay, maternity leave) are often financed through separate contribution rates. Paraguay could consider separating these benefits from the work-accident insurance premium, which could be financed through an employer contribution (CISS, 2012[7]).
The IPS health fund faces financial challenges
In 2024, expenditures from the IPS health fund exceeded revenues. The 2024 deficit amounted to USD 55 million, representing 9.7% of total revenues. Social security contributions accounted for 99% of total income. The largest expenditure categories were medical and pharmaceutical products and human resources, representing 31% and 38% of total spending, respectively (Table 2.1). Around 9% of the expenditure corresponded to interest payments and other payments towards the financial sector. Deficits are financed through a combination of loans with the domestic financial sector and deferred payments to medical suppliers. The latter often lead to higher procurement costs, as suppliers adjust prices to account for delayed payments. The health fund’s financial situation raises concerns about its long-term sustainability and underscores the need for enhanced revenue mobilisation and greater efficiency in expenditure management.
Note: The average exchange rate for 2024 from the World Bank has been applied (USD 1 = PYG 7 560.25).
Source: IPS.
A key factor behind expenditures exceeding revenues is the extension of health insurance coverage to dependants without corresponding additional contributions under the IPS health fund. Under the IPS, contributing private sector employees and pensioners may extend health insurance coverage to family dependants at no additional cost. On average, each insured worker and pensioner provides coverage to 0.61 dependants (IPS, 2025[8]). Eligible dependants include spouses, co-habiting partners, minor children or children with disabilities but also parents and in-laws, provided they reside within the same household. According to the 2024 EPHC survey, 12% of the insured are dependent spouses (predominantly women) and 27% are dependent children (Figure 2.4). With fertility rates remaining above two children per woman, coverage of dependent children is likely to continue representing a substantial cost for the IPS over the medium term. About 5% of informal workers are covered through mixed households where IPS coverage of formal workers is extended to dependent spouses, children and relatives. While EPHC data capture only dependants residing in the same household, IPS officials indicate that younger contributors frequently extend coverage beyond spouses and children to include parents living in separate households.
Note: It is mandatory for pensioners to pay contributions to the IPS health fund (6%), except for retired teachers who contributed under the special regime and can choose to opt out. Other dependants include dependent family members living in the same household, except for children, spouses and parents. The EPHC survey does not include the departments of Boquerón and Alto Paraguay, indigenous communities, collective housing and live-in domestic workers.
Source: OECD based on EPHC (2024[6]).
Nonetheless, over the past decade, the increase in the number of contributors did not translate into a corresponding rise in the number of dependants that are covered. The number of insured individuals under both the general and special regimes of the IPS has been increasing gradually over time. In 2024, the IPS covered 754 837 contributors under the general regime (including pension benefits), representing approximately 80% of total contributors, and 223 414 contributors under the special regime, accounting for the remaining 20% (Figure 2.5). Since 2015, the number of contributors has grown, on average, at annual rates of 4.1% under the general regime and 3.4% under the special regime. The number of dependants insured under both regimes has remained relatively stable since 2015, with only minor fluctuations. In 2024, of the total insured population, 60% were active contributors, while the remaining 40% were dependants.
Note: Contributors are split into two categories: the general regime refers to those who contribute to the IPS pension and health fund; and the special regime refers to those who contribute only to the IPS health fund. Army veterans are part of the non-contributory regime while dependants refer to dependent family members who do not contribute themselves.
Source: IPS (2025[8]).
Measures to extend coverage to workers with earnings below the minimum wage have implications for the financial sustainability of the IPS health fund. Private sector teachers contribute to the health insurance fund but unlike the rest of private sector workers they are not subject to a minimum contribution base (Law 4370). Similarly, measures that lower contribution requirements for specific groups of workers – such as the recent Mipymes Law No. 7444/2025 – risk widening the financing gap per contributor (see Chapter 6 for a description of this law).
