PERSPECTIVES THE
BRAZILIAN HEALTHCARE
INDUSTRY
José Cechin
é C hi
Santander 3 fev 2010
[email protected]
55 11 3706.9747
Agenda
• A regulated industry
• Consolidation
• Concentration
• Beneficiaries
• VCMH – cost trends
• Perspectives
2
A regulated industry
3
Regulation is necessary
• Market imperfections
• Information assymetry
•
Equity, adverse selection, risck selection
•
M lh
Moral
hazard
d
•
Third party payer
4
Regulated matters
• Administrative
ƒ Operators and
d products
d
must b
be registered
d
ƒ Start up and close down rules
ƒ Continuityy of contracts (individual)
(
)
• Medical assistance
ƒ
ƒ
ƒ
ƒ
Integral
g coverage
g – all diseases under the IDC
Limits to waiting times
Prohibitions: to exclude diseases, to limit healthcare periods
p
, to select risks
or expenditures,
Economic-financial
ƒ
ƒ
ƒ
Solvencyy and liquidity,
q
y,
Minimum capital, technical reserves, guarantees and
provisions
Price readjustments
5
Results after 11 years of regulation
• One law regulates
g
all types
yp of operators
p
• Inhibited unfaithful competition
• Increased
In r
d tr
trustworthiness
t rthin / rreliance
li n off h
health
lth pl
plans
n
• Standardized products
• Regulation had positive impacts, but it …
– Reduced product diversity
– Limited entrepreneurial initiatives and range o consumer
choices
– Reduced growth potential – regulatory, judicial and price risks
6
Types of operators
• Health Insurance
• Health Plans - HMO
• Medical Cooperatives
p
– Unimeds
• Self-maintained health plans
p
• Philantropy
7
Operators - Main numbers
Brazil
September/09
2008
Types Operators Beneficiaries (%)
Receipts (%) I
Insurers
13
11 7
11,7
18 3
18,3
HMO
497
37,6
29,1
Cooperatives
343
35,1
35,3
Self‐maintained
250
12,3
11,8
Philantropy
97
3,2
3,7
8
Consolidation
9
Operators - origin
• Started in late 1950s byy practitioners
p
• A few grew up but continued as family companies
• The
Th advantages
d
off being
b i bi
big stimulates
i l
ffurther
h growth
h
• Sluggish market induced them to mergers and acquisitions
• Size requires professional governance
• IPO to speed up growth
• Brief interruption during the global crisis
Industry is on the road to maturity
y
y
10
Number of Operators
ANS
3 000
3.000
2.722
2.500
Regulation
2.000
1.587
1.500
1.200
SUS
1.105
1.000
500
291
1977
1987
1994
1999
2000
2001
2003
2007
Total AMH
Medicina de Grupo
Cooperativas
Seguradoras
Autogestão
Filantropia
set/09
11
Consolidation
• Close down of operators
p
which never had beneficiaries
(precautionary constitution)
• Insolvency caused by fierce competition
• Inability to form the required guarantees and technical
reserves
• Because of acquisitions and mergers
12
The importance of size
• Economies of scale – smaller administrative cost per
beneficiary
• Rick pooling:
p
g
The larger the number of beneficiaries the smaller the
expenditure variance and the relative amount of reserve
requirements
i
t
– Example, for a catastrophic risk of 1%
• Pl
Plan with
i h 100 beneficiaries:
b fi i i 1 expectedd case
• Plan with 100 thousand beneficiaries: 1000 expected cases
• The occurrence of 1 case above the expected:
– Catastrophic expenditures double in the first case
– Bur increases by only one thousandth in the second
13
Concentration
14
Operators and beneficiaties
Deciles %
% Deciles %
Benef Benef /Operator (000)
Benef. Benef./Operator (000)
3.655
705
9
176
10
4 175
4.175
93
10
4.197
51
10
4.197
10
18
10
11
10
6
11
4
10
2
0
231
696
4.447
100
45
400
4.174
4.335
24
120
4.149
