Taking stock of eight years ofimplementation of Seguro Popular inMexico:Lessons for developing countriesMariano Bosch, Belen Cobacho and Carmen Pagés
This paper Study the health and labor market effects of Seguro Popular, alarge program intended to provide free health care to theuninsured population in Mexico. The analysis of this program is interesting because:• Its size: Intention is to reach more than 50 million individuals• Its representative of a wider trend: towards the expansion of non-contributive programs in developing economies. We focus on this program with the aim of extracting lessons forother developing economies.
The Context Social insurance systems have been unable to reach widecoverage in developing economies:– Design issues: in most cases exclude the self-employed, a large shareof employment in developing co.– Evasion: low compliance with health and pensions contributions. Inability to reform SS has led to a trend towards anunprecedented expansion of non-contributive programs sideby side SS– Health– Pensions– And more.
Non contributory Pensions05101520251970 1975 1980 1985 1990 1995 2000 2005 2010YearUniversal pensionsComplementary pensionsTargeted pensionsCountries with any non-contributory pension
Parallel non contributory regimes+ Rapid expansion ofcoverage in economieswhere formalization isslow.- The combo SS/noncontributive programreinforces incentives tobe in informalemployment or OLF. Poverty traps Resource misallocation Output loss
Large flowsThis is particularly the case in economies with largeformal to informal flows: Mexico– Large transitions between formal and informal workers:– 1 out of 4 formal workers will be in informal within a year.
This paper We review the empirical evidence on the consequences of theintroduction of Seguro Popular (SP) We find:– SP has been a very effective tool in reducing catastrophic healthexpenditures for Mexican families.– No health effects yet.– An increase in informal employment of 0.4 - 1 % points of totalemployment, or equivalently between 160.000 and 400.000workers. Some incentives to transit to inactivity.
Outline Description of Seguro Popular Effects on health services provision andhealth outcomes Effects on the labor market Discussion
Mexican Health Institutions As in many other Latin American countries, access to healthcare in Mexico is intimately linked to formal work status. Mexico’s health care system was born in 1943. Two institutionswere created for formal sector workers.– IMSS for private workers– ISSSTE for public workers In parallel to IMSS and ISSSTE, the Secretaría de Salud yAsistencia (SSA) was created to serve all individuals outsidethe formal sector. Discussion
Mexican Health InstitutionsBy 2000: Nearly 50 % of the Mexican population, amounting to47 million people, was not insured through eitherIMSS or ISSSTE. The SSA estimated that 2 - 4 million families (10 - 20% of the total population) suffered catastrophic andimpoverishing health care expenses every year.
The Reform In 2003 reform in Mexico establishing the System for Social Protectionin Health (Sistema de Protección Social en Salud, SSPH)– SP was functioning as a pilot since late 2001, although expenditure in non-contributory Health was increasing even before SP was born. One of the objectives of the reform was creating and guaranteeing anexplicit basic universal package of services to uninsured households– Only households not covered by Social Security health services are eligible forthe program . Another aim of the reform was to promote a “culture of co-payment”– The poorest 20% of the households were declared exempt from all payments– By 2010 the poorest 40% of the households were exempt from any payment, andfamilies up to the seventh decile with at least 1 child younger than 4 years of agewere also exempt.
Implementation of SP The SP was implemented in stages across states andmunicipalities.– The program had begun with a pilot phase in five states in 2002 The rules of operation stated that the program had toimplemented in localities with high poverty and/or localitieswith indigenous populations, but the localities also needed tohave health facilities in close range. The expansion of the SP was very fast. By 2010, the SP hadmore than 43 million affiliates (Secretaría de Salud, 2010).– Although this number could be an overestimate. According to the 2010Census there are only 26.2 million
Implementation of SP A crucial issue in the impact evaluations of SP is how this rollout across municipalities was undertaken– In principle poorest municipalities should receive it first– Barros (2009) shows how political and logistical concerns seem to havedriven the implementation sequence of the SP program across states inMexico– Díaz-Cayeros et al. (2006) argue that municipalities in smaller stateswere given preference to achieve full coverage of the SP.– Bosch and Campos (2010) show that bigger municipalities implementedSP earlier, but variables related to the income, number of uninsured,and industrial structure were not significant in predicting the timing ofaffiliation of a municipality to SP– Aterido et al. (2011) show that the growth rate of informality prior to theintroduction of SP does not predict the arrival of SP either Most studies rely on the rollout of the SP.
Outline Description of the program Effects on health services provision andhealth outcomes Effects on the labor market Discussion
Effects on Health A series of articles where published in The Lancet , 2006suggesting the program had been a success– Frenk et al. (2006): The reform allowed a substantial increase in publicinvestment in health, and it realigned incentives towards a better qualityservice
Effects on Health The two most systematic studies up to date on the effects ofthe SP on health outcomes.– King et al. (2009), using an experimental approach– Barros (2009), using triple differences in differences Both find that– The SP significantly reduced health catastrophicexpenditures of Mexican households.– No significant effects on health outcomes, at least sofar.