In 2024, the average financing gap of the IPS health fund was USD 59 per contributor. Average contributions amounted to USD 570 per contributor, while health expenditures reached USD 391 per insured person (Figure 2.3). Given that on average each contributor provided coverage of 1.61 individuals, the resulting financing gap was USD 59 per contributor.
Beyond the inclusion of dependants, several additional factors have contributed to rising expenditure in the IPS health fund. The provision of health services for individuals and dependants insured under the IPS has expanded in recent years, with growth rates exceeding the growth in beneficiaries for some categories. Between 2019 and 2024, the volume of health services delivered by IPS increased across most categories, with outpatient treatments and hospitalisation showing significant increases (Figure 2.6, Panel A). The annual growth rates of these health services are exceeding the increase in the number of IPS beneficiaries (Figure 2.6, Panel B). This faster expansion in service provision has contributed to higher expenditure for the IPS health fund, as the expenditure per beneficiaries increased on average. Additional factors driving expenditure growth include the continued introduction of high-cost medicines covered by the fund and the absence of limits on hospitalisation coverage. The absence of microdata on health expenditure that would allow identification of spending by individual users constitutes a significant constraint for effective financial oversight, as well as for accurate forecasting and policy design.
Source: IPS Observatorio website, https://public.tableau.com/app/profile/instituto.de.prevision.social.paraguay/viz/AsistenciaMdicaObservatorio/PRESTACIONESSALUD.
Paraguay has introduced measures to increase resources allocated to the IPS health fund
A gradual reallocation of contributions is being implemented over the medium term with the aim of improving the financial sustainability of the IPS health fund. The contribution rate to the IPS Health Fund is being progressively increased from 9% to 12% by 2029 without increasing overall contributions to IPS. This adjustment is financed through a reallocation of existing contributions, notably a phased elimination of 2.5 percentage points from the SENEPA and SNPP Malaria Fund and a reduction of 0.5 percentage points from the Administration Fund (Table 2.2). The aggregate contribution rate for private sector employees under the general regime remains unchanged at 25.5% throughout the transition period. Contribution rates under the special regime applicable to teachers, university professors, and staff of the public prosecutor’s office will be kept constant at 5.58% and 9.5%, respectively (Table 2.2). The lower contribution rates under the special regime, which covers health insurance only, are associated with more limited benefit entitlements, including the exclusion of certain services such as prostheses. Pensioners are required to continue contributing at a rate of 6%.
Note: Financial sector employees contribute 11% and their employers 17%.
Source: IPS (2025[8]) Anuario Estadístico IPS 2023.
Health contribution rates for private sector employees in Paraguay are broadly in line with rates in other LAC and OECD countries. Figure 2.7 presents mandatory health contribution rates in selected LAC and OECD countries, covering employer and employee contributions. Paraguay’s combined health contribution rate for health, work accidents, sickness and maternity benefits stands at 10% in 2025 under the general regime of the IPS, which is lower than those in several LAC and OECD countries. While no upper ceiling is applied to the contribution base under the IPS, a minimum threshold is established, corresponding to the statutory minimum wage with certain exceptions for professional groups earning below the minimum wage (see chapter 6).
Note: The rates for mandatory social security contributions for health insurance for private sector employees are displayed, showing two rates in cases where rates differ depending on the income level or family status. In Uruguay, the health contributions amount to 8% of gross earnings for a single contributor and up to 13% if dependants are included. In Paraguay, the contributions also include funding of sickness, maternity and work-accidents.
Source: IBFD and national sources.
Options for strengthening revenue of the Health Fund
Enhanced monitoring could help reduce the incidence of income underreporting
The contributor base of the IPS is largely composed of low-income earners. In December 2023, approximately 43% of contributors reported monthly earnings at or below the statutory minimum wage (IPS, 2025[8]). This concentration of formal incomes around the minimum wage is further corroborated by data from the 2024 EPHC survey (Figure 2.8). Fewer than one in five contributors earned more than twice the minimum wage – an income level that approximates the monthly net personal income tax (PIT) threshold (see Annex 2.A).
