Limited Budgets, Primary Care to Affect Recovery: Frontier View

As COVID-19 cases decrease, Mexico’s healthcare sector faces numerous challenges in the form of budget restrictions, limited primary care and diagnostics, a pension deficit and the migration of medical professionals to the private sector, said Alec Lee, Director of Healthcare Research, Frontier View Strategy Group. Lee also discussed potential opportunities for Mexico’s healthcare sector.

Mexico’s macroeconomic growth has three main takeaways that will affect all sectors. Initially, “Mexico’s economic recovery will continue in 2022 mainly on the back of exports to the US but the country, alongside Argentina, will be one of the last to recover to pre-pandemic levels among Latin America’s top markets,” Lee said. Secondly, market players can expect consumer spending to bounce back as a part of this recovery due to better Mexican labor market prospects and strong remittances. Finally, firms in the country’s healthcare sector “will need to cope with inflationary pressures until 2023, mainly driven by faster-than-expected demand recovery and supply chain disruptions.”

Frontier View forecasts that the economic recovery will continue this year despite the various downside risks laid out ahead but the expected economic stimulus will remain below 2 percent during 2022 based on export-led growth. In its forecasts, the firm considered the global COVID-19 outlook, Mexico’s COVID-19 environment, the international growth environment, economic stimulus, President Andrés Manuel López Obrador’s 2022 recall survey, Mexico-US relations and the infrastructure plan. Frontier View’s pessimistic scenario forecasts a recovery in 2028, which is 20 percent likely. Its base scenario forecasts a recovery in 2023, which is 70 percent likely, and its optimistic scenario forecasts a recovery in 2022 that is 10 percent likely.

Even though the government’s budget proposal for 2022 prioritizes health much more than in past years with an approved increase of MX$1.58 billion (US$77.5 million), Lee believes Mexico still has not reached an ideal financing for the sector because budget increases are lower than inflation. However, the increased healthcare funding as a result of the pandemic is likely to continue as a trend for future years.

The approved budget for 2022 has notable increases for INSABI, vaccines and the healthcare industry as a whole. The Ministry of Health's average budget totals by state are noticeably higher in Morena party affiliated states, where there has been an average 32 percent increase (including the nation’s capital) compared to 2 percent increase for states not associated with the party. Additionally, 37 percent of the year’s budget will go towards “subsidies and transfers.”

In the aftermath of the pandemic, which is seemingly in-sight as the explosive fourth wave continues to die down, primary care decreasing below pre-pandemic levels could result in many undiagnosed patients as screenings have decreased nationwide. However, private sector services and procedure volumes are expected to see a recovery sooner than those in the public sector.

According to Frontier View’s analytics, challenges for a recovery of non-COVID-19 related treatments in the healthcare sector include IMSS’ pension deficit explosion in the last 12 months and the migration of medical professionals from the public to the private sector even though less than three percent of the country’s population is covered by private health insurance. Additionally, patients will face difficulties in self-financing as the continued stockouts seen in hospitals will also play a role. For this Lee sees two possible key action steps: having private insurance facilitates access through low-cost premiums and digital health policy advancing access to insurance, which has been the case in Brazil’s successful telehealth policy.