The Challenges Of Public Regulation In Brazil

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The Challenges Of Public Regulation - OCDE

The Challenges Of Public Regulation - OCDE

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  • 1. International Seminar Regulation of Private Health Insurance in Brazil, 10 years of Law 9.656/98, Rio 2 June 2008 The challenges of public regulation in Brazil the OECD Review on Regulatory Reform Mr. Stéphane Jacobzone Principal Administrator Regulatory Policy Division Directorate for Public Governance and Territorial Development
  • 2. Why Regulatory Reform ? Quality Regulation to strengthen governance and economic growth
    • Efficient markets, Good governance and the rule of law
    • Maintains and increases regulatory protections, to c orrect market failures in PHI systems
    • Benefits to consumers quality, choice, cost and price
    • Establishing markets for the private sector
    • Improves transparency and accountability, and raise trust in government
  • 3. The Brazil Review in the context of the OECD Country Reviews of Regulatory Reform
    • Independent assessment by team, Vivian Figer
    • Multidisciplinary approach :
      • High Quality Regulation
      • Regulatory Authorities in four core sectors:
      • Supplemental Health Insurance
      • Telecommunications
      • Electricity
      • Land Transport
    • Extensive consultation
      • government officials (including elected officials)
      • business and trade unions, consumer groups, academics
    • Standardised report
      • (Mexico, Switzerland, Norway)
      • Other OECD Studies on PHI : 2004 report, reviews of Ireland, France, NL,
  • 4. Setting up Independent Regulatory Authorities (IRAs)
    • Policy Objectives
      • Improve economic efficiency in a market framework shielded from short-term political and administrative risks
      • Avoid the risk of capture by specific interests
    • Context
      • Privatising former state-owned enterprises
      • Necessity of a sound regulatory framework
      • Ensuring market efficiency and protecting consumers' interest in cases of imperfect competition/monopolistic markets
  • 5. A Political Challenge
    • The choice
      • Self-regulation and competition framework
      • Direct Ministerial Oversight
      • Independent Regulators
    • The rationale
      • Delegating power to a regulator at arms' length from the political system
      • Improving the protection of consumer interest in case of market failures or other failures
      • Improving transparency and stability
      • High quality staff and technical expertise
  • 6. Towards the "Regulatory State"
    • Clarifying the functions of the State
      • Public Ownership General rule making (general rules)
      • Enforcing regulation (applying the rules)
      • Consumer protection (quality/market)
    • A challenge to the executive and parliamentary powers
      • A regulator entrusted with regulatory powers, including sanctions, licences, and even some rule making
      • A Government in Miniature?
      • Establishing the legitimacy of a "non majoritarian" institution
  • 7. The international context
    • Trend towards participation of the private sector for the delivery of core public services/network industries
    • The European dimension
    • OECD Work
  • 8. Independent Regulatory Authorities in the proposed 2005 OECD Recommendations on Regulatory Quality
    • Broad regulatory perspective
      • Establish regulatory arrangements that ensure that the public interest is not subordinated to those of regulated entities and stakeholders
      • Ensure that regulatory institutions are accountable and transparent
    • Competition dimension
      • Ensure that regulatory restrictions of competition and market openness are limited and proportionate to the public interests they serve
      • Periodically review the need for universal service obligations, their effectiveness and the need to maintain restrictions on entry and prices
      • Promote efficiency and the transition to effective competition where economic regulations continue to be needed (abuse of market power): separate competitive activities from regulated utility networks, promote non discriminatory access to essential network facilities, promote interconnection of networks, use price caps and other mechanisms to encourage efficiency gains.