However, comparisons between administrative data on IPS contributors and self-reported income data from the 2024 EPHC survey suggest possible underreporting of wages in the administrative records (Figure 2.8). While IPS administrative data indicate that around 20% of contributors report earnings below the minimum wage, survey data suggest a significantly lower share, at around 7%. Similarly, contributors earning between one and two times the minimum wage account for 64% of contributors in IPS administrative records, compared to 58% in the survey data. The higher concentration of contributors reporting earnings below twice the minimum wage in administrative sources may point to under‑reporting of wages, potentially reflecting arrangements whereby employers and workers declare lower earnings to reduce social security contribution liabilities while increasing net take‑home pay. Strengthening monitoring, compliance and enforcement mechanisms is therefore essential to ensure that social security contributions are assessed on the basis of actual earnings.
Note: The distribution of contributors by income bracket are based on administrative data of the IPS from 2023, published in the 2025 IPS Anuario report is represented by the blue bars. The distribution based on the EPHC survey data from 2024 is shown in green bars. The minimum salary was PYG 2 289 324 per month from July 2023 to June 2024, and PYG 2 798 309 from July 2024 to June 2025. For the calculation presented in green bars, the average of these two minimum wages was used.
Additional contributions could be levied for dependants
The IPS could consider introducing additional contributions to extend coverage to dependants. The current structure of SSCs for health insurance in Paraguay allows insured workers and pensioners under the IPS scheme to cover all household dependants at a flat contribution rate of 9% of gross salary (or 6% of gross pension income). In contrast, many countries adjust SSC rates based on whether dependants are covered or not. For example, in Uruguay, contributions to the National Health Fund (FONASA) range from 8% to 13%, depending on the presence of a dependent spouse and children (see Box 2.2). Coverage is limited to spouses and children.
In Uruguay, formal workers are required to contribute to the National Health Fund (FONASA) through mandatory SSCs (Table 2.3). Workers can choose a mutual health insurance, with the public sector as one of the options available. Coverage has to be extended to the worker’s children and also to his/her spouse, provided the spouse is not formally employed. Employee SSC rates range from 3% to 8% of gross salary, comprising a base rate of 3% and an additional rate determined by income level and family composition (e.g. presence of a spouse and children). For instance, single workers earning below USD 413 (2.5 Benefits and Contribution Base (BPC) units) do not pay an additional rate to cover their children if they are single parents and pay an additional 2% (total of 5%) if they cover their dependent spouse. For employees earning above 2.5 BPC, total health insurance rates increase to 6% for single parents and 8% for workers that cover both their children and dependent spouse.
Note: 1 BPC corresponded to UYU 6 576 in 2025 (approximately USD 165).
Employers contribute a standard rate of 5%, with an additional contribution supplement if applicable. This supplement is calculated based on the difference between the total cost of monthly health insurance for all beneficiaries and the sum of the 3% basic employee contribution and the 5% employer contribution.
It is mandatory for self-employed workers to contribute to social security (both health and pensions). In the same way as employees, self-employed workers need to provide health insurance coverage for their dependant spouse and children. For sole proprietors, contributions are determined by applying the same rates as for employees but based on a notional income that varies by economic activity and is periodically updated. Contributions are also mandatory for workers registered through the monotributo (presumptive tax regime) and amount to UYU 6 673 if children are covered and UYU 7 528 per month if children and the spouse are covered.
Source: Banco de Previsión Social, Uruguay.
To enhance the financial sustainability of Paraguay’s health insurance system, the following reform options could be considered:
Restricting coverage to children and spouses who lack alternative health insurance through formal employment while the insurance of newly dependent parents could be discontinued. Although dependent parents seem to be the minority of the dependants in the IPS regime, the cost of their insurance is expected to increase with population ageing.
