The healthcare crisis pitting Colombia’s leftist leader against business
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A deepening crisis in Colombia’s healthcare system is pitting the South American country’s leftist president Gustavo Petro against business leaders and opposition politicians who accuse him of bypassing congress to advance his radical agenda.
After lawmakers shelved his landmark healthcare bill, Petro instructed regulators to take over the country’s two largest private health insurers, which face significant liquidity problems. The moves mean that more than half of the population’s healthcare accounts are now under state management, according to industry groups.
Petro, who says the reforms are necessary to weed out corruption, make the system financially sustainable and improve coverage in rural areas, will soon make another push to get his health bill through. But business and opposition leaders say that rather than overhauling the system to keep it afloat, Petro is allowing insurers to collapse because of his ideological opposition to the private sector.
“[The government] knows how to destroy a system that they don’t like but they don’t have any strategy to face the destruction,” said Bruce Mac Master, president of Colombia’s largest business association. “They want to intervene in any activity in which they think the state should play a part.”
For decades, private insurers, collectively known as Empresas Prestadora de Salud (EPS), have been a cornerstone of the health system, which provides coverage to about 98 per cent of the population of 52mn. Colombians pay some of the lowest out-of-pocket costs in the region.
The government sets insurance payments for individuals via means-testing, which are deposited in a government-run fund. They are then distributed to insurers to be paid to hospitals and other healthcare providers.
But Petro has accused the for-profit EPS of mismanaging their finances and perpetuating discrepancies in access to healthcare between urban centres and isolated rural communities. He has proposed that management of the funds be handed over from the insurers to local mayors.
“Health cannot be a business, nor a patient a customer,” Petro said last year as he sent his reform bill to congress. “We want a doctor to be able to go to the home of a peasant family, no matter how far away it may be.”
Analysts cite a number of problems with Colombia’s healthcare system. Of the 27 EPS, only seven have the sufficient financial and technical reserves mandated by regulators. Others suffer from a lack of management capacity, while government payments do not cover the rising costs of updating hospital equipment and infrastructure as well as an increase in people seeking treatment.
Daniel López Morales, professor of law at Bogotá’s Javeriana university, said that while there was “no magic recipe” to resolve the crisis, any reform should allow time for transition and have the buy-in of all participants.
“The health system should be thought of as a collaboration between the private sector, rather than something antagonistic,” he said
In April, government regulators took over Colombia’s two largest EPS, Sanitas and Nueva EPS, replacing their executive boards for a year.
At Sanitas, which insures about 5mn people, regulators found losses of more than $100mn and an “increase in unjustified operating costs”. At Nueva EPS, Colombia’s largest health insurer with nearly 11mn affiliates, they said $1.25bn in invoices was missing from financial statements.
While Sanitas has not responded to the regulator’s filing, Nueva’s ousted board said it was unaware of any hidden invoices in its accounts, which were signed off by Deloitte and KPMG.
Petro’s reform bill sought to supplant private insurers with a government agency in order to directly pay hospitals. After it was shelved by congress in April, the president said big business had become “owners of politics” and that he would submit another bill when the next legislative session began in July.
Petro said that without intervention, the system could collapse as some of the EPS begin to fold. “If I wanted to get rid of the EPS, you know what I would do? Not present a reform bill and leave what is happening to happen,” he said last year.
His prediction appears to be playing out. Sura, which has about 5mn affiliates, last month requested regulatory approval to withdraw from the health system, claiming the resources it received from the government did not cover its costs. The EPS posted $92.3mn in net losses from 2022/23.
Gustavo Morales, president of a private insurance association, said that while the government was not principally responsible for the sector’s financial crisis, it could have signalled an intent to work with insurers like Sura to keep the system afloat.
“What gave rise to Sura’s decision was the perception that there was no short-term willingness [from the government] to sit down and solve the problem with the urgency required,” Morales said.
Business leaders are worried that the president’s interventionist approach could be used to expand the state’s role in education and overhaul labour laws, if congress does not approve planned reforms in these sectors before its session ends on June 20.
On Friday, lawmakers in the lower house, where Petro’s coalition has a comfortable majority, approved his pension reform without debating it, potentially opening the bill to legal challenges before the president signs it into law.
“In a democratic system you present something which is then subject to counterpoint, to a process of negotiation,” said Antonio José Ardila, a business tycoon and formerly Colombia’s ambassador to the UK, adding that the government had frequently avoided a consultative approach.
Petro’s agitation with the private sector comes amid sluggish growth in gross domestic product of 0.6 per cent in 2023 and a forecast 1.2 per cent this year, according to the OECD. A shortfall in tax revenues led the government on Monday to cut public spending by $5bn. Meanwhile, the fiscal deficit is forecast for this year at 5.6 per cent of GDP amid high inflation of 7 per cent.
In the face of ever tightening finances, opposition figures are urging Petro to moderate his combative approach to business and promote investment.
“We are seeing a clear persecution by the government of the private sector,” former rightwing president Iván Duque said at a banking conference last week.
“That means that companies are cutting their structural investment and foreign direct investment is rushing out of the country, generating uncertainty.”
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