    • Assessment
      • Use performance-based assessment of regulatory tools and institutions, to assess how effective they are in contributing to good regulation and economic performance
  • 9. PRIVATE HEALTH INSURANCE
    • OECD Work on PHI: need for regulation in imperfect markets
    • SUS plus PHI duplicate cover (similar to other OECD countries) : 30 % in SE, below 10% N/NE
    • Covers services by private providers and reimburses SUS for public services in some cases
    • Half of total health expenditure private, and a third covered by PHI: very significant social impact, per capita expense similar to Australia Ireland, above Portugal or Spain in PPP
    • Relatively high health expenditure in GDP
    • Various organisational forms, high administrative expenses (higher than in OECD countries, US)
  • 10. Health expenditures by source of funding Source: OECD Health Data, Brazil
  • 11. Health expenditure in GDP and GDP per capita Source: OECD Health Data, Brazil
  • 12. PHI’s expenses per capita and GDP per capita Source: OECD Health Data, Brazil
  • 13. Share of PHI’s expenses in THE and share of population covered by PHI Source: OECD Health Data, Brazil
  • 14. Collective plans: premium share by operator Source: OECD Health Data, Brazil Individual plans: premium share by operator
  • 15. Price Index of Health Plans Source: IDEC CREMESP
  • 16. The regulatory framework
    • Move from Social insurance to universal insurance in 1988 with constrained funding
    • Regulation introduced in 1998, and ANS created by law in 2000
    • New and old plans, prohibition of age or illness discrimination
    • Institutional set up similar to Australia, Ireland the Netherlands (specific PHI agencies), in Mexico and Canada insurance oversight agencies (similar to SUSEP). In US state level regulation: insurance commissioners.
    • Highly concentrated markets (Over ¾ for two operators).
  • 17. The regulatory framework
    • Regulation of contracts (reference, minimum and amplified plan), restriction on rate settings
    • Tighter controls for individual contracts
    • Supervision of insurers:
      • Financial supervision
      • Relationships with providers
    • Procedure for information sharing (TISS)
    • Policy for Quality in Supplemental Health: monitoring performance.
    • Relations with public budgets
      • Compensation to SUS
      • Fiscal expenditures
    • Issues similar to those faced by OECD countries (relatively high cost system).
  • 18. The regulatory framework
    • Remodelled with ANTT in 2001 after major deregulation and privatisation/concessions
    • Loss of analytical capacity (GEIPOT, PNLT)
    • Third party access to rail (Does not exist in Mexico, or in many European countries for example)
    • Safety targets for rail
    • Partnership with state agencies and the policy
    • “ Cleaner situation” for bus transport and licences
    • Limited regulation for road freight: price competition but implications for quality and safety
    • New concessions: lack of agreement on the internal rate of return: close scrutiny of TCU, role of BNDES, impact of future renegotiations?
    • More significant regulation for passenger transport (but bid for tender)
  • 19. REGULATORY GOVERNANCE
    • Institutional aspects
      • Special autarchies under the indirect administration
      • Level of autonomy specified in specific laws
      • Consensus on the role of the state apparatus
      • Less policy attention at the start
      • The new law proposal as a way to solve a problematic situation
      • Diversified situation across sectors but this is also the case in OECD countries
  • 20. A heterogeneous institutional status
  • 21. Independence the formal dimension
    • The executive structure of the regulator: Single head / board
    • Duration, nomination, renewal (link with Parliamentary terms?)
    • Rules for the staff vs. the sector (hiring, firing)
    • The possibility of overturning the decision: appeals
    • The Brazilian case:
        • Structures comparable to other OECD countries
        • Different administrative and cultural background
  • 22. Independence Independence in practice
    • The role of experience, respecting the terms
    • The leadership of the first head
    • Relations with elected politicians
    • The ability to manage crises (e.g. peak in energy prices, energy rationing, currency fluctuations or telecommunication prices)
    • Quality of the staff
    • The issue of Brazil
      • Nominations to the board
      • Need to have complete boards
      • Role of the public debate in a multi centric democracy
  • 23. Governance structures
  • 24. Possibility of Instructions
  • 25. Appeals
  • 26. Appointment of Heads
  • 27. Terms of Appointment
  • 28. Financial resources and staffing
    • Financial resources
      • Use of central public funds: binding constraints
      • Implicit pressure of budgeting ministries
      • Control of audit offices
      • Fees/Levies on the regulated industry: setting an independent formula ?
      • Recent Brazil examples
    • Human resources
      • A difficult challenge for small countries (multisector regulation)
      • Rules for conflicts of interest, cooling off period (OECD Recommendations)
      • Need for a specific framework for regulatory authorities?