Introducing additional contribution rates to finance the coverage of dependants, with exemptions for workers earning below the minimum wage. Table 2.4 presents alternative scenarios, which suggest different additional contributions rates for spouses, children and dependent parents. To mitigate the regressive impact, Scenarios A and B introduce an additional SSCs rate applicable when contributors have children; however, this rate remains fixed regardless of the number of children. Scenario C avoids applying any contribution rate to children, which reduces the regressive effect but comes at the cost of lower potential revenue, given that children constitute the majority of dependants. All scenarios exempt workers earning below one minimum wage from additional contributions to further reduce regressivity. However, this exemption may create incentives for underreporting wages.
Source: OECD.
The simulated scenarios of additional contribution rates for dependants indicate that additional revenues of up to 0.24% of GDP could be generated. Table 2.5 presents the estimated revenue gains under three scenarios of rate increases, as outlined in Table 2.4. The simulations are based on data from the 2024 EPHC survey and include dependants such as children and spouses; dependent parents could not be included due to data limitations. The simulated revenue gains range from PYG 371 200 million to PYG 814 800 million, or approximately 0.11% and 0.24% of GDP, amounts that in all cases exceed the deficit faced in 2024. These additional contributions could represent a meaningful step toward enhancing the fund’s financial sustainability.
Note: The revenue estimates are based on wages reported in the 2024 EPHC survey which are overall slightly higher than those observed in the administrative data (see Figure 2.8). However, the survey underestimates the total number of contributors. To adjust for this limitation revenue estimates are adjusted upwards by multiplying them by the factor 1.19. This factor is the result of comparing data on actual contributions to the IPS health fund in 2024 (PYG 4 218 billion) and estimated contributions based on the survey data (PYG 3 540 billion).
Source: OECD based on EPHC (2024[6]).
The coverage of the IPS health insurance could be extended to civil servants
Civil servants in Paraguay are not covered by the public health insurance system but receive a subsidy to pay for private health insurance. Public sector workers from the central administration are granted a subsidy, varying in amount, to help cover the cost of private health insurance. There were approximately 97 000 public sector workers eligible for the subsidy in 2024. However, it is not compulsory for them to purchase private health insurance, which leaves some public sector workers uninsured. According to the EPHC survey, about half of the civil servants that receive the subsidy have replied that they have not purchased private health insurance.
The allocation of the health subsidy varies across public entities. The lowest health subsidy amounts to approximately PYG 300 000 per month, whereas the maximum value of the subsidy can reach up to PYG 1 million per month. This fragmented approach to health coverage within the public sector raises considerations regarding equity and efficiency of health financing arrangements across government institutions. In 2024, the cost of this health insurance subsidy for civil servants amounted to USD 96 million or 0.22% of GDP (Table 2.6). Thereof, two thirds are funded by financial resources from the treasury (FF10) and one third is funded by institutional resources (FF30), hence from social security contributions paid to the Caja Fiscal.
Note: The funding source FF10 refers to general tax revenues, whereas the funding source FF30 refers to institutional resources such as contributions to the Caja Fiscal.
Source: MEF.
In the near term, the government could consider integrating civil servants into the IPS health insurance scheme. This reform could be implemented under harmonised contribution rates (at a rate of 10%), with the government paying for health contributions, rather than providing subsidies. According to data from the Ministry of Labour, Employment and Social Security (MTESS, 2024[9]), the average gross monthly salary of a public sector employee was PYG 6.5 million in 2023. Applying the standard health contribution rate of 10% to the IPS would yield a monthly contribution of approximately PYG 645 350. This amount is not that different from the current average health-related subsidies provided to public employees, which amounts to PYG 676 623 per month. The contribution could be entirely covered by the government as in most cases the current subsidy exceeds the potential contribution amount. This example highlights the potential for aligning existing subsidy mechanisms with contributions to the IPS Health Fund, and in this way ensuring that public servants have health insurance while, at the same time, supporting the financial sustainability of the IPS health fund.