King et al (2007) King et al. (2007, 2009) introduce an experimental component toevaluate the program. During the early stages of the roll out of SP, King et al. (2007)were able to randomly assign encouragements and extra healthexpenditures to particular health clusters. The find:– A 23% reduction from baseline in catastrophic healthexpenditures.– Contrary to expectations, they found no effects on medicationspending, health outcomes, or utilization.
Barros (2009) Barros (2009) estimates the impact of the SP program by analyzingdifferences over three dimensions.– Program intensity target, measured as the ratio of the total number ofhouseholds agreed (by the federal and state governments)– Across time– SP eligibility (IMSS or not) He finds– SP increased non-health expenditures or savings by 4.2 percentage points,and encouraged beneficiaries to seek care.– While at baseline SP-eligible households were 10.4 percentage points less likelythan Social Security covered households to seek care due to financial concerns,the effect of SP has been to close this gap by about 40%.– However the effect on health status is negligible.
Health Effects In sum– Increase in health expenditures for the uninsured– The SP significantly reduced health catastrophicexpenditures of Mexican households.– No significant effects on health outcomes, at least sofar
Outline Description of the program Effects on health services provision andhealth outcomes Effects on the labor market Discussion
Effects on the Labor Market A pre-requisite to join the SP was that the worker was notcovered by SS. Concern that workers and firms could opt out of SS and joinSP. This issue is of particular relevance in Mexico becauseevidence of a large degree of mobility between formal (theinsured) and the informal (the uninsured).– Around 25% of formal workers are found in the informal sector or innon-employment a year later.
Three main concerns of the shift to Informality Fiscal concerns Reduction in coverage in other SS benefits (bundling)– If workers or firms (or both) choose to avoid social security contributionsbecause SP provides affordable health care, it triggers the loss of allother benefits as well “informalization” of firms and workers may lead to resourcemisallocation & productivity losses.– Reduction in the scale of production.– Too many resources allocated to low scale unproductive firms. (subsidyfor health care for informal firms)
Effects on the Labor MarketVery active field with diverse results. Early studies: No effect– (Gallardo-García, 2006; Esquivel and Ordaz, 2008; Barros, 2009;Campos and Knox, 2010; Aguilera, 2011). With data covering up to 2010 some studies find small negativeand non-significant effects on the share of informality. (Azuaraand Marinescu, 2010; Duval and Smith, 2011). Other find significant adverse effects– (Aterido et al., 2010; Bosch and Campos, 2010; Bosch and Cobacho,2011; Pérez-Estrada, 2011).
Effects on the labor market Almost all studies use the roll-out of the SP Different datasets– ENIGH (Income and Expenditure Survey)– ENE-ENOE (Household Survey)– IMSS data– ENAMIN (Micro Firm Sample) Different municipality coverage– ENE-ENOE: around 400– IMSS: 1300– ENAMIN: 70
Studies using the ENE-ENOE Azuara and Marinescu (2010),– 1995 -2010– They find no significant effect of the SP when they analyze the whole employedpopulation (0.8% points) Aterido et al. (2010)– The exploit the panel dimension—better control for unobservables.– SP has generated adverse effects on SS affiliation of around 0.4-0.7 percentagepoints of total employment.– Effects on labor flows: 3.1 percentage point reduction of flow into formality. Littlemovement from formality to salaried informality, but some increase to self-employment and inactivity.– Reduction of wages of informal workers Pérez-Estrada (2011)– Confirms earlier studies that the SP decreased the share of formal employmentby around 1 % point coupled with a 15% decrease of relative informal wages
Some groups are more sensititveSome groups are more sensititve Azuara and Marinescu (2010) Significant decrease (1 % point ) in the share of formal employment for less educatedworkers (with less than 9 years of schooling). Aterido, Hallward and Pagés (2011)– Second earners more sensitive to SP than primary earners (heads of household)– Households were head has lower than secondary education, particularly if head is a woman.– Large households. Bosch and Campos (2010)– The effects are much stronger in small firms.
Other datasets Parker and Scott (2008)– Mexican Family Life Survey (MxFLS) 2002–2005,– Find a disincentive effect in rural municipalities: beneficiaries of the SP 13 to 15percentage points less probable to be formal in rural areas, and about 7percentage points in urban areas. Bosch and Campos-Vazquez (2010)– IMSS data– After three years of the initial implementation of the SP, the level of registration is4% lower than it should have been for both employers and employees in firms ofless than 50 employees. Bosch and Cobacho (2011)– ENAMIN– On average, a 10% increase in the time of exposure to the SP decreases theshare of formal employment of young workers by 1.1 and 2.1 percentage pointsrelative to workers between 25-35 and older than 35, respectively.