  • 29. Financial Resources
  • 30. Functions and powers of regulatory authorities
    • Economic functions
      • Enforcing market rules
      • Licensing (entry, exit)
      • Fixing prices of access to the Grid or the Network
    • Managing risks
      • Inspection, Control
      • Prudential ratios for financial institution
      • Avoiding rupture of service
      • Assuring Universal Service Provision
  • 31. The rule making power
    • Normally power of the ministers/cabinet (political trade offs) but views may differ
    • In practice some rule making power given to independent regulators technical standards vs. laws:
    • A tension between delegating rule making and respecting independence
    • But jurisprudential approach: set of precedent decisions  rule
    • Solutions
    • Possibility of suggesting official amendments of the existing rules (annual report to Parliament)
    • Possibility of proposing rules to Government
  • 32. The issue of strategic planning and law making
    • Not a regulator’s attribute
    • Need to separate enforcement from law making
    • Need for capacity in the ministries:
      • Example of EPE in Brazil for electricity
      • Ministry of health monitoring is very important
    • The role of national councils to develop a strategy
    • Building consensus in a diverse democracy
  • 33. The power of sanction
    • An independent regulator  government in miniature
    • Executive power, preparing rules and judging? (settling disputes)
    • Problem vs. the traditional setting of democracies
    • In practice
    • Respect of certain judicial forms for applying sanctions: separating investigation from deciding on the sanction
    • Adapt the level of sanctions: Inapplicability of penal law:
    • Efficient sanction: to deter from inappropriate behaviour and make it "ex ante" worthless
  • 34. Horizontal Design
    • Coordination with Competition Authorities
    • SDBC in Brazil
      • Important for health care issues,
      • Cases with CADE
    • Coordination among regulatory authorities
    • SUSEP
    • PRO CONs
  • 35. Balancing Independence with Accountability
    • A condition of success
      • "non majoritarian" institutions (Majone)
      • Political credibility of the regulator
    • No explicit mechanism for reporting and establishing legitimacy
    • Procedural and political aspects
      • Often demanded by the independent regulators themselves (cf dialogue with Parliament)
  • 36. Ensuring Accountability: How ? without undermining independence
    • Systems of checks and balances
    • Transparency and procedural requirements
      • Administrative procedure laws
    • Dialogue with citizens and Parliament
      • Annual report, dialogue with Parliament (expertise)
      • Links with consumers' associations: role of IDEC
    • Substantial judicial/legal review: issue in Brazil
  • 37. Ensuring Accountability and High quality regulation
    • High quality regulation:
      • Subject the regulators' decisions to requirements for high quality regulation :
        • Regulatory Impact Assessment
        • Transparency
        • Predictability
    • Key for industry and for credibility
    • Cf PRO-REG project in Brazil
  • 38. Assessing quality Performance evaluation
    • Several dimension
      • legal, judicial review
      • accounting/auditing
      • overall economic assessment
      • Recent UK example on capability assessment, Treasury reviews, National Audit Office
  • 39. Performance Assessment of regulators in Brazil
    • Self assessment by regulators
    • Role for TCU / CGU
    • Role for consumers: IDEC/IADB
    • Role for foreign investors in some sectors AMCHAM reviews
    • National academic studies
    • Evaluations by WB/IADB
  • 40. General conclusions
    • Designing independent and effective regulators
    • The need for high quality regulation
    • No "pre cooked recipe"
    • Respect national institutional settings while adopting international standards
    • Significant policy turmoil in Brazil, in a moving regulatory environment:
    • Regulatory authorities have stood the test of time but may need some fine tuning and adaptation
  • 41. Conclusions for Health/PHI
    • Significance of PHI sector in Brazil: only second to US in sample of countries surveyed
    • Problems of OECD countries: e.g. Australia, Ireland
    • Cost Containment and consolidation
    • Efficient use of modern technologies
    • Quality monitoring and accreditation
  • 42. Selected Policy recommendations
      • Consolidate the autonomy and statute of Brazilian regulatory authorities
      • Strengthen the strategic framework for planning and decision making in regulated sectors
      • Strengthen social accountability mechanisms without undermining the authorities’ autonomy
      • Implement Regulatory Impact Analysis as an effective tool for regulatory quality.
      • Improve transparency and increase social participation in regulatory processes.
      • Systematise cooperation with competition authorities
      • Strengthen the powers of the Brazilian regulators
  • 43. Thank you for your attention