Integrating civil servants into the IPS health insurance scheme could enhance equity and efficiency in healthcare coverage delivery and help reduce fragmentation within the public health system. Despite the current financial constraints facing the IPS, which limit its capacity to expand coverage to additional professional groups, the inclusion of civil servants may increase revenues for the IPS health fund. Given that civil servants tend to be among the higher‑income earners in Paraguay, their inclusion would be expected to generate contribution inflows to the IPS that exceed the system’s average contribution level. However, this measure should be considered alongside the introduction of additional social security contributions for dependants to ensure that the inclusion of this group is financially sustainable for the IPS. More broadly, any extension of IPS coverage to new professional groups should be implemented gradually and supported by a clear forecasting framework. From the perspective of public sector workers, such an extension would also ensure continued access to IPS health insurance coverage after retirement.
The introduction of mandatory health contributions, combined with the removal of existing health subsidies for public civil servants, could be designed to be revenue neutral or to generate additional revenues for the general budget. Approximately 70% of civil servants employed in the central administration earn between PYG 3 million and PYG 10 million per month and their health contributions would be in the range of the current subsidies. For an estimated 19% of the civil servants, the government’s health contribution would fall below PYG 300 000 per month. Conversely, around 10 per cent of civil servants would require contributions exceeding PYG 1 million per month. For workers earning less than PYG 3 million per month who currently receive a PYG 300 000 subsidy, and for those earning below PYG 10 million who receive a PYG 1 000 000 subsidy, the amount of the contribution would be inferior to the current amount of the subsidy (Figure 2.9). This difference could potentially be covered by the government to ensure that their net income remains unchanged. On the contrary, the reform may lead to increased public revenue for workers earning above PYG 3 million and currently receiving a subsidy of PYG 300 000 and for workers earning more than PYG 10 million, who currently receive a subsidy of PYG 1 million. The net fiscal impact could not be assessed in this study, as available data cover only the aggregate amount of subsidies paid and do not provide information on their allocation across ministries or on the remuneration of individual workers.
Note: This estimated distribution represents potential health contributions (10% of gross salary in line with rates allocated to the IPS health fund in 2025) that the government could collect from public sector workers who currently receive a subsidy for private health insurance. The contribution base is the gross salaries of the public sector workers excluding those who already contribute to the IPS for health insurance, and the military and police who are covered by their own health system. For those public sector workers, who declared in the survey not to have a private health insurance, the lowest possible health subsidy (PYG 300 000) was subtracted from their net monthly salary. The 16% contribution to the Caja Fiscal is added to primary net income to calculate the gross income reported in the EPHC. The primary net income variable was winsorised at the 96th percentile and the last displayed bin includes all incomes above this percentile. The sample distribution is expanded by the population expansion factor.
Source: OECD based on data from EPHC (2024[6]).
Independent workers are not required to contribute to health insurance. Access to healthcare for this group is typically obtained through free health services provided by the MSPBS, as dependants under the IPS, or through voluntary enrolment in private health insurance schemes. At present, independent workers may contribute voluntarily only to the IPS pension fund, but take‑up remains limited, with just 967 contributors recorded in 2023. Extending health insurance coverage to independent workers could increase the attractiveness of participation in the IPS by offering more immediate and tangible benefits alongside longer‑term pension entitlements.
Independent professionals could be required to contribute to health insurance by linking participation to registration with the tax administration. A significant share of independent workers falls within higher income brackets and has the financial capacity to contribute to public health insurance, notably among liberal professions such as doctors and lawyers. Extending mandatory health insurance coverage to this group could enhance the financial sustainability of the IPS by broadening the contribution base. Contribution rates could be applied to a presumptive income base calibrated to at least cover the per capita cost of care within the IPS system. This presumptive base could be differentiated by economic activity, as is the case in Uruguay. As in the case of public sector workers, the introduction of mandatory coverage should be accompanied by additional contribution rates to finance the inclusion of dependants.
