Mexico’s Limited Health Financing to Cause Future Trouble

Mexico has always struggled with a fragmented and segmented health system and has further struggled with health financing. Historic neglect of the healthcare system will inevitably take its toll, especially in the wake of the COVID-19 pandemic, warn international organizations.

Mexico has several competing, non-cooperating, nor coordinated healthcare systems, each with its own financing structure. Segmentation involves the coexistence of various health subsystems with distinct financing, affiliation and provision arrangements for different population segments, explains  the Interamerican Development Bank. Fragmentation refers to the existence of many non-integrated entities and/or agents within the whole system that operate without synergy and often compete among each other. Mexico’s health providers include IMSS, ISSSTE, INSABI, PEMEX and SEDENA, all of them catering to different groups but still a significant part of the country’s population does not have access to healthcare services.

Besides the necessity of designing a more comprehensive, ideally integrated health system, the country has historically struggled with health financing. According to the latest data provided by the OECD, Mexico spends US$1,154 per capita or around 5.5 percent of its GDP in healthcare. This falls below the average for the rest of the OECD countries, 8.8 percent and US$4,224 dollars per capita, respectively. While health expenditure is currently low, as it has been for a while. According to the World Bank, there has been an overall growth in health expenditure in the last 20 years and a decreasing trend in out-of-pocket spending, according to WHO. It should be noted that out-of-pocket spending is still high, representing around 41 percent of total health expenditure, as Mexico is also the second-highest country in the OECD in out-of-pocket expenditure.

There is an important caveat when discussing healthcare financing: spending more does not necessarily correlate with better quality of care or outcomes. Still, there are several gaps that Mexico needs to cover to provide the best care possible. One key area regards healthcare professionals, as Mexico is one of the countries with fewer health workers per 1,000 inhabitants.

According to CIEP, the 2021 federal budget (PPEF) contemplates 1.87 percent more resources than last year. Still, there is a budgetary deficiency compared with WHO’s recommendation of having at least a 6 percent expenditure in health. This increase in funding will focus on expanding the number of health workers to reach 0.61 per 1,000 inhabitants. While this is undoubtedly progress, it is still far behind the OECD’s average of 3.5 per 1,000 inhabitants.

Another critical area to consider when talking about healthcare spending, or any governmental expenditure for that matter, is where the money to finance the program will come from. Regardless of how it is funded, Mexico is in a tough spot. Having neglected the healthcare system for years will inevitably take its toll, and financing will become more challenging each passing year. According to OECD, healthcare spending is projected to outpace economic growth by 2030.

This urgency has been significantly exacerbated by the current pandemic, denoting the country’s difficulty in sustaining health spending and welfare spending more broadly. According to the IMF, Mexico is the emerging economy that spent less during the pandemic, having spent 0.7 percent of its GDP in the pandemic response.