4 395
4.395
705
82
4.186
35
10
5
1.112
2.167
200
300
400
500
600
700
800
15
Beneficiaries per operator
Countries
Benef.//
Benef
Operator (000)
B il 2003
Brazil
21
Brazil 2008
35
U it d St
United
States
t
196
Australia
288
Chil
Chile
381
16
Concentration indices
• C4 – market share of the 4 larger
g companies
p
C4 > 75% - Concentrated
• HHI – sum of square
q
market shares
HHI < 10 - competitive
HHI between 10 & 18 - moderately concentrated
HHI > 18 – highly
g y concentrated
17
National concentration indices
C4 & HHI - 2003 a 2008
2008
2007
2006
2005
2004
2003
0 00
0,00
5 00
5,00
10 00
10,00
15 00
15,00
20 00
20,00
%
HHI C4
18
Concentration in Metropolitan Areas
MA
Operators
SP
761
RJ
Beneficiaries (000)
C4
HHI
9 745
9.745
36 1
36,1
49
4,9
599
4.429
38,7
5,2
BH
449
1.729
50,7
14,5
PA
355
1.170
42,7
6,9
Recife
295
988
33,2
4,8
Salvador
349
872
34 5
34,5
53
5,3
Cuiabá
129
224
73,4
29,7
Interior
200
70
63,0
12,5
Mato Grosso
19
Beneficiaries
20
Self‐Maintained
HMO
Cooperative
Insurance
Philanthropy
Self‐Maintained
HMO
Cooperative
Insurance
Source: Tabnet/ANS
21
Philanthropy
seet/09
fevv/09
ju
ul/08
dez/07
maai/07
out/06
mar/06
ago
o/05
jan
n/05
jun
n/04
novv/03
0
ab
br/03
2
seet/02
6
fevv/02
8
ju
ul/01
14
dez/00
set/09
abr/09
nov/08
n
jun/08
jan/08
aago/07
mar/07
m
out/06
mai/06
m
dez/05
d
jul/05
fev/05
set/04
abr/04
nov/03
n
jun/03
jan/03
aago/02
mar/02
m
out/01
mai/01
m
dez/00
d
Million of B
Beneficiaries Beneficiaries by type of operator
18
16
1,9
1,7
12
1,5
10
1,3
1,1
4
09
0,9
0,7
Macro performance
1,4
1,5 13
1,3
1,3 1,2
1,1
1,1 1,0
GDP seazonally adjusted
Total
Individual
Source: ANS tabnet 14dez009, IBGE sidra table 1621
sset‐09
jun‐09
mar‐09
m
dez‐08
d
sset‐08
jun‐08
mar‐08
m
dez‐07
d
sset‐07
jun‐07
mar‐07
m
dez‐06
d
sset‐06
jun‐06
mar‐06
m
dez‐05
d
sset‐05
jun‐05
mar‐05
m
dez‐04
d
0,9 Colective
0,9
Dez/00
Dez/01
Brasil
Dez/02
Dez/03
Dez/04
Capitais
Dez/05
Dez/06
Dez/07
Dez/08
Regiões Metropolitanas
Source: ANS - Tabnet; IESS
22
Macro performance
1,3
1,2
Brazil
Metropolitan Areas ‐ PME ‐ IBGE
1,2
1,1
1,1
1,0
1,0
0,9
0,8
Beneficiaries
Industrial Production
Sources: ANS‐Tabnet, IBGE and CAGED
CAGED
Beneficiaries
Formal Employment
Informal Employment
Sources: ANS‐Tabnet and Monthly Employment Survey (PME)/IBGE
* M.A.: Recife, Salvador, Belo Horizonte, Rio de Janeiro, São Paulo, Porto Alegre
Porto Alegre
23
Set/09
Jun/09
Mar/09
Dez/08
Set/08
Jun/08
Mar/08
Dez/07
Set/07
Jun/07
Mar/07
Dez/06
Set/06
Set/09
Jun/09
Mar/09
Dez/08
Set/08
Jun/08
Mar/08
Dez/07
Set/07
Jun/07
Mar/07
Dez/06
Set/06
0,9
Annual and quarterly growth rates
Annual rate (%)
Quarterly rate (%)
Medical plans
2007
2008
2007
2008
IVQ/08
IQ/09
IIQ/09
IIIQ/09
Brazil
5,0
5,8
1,2
1,4
1,2
0,2
0,7
1,6
State Capitals
2,2
3,0
0,5
0,8
1,2
0,0
0,3
1,2
M. Areas
3,9
4,6
1,0
1,1
1,1
0,0
0,4
1,6
Coop. Unimeds
9,1
8,1
2,2
2,0
1,4
1,4
1,7
2,2
HMO
2,3
3,7
0,6
0,9
1,3
-0,5
0,2
1,9
Insurance
7,5
13,5
1,8
3,2
2,2
-0,2
0,7
0,6
Fonte: ANS - Tabnet; IESS
24
Annual and quarterly growth rates
Individual Plans
Annual rates (%)
Quarterly rates (%)
2007
2008
2007
2008
IVQ/08
IQ/09
IIQ/09
IIIQ/09
Brazil
2,0
0,1
0,5
0,0
0,2
0,2
0,3
1,3
Coop. Unimeds
2,5
2,8
0,6
0,7
0,6
1,1
1,2
1,3
HMO
3,3
-0,6
0,8
-0,2
0,5
-0,1
0,0
1,7
Insurance
-9,4
-10,1
-2,4
-2,6
-2,3
-2,1
-2,0
-1,4
Brazil
6,7
8,6
1,6
2,1
1,7
0,3
0,8
1,8
Coop. Unimed
12,5
10,7
3,0
2,6
1,8
1,7
2,0
2,7
HMO
2,7
,
6,6
,
0,7
,
1,6
,
2,0
,
-0,6
,
0,3
,
2,1
,
Insurance
11,1
17,7
2,7
4,2
2,8
0,1
1,0
0,6
Collective p
plans