For individuals with limited or no capacity to contribute, the MSPBS remains the primary channel for access to healthcare. The IPS could nonetheless offer these groups the option of voluntary enrolment in health insurance, without eligibility to include dependants. Alternatively, mandatory health insurance contributions could be incorporated into simplified tax regimes such as the IRE RESIMPLE, in line with arrangements under the Monotributo schemes in Argentina and Uruguay (see Chapter 6).
Paraguay could consider increasing health insurance contribution rates for pensioners to the same level that applies to workers. Pensioners currently contribute 6% of their gross income to the IPS Health Fund, despite health expenditures being significantly higher for older age groups than for middle-aged individuals (see Box 2.1). Furthermore, unlike in most OECD countries, pension income in Paraguay is exempt from personal income tax. Health contribution rates for pensioners could be increased to 9% for those with incomes above the minimum wage, while maintaining the 6% rate for pensioners with incomes below the minimum wage. According to IPS estimates, such a measure could generate additional annual revenues of around USD 10 million.
The public healthcare system administered by the MSPBS is financed primarily through general tax revenues, supplemented by external loans and earmarked revenues from social security contributions. In accordance with Law No. 5099/2013, the MSPBS provides free healthcare services through its network of public hospitals and clinics. In 2025, the MSPBS’ budget amounted to PYG 9 715 billion, equivalent to 2.9% of GDP (Law No. 7408/2025). The majority of this budget was financed through general tax revenues (65%). Additionally, one percentage point of employer social security contributions is earmarked to finance the MSPBS, mandated by Law No. 1429/99. The redirection of employer health contributions from the contributory to the non-contributory system deviates from international best practices. This approach undermines the integrity of the contributory system and disincentivizes worker formalisation. Financing part of the non‑contributory healthcare scheme through contributions from the IPS increases labour tax burdens and may indirectly strengthen incentives for informality. The remaining budget is financed through other institutional resources, external credit and other current and capital revenue. To increase the resources available to the non-contributory scheme, the primary focus should be on raising general tax revenue. Policies to mobilise domestic revenues are discussed in Chapter 5.
Source: MEF, Ingresos por Entidad, 12.8 MSPBS, https://www.mef.gov.py/es/marco-legal/ley-de-presupuesto/2025/ingresos-por-entidad.
The FONARESS has shown limited capacity to serve additional patients despite increased revenue
In addition to the general public health budget, Paraguay has established the FONARESS fund to cover the treatment of specific diseases. The Fondo Nacional de Recursos Solidarios para la Salud (FONARESS), established in 2022, is also administered by the MSPBS but has a separate budget. The fund is designed to provide financial support for individuals without access to health insurance schemes. The FONARESS currently focuses on financing high-cost medical treatments, such as medication for spinal muscular atrophy, but also aims to finance other complex and high-cost conditions such as cardiovascular diseases and rare genetic disorders.
The FONARESS fund is financed through earmarked general tax revenue. In 2025, approximately 90% of the fund’s resources were financed through earmarked revenues from the Dividend and Profit Tax (IDU), with a further 6% originating from earmarked health-related excise taxes and 4% from unclaimed gambling prizes (Figure 2.10, Panel A). Specifically, 10% of IDU revenues, 5% of excise tax revenues on tobacco and alcohol, and 100% of unclaimed gambling prizes are allocated to the fund. The earmarking of tax revenues for health financing provides a targeted mechanism to mobilise resources, but it also reduces overall budgetary flexibility. While reliance on IDU revenues ensures a substantial funding base, it introduces a degree of volatility linked to corporate profit cycles. By contrast, earmarking revenues from excise taxes on harmful products is a more widely used approach, as it explicitly links the consumption of health‑damaging goods to the financing of healthcare services (see Chapter 5). Although earmarking is not considered a first‑best financing solution, it may be appropriate in contexts characterised by high‑cost treatments and rapidly rising expenditure pressures.
Source: MSPBS.