Other datasets Aguilera (2011)– Employs the social security administrative database of the pensionsystem (Sistema de Ahorro para el Retiro, BDSAR),– She then matches this database provided by the randomizedexperiment implemented by King et al. (2007) described above at thezip code level.– The results suggest that SP has no impact in the short run on formalemployment or the probability of entering or leaving the formal sector.– Very few municipalities
In all While studies analyzing the early years of SP did not findsignificant effects of the program in the labor market…recentstudies do find effects on informality. However the extent of this effect is a matter of debate.– Some studies suggest 0– ENE-ENOE suggests around 0.4-1 percentage points. Equivalent to160.000 to 400.000 thousand jobs. With different degrees of precision.– IMSS data suggests around 300.000 jobs.
We try to , We use, the ENE-ENOE, IMSS and Census data to shed somelight on the differences We estimate the following equation using diferent datasetsmmsm Xy 2000,ln(exp)
EstimatesTable 3: Effect of the SP on the growth rate of the number of formal workers 2000-2010Census, IMSS and ENE-ENOE(1) (2) (3) (4) (5) (6)Log quarters -0.1280*** -0.1356*** -0.1581*** -0.1168* -0.1794*** -0.3222of exposure (0.028) (0.025) (0.049) (0.061) (0.064) (0.203)Dataset Census Census Census IMSS IMSS ENE-ENOESample Census IMSS ENE-ENOE IMSS ENE-ENOE ENE-ENOEMunicicipalities 2,332 1,373 428 1,373 428 428ControlsStates Fixed Effects X X X X X XMun. Characteristics X X X X X X*** Significant at 1%. ** Significant at 5%. * Significant at 10%.Notes: The table shows the results of estimating equation (1) where the dependent variable is the growthrate of the number of formal workers by municipality and the independent variable is the log of the numberof quarters the municipality has been exposed to the SP. “Dataset” indicates the source of data. “Sample”indicates the restriction on the number of municipalities available to the Census, IMSS and ENE-ENOEdatasets. All regressions include state fixed effects. “Mun. Characteristics” refer to municipalitycharacteristics in the 2000 Census and include 16 industry shares, share of dependents, share of females,years of schooling, log population, urban dummy, human development index, and share of informalworkers in 2000. Errors are clustered at the state level and regressions are weighted using municipalitypopulation in the year 2000.
Effects on the Labor MarketTable 4: Effect of the SP on the growth rate of the share of formal workers 2000-2010Census, IMSS and ENE-ENOE(1) (2) (3) (4)Log quarters of exposure -0.0578** -0.0453** -0.0220 -0.1880(0.022) (0.021) (0.033) (0.132)Dataset Census Census Census ENE-ENOESample Census IMSS ENE-ENOE ENE-ENOEMunicicipalities 2,332 1,373 428 428ControlsStates Fixed Effects X X X XMunicipality Characteristics X X X X*** Significant at 1%. ** Significant at 5%. * Significant at 10%.Notes: The table shows the results of estimating equation (1) where the dependent variable is thegrowth rate of the share of formal workers by municipality and the independent variable is the logof the number of quarters the municipality has been exposed to the SP. “Dataset” indicates thesource of data. “Sample” indicates the restriction on the number of municipalities available to theCensus, IMSS and ENE-ENOE datasets. All regressions include state fixed effects. “Municipalitycharacteristics” refer to municipality characteristics in the 2000 Census and include 16 industryshares, share of dependents, share of females, years of schooling, log population, urban dummy,human development index, and share of informal workers in 2000. Errors are clustered at the statelevel and regressions are weighted using municipality population in the year 2000.
Outline Description of the program Effects on health services provision and health outcomes Effects on the labor market Discussion
What have we learned? SP has promoted a rapid increase of coverage and a reductionin health related expenses. Difficulties of creating a culture of prepayment. Provides a noteof caution on systems based on copayment or matchingcontributions.
What have we learned? SP has increased the cost of employing low skilled labor inlarge formal firms and has reduced the relative cost of doing soin small less productive ones.– The available evidence so far points at an increase at the share ofinformality between 0.4 and 1 percentage points which is equivalent to160.000 to 400.000 workers SP has also increased transitions towards inactivity. Incomeeffects.
Is this effect large or small? The estimates in the literature are for the short to medium runbut estimates provided by this paper based on the intensity ofexposure suggest that they will increase overtime. Estimates based on the roll out of SP are likely tounderestimate the size of the effects, because non-contributoryexpenditures were increasing even before SP started. We onlycapture the effects of the resources labeled as SP. The SP is by no means the only social program in Mexico– It only represents 25% of the expenditure on non-contributory programs.
What have we learned? The recent trends in the regions to entitle informal workers(and their families) with a series of non-contributory benefits islikely to further distort the labor market. Poverty traps for lowincome workers?– Camacho et al. (2009) show that the expansion of social programs inthe early nineties in Colombia inadvertently created incentives forpeople to become informal. Colombia: Inequality of benefits based only on condition ofemployment is not sustainable. While we favor universalization of coverage, this needs to beachieved with more integrated programs. Reform of the socialsecurity systems is overdue…