Fonte: ANS - Tabnet; Elaboração: IESS
25
VCMH
cost trends
26
Expenditures index
Price variatiom does not measure cost variation
Cost = P x Q
Inflation: a measure of price changes
Cost variation is the sum of:
Cost variation is the sum of:
Price variation and
Variation in Quantityy
ΔC
C
ΔP ΔQ ΔP
ΔP
ΔQ
ΔP x ΔQ
= + + P Q C
inflation
27
27
27
Results
(period 2) / (period 1)
VCMH %
2007/ 2006
8,12
2008/ 2007
10,75
(jun08 a may09) / (jun07 a may08)
14,22
ƒ 1,3 million individual beneficiaries (18% of total) ƒ belonging to the 6 IESS affiliated operators
ƒ Calculated according to ANS methodology
ƒ company‐by‐company for 5 main groups of medical procedures
28
z/
0
ja 7
n/
0
fe 8
v/
m 08
ar
/0
ab 8
r/
m 08
ai
/0
ju 8
n/
08
ju
l/
ag 08
o/
0
se 8
t/0
ou 8
t/0
no 8
v/
de 08
z/
0
ja 8
n/
0
fe 9
v/
m 09
ar
/0
ab 9
r/0
m 9
ai
/0
9
de
VCMH – Individual plans
16
14
8
2
14,2
12
10,3
10
8,1
6
5,9
4
36
3,6
42
4,2
VCMH
5,0
11 2
11,2
12,1
,
11,8
10,45
60
6,0
5,8
0
IPCA medio 12 meses
29
US - Example
30
Cost increases - price and frequency
2007/2006
Freq. Price
Visits
2008/2007
Cost
Freq. Price
May09/May08
Cost Freq. Price
Cost
May 09
Weights
-1,7
12,0
10,0
4,2
9,0
13,5
6,3
7,7
14,5
10
Lab exams
2,1
3,3
5,5
7,5
0,9
8,5
7,9
2,8
10,9
18
Therapies
4,7
3,8
8,6
15,9
-1,8
13,1
18,2
-4,2
13,9
4
Hospital.
8,2 -17,5
-10,8
11,7
-1,5
10,0
12,8
1,4
14,4
60
31
Beneficiaries by age group
Old Plans
(perchased before 1999)
mai/08
mai/09
New Plans
mai/08
mai/09
Total (000)
00-18
19-58
59 ou +
Total
115
381
170
666
95
339
169
603
120
271
66
457
151
311
77
539
17,2
57,2
25,6
15,8
56,2
28,0
26,3
59,3
14,4
28,0
57,7
14,3
Participation %
00 18
00-18
19-58
59 ou +
Change %
00-18
19-58
59 ou +
T l
Total
(16,8)
(10,9)
(0,9)
(9 4)
(9,4)
25,3
14,8
17,1
17 9
17,9
32
Frequency and unit price - visits
Doctor visits
10
FREQUÊNCIA
60
PREÇO
50
8
40
6
30
4
20
2
10
-
0
00-18 19-23 24-28 29-33 34-38 39-43 44-48 49-53 54-58 59+
00-18 19-23 24-28 29-33 34-38 39-43 44-48 49-53 54-58 59/ +
Frequency
q
y and average
g price
p
of doctor visits (R$)
( $) byy age
g groups
g p (12
(
months up to may 2009 compared with same period year before)
33
Frequency and unit price - hospitalization
Hospitalizations
p
0,5
FREQUÊNCIA
0,4
12
PREÇO
9
0,3
6
0,2
3
0,1
0,0
00-18 19-23 24-28 29-33 34-38 39-43 44-48 49-53 54-58 59/+
00-18 19-23 24-28 29-33 34-38 39-43 44-48 49-53 54-58 59/+
Frequency and average price of hosapitalizatiosn (R$ 000) by age groups (12
months up to may 2009 compared with same period year before)
34
Frequency – Helth plans x SUS
Doctor visits
Magnetic Ressonance*
Computerized Tomography
Hospitalization
p
Hemodinamics*
Radiotherapy*
Kidney Therapy
Therapy*
Chemotherapy*
IESS
6,45
0,19
0,29
0,23
,
3,30
109,81
41,08
69,33
SUS Only
1,430
0,003
0,018
0,075
,
1,523
94,120
126,688
22,918
*average frequency for 1.000 persons
Average 2006‐2007 forSUS. Source: DATASUS, IESS.
35
Perspectives
36
Perspectives
• Buoyant economy - GDP, employment and earnings
• Competition and consolidation
• Individual x collective plans
• Portability and liberation of price readjustments
• New relationship between private healthcare and SUS
• Quality movement – value for money
• Qualification and accreditation
• Assistance model – operators as health producers
• Regulation of Home care
• Incorporation of Technology
• Aging – old age dependency from 10/100 today to 36/100 in 2050
37
José Cechin
INSTITUTO DE ESTUDOS DE SAÚDE SUPLEMENTAR
[email protected]
jcechin@iess
org br
www.iess.org.br
55 11 37069747
38