Since its establishment, the FONARESS fund has experienced growth in revenues, while expenditure has increased more moderately, with only a limited number of patients benefiting to date. While revenues rose from under PYG 50 billion to over PYG 300 billion from 2022 to 2024, expenditure increased from PYG 25 billion to over PYG 125 billion in the same period (Figure 2.10, Panel B). In 2024, approximately 80% of total expenditure was allocated to the purchase of high‑cost medications. Despite the increase in funding, the fund’s reach remains limited: by 2024, only 69 patients had received support.
Contributory healthcare (IPS):
Introduce additional contribution rates linked to the coverage of family dependants, in order to better align contributions with benefit entitlements.
Consider increasing health contribution rates for pensioners with higher pensions, for example by raising the rate from 6% to 9% for beneficiaries receiving pensions above one minimum wage.
Any reform aimed at expanding coverage to new categories of contributors should be accompanied by either an additional contribution per dependant or restrictions on dependant coverage for these groups. In this context, policy options include:
Integrating public sector workers into the IPS health insurance scheme and replacing existing subsidies to private health insurance with employer contributions to the IPS.
Extending mandatory IPS health insurance coverage to liberal professions.
Offering voluntary health insurance to other independent workers, or integrating SSCs into a presumptive tax regime, building on the IRE RESIMPLE.
Establish separate contribution rates for cash benefits related to sickness, maternity and work-related injuries.
Strengthen monitoring and enforcement mechanisms to reduce the underreporting of wages and improve contribution compliance.
Non-contributory healthcare (MSPBS):
Improve spending efficiency within the MSPBS.
Ensure that the non-contributory health scheme is financed primarily through general tax revenues.
Consider abolishing the redirection of employer contributions toward the financing of the non-contributory health system.
References
[10] Bai, H. and B. Zelko (2022), La densidad de cotizaciones al IPS en Paraguay, https://www.ilo.org/sites/default/files/wcmsp5/groups/public/@americas/@ro-lima/@sro-santiago/documents/publication/wcms_857549.pdf.
[7] CISS (2012), Estudio actuarial para el Seguro de Salud y estudio de costos de las prestaciones de salud.
[6] EPHC (2024), Encuesta Permanente de Hogares Continua de Paraguay, Instituto Nacional de Estadística (INE) Paraguay, https://www.ine.gov.py/microdatos/Encuesta-Permanente-de-Hogares-Continua.php.
[5] INE (2022), Censo Nacional de Población y Viviendas, Paraguay, 2022, Instituto Nacional de Estadística Paraguay, Asunción, https://www.ine.gov.py/censo2022/.
[8] IPS (2025), Anuario Estadístico IPS 2023, Instituto de Previsión Social, Paraguay, https://portal.ips.gov.py/sistemas/ipsportal/contenido.php?c=289.
[4] Morgan, D. and M. Mueller (2023), “Understanding international measures of health spending: Age-adjusting expenditure on health”, OECD Health Working Papers, No. 162, OECD Publishing, Paris, https://doi.org/10.1787/043ed664-en.
[2] MSPBS (2025), Cuentas de Salud Paraguay 2023, Ministerio de Salud Pública y Bienestar Social Paraguay, Asunción.
[3] MSPBS (2015), Política Nacional de Salud 2015-2030, Ministerio de Salud Publica y Bienestar Social, Paraguay, https://www.mspbs.gov.py/dependencias/portal/adjunto/9753ad-POLITICANACIONALDESALUD.pdf.
[9] MTESS (2024), Boletín Estadístico de Seguridad Social 2024, Ministerio de Trabajo Empleo y Seguridad Social Paraguay, https://www.mtess.gov.py/application/files/2217/3581/7654/BOLETIN_ESTADISTICO_SEGURIDAD_SOCIAL_2024..pdf (accessed on 12 June 2025).
[1] World Bank (2018), Paraguay Public Expenditure Review in the Human Development Sectors and Fiscal Management, World Bank, Washington DC, https://documents1.worldbank.org/curated/en/947381713366044473/pdf/Paraguay-Public-expenditure-review-in-the-human-development-sectors-and-fiscal-management-spending-better-for-better-lives.pdf.