Health Reform in the Midst of a Social and Political Crisis in Chile, 2019-2020

ABSTRACT The protests in Chile in October 2019 raised the issue of health reform to the public agenda again. This article reviews some of the explanations for why there was a widespread protest, including the expectations of continued progress, the emergence of a “fear-based populism” and the decline in legitimacy of most social and political actors. Using the theories of Kingdon to explain how reforms are placed on the political agenda, we describe how the protests raised health reform as a problem to be addressed, discuss the tendency toward consensus on policy options by technical health reform advocates, and examine the uncertain political processes that would be necessary for a consensus reform to be adopted and implemented. A lesson for reformers is the need to pay attention to growing signs of popular resentment over failures of health reforms to address accumulating problems and to try to address them with urgency to avoid populist crises.

2][3][4] Starting initially with protests against a minor increase in transportation prices, the protests soon spiraled to express wider frustrations especially about multiple social problems.These included the weak individualized pension system, which left many pensioners with poverty level retirement; long waiting lines for treatments in public health facilities; and unequal access for over 80% of the population not covered by private insurance.The protests also called for reforms to address poor quality education and unequal access to higher education, as well as concerns about failures to address climate change, sexual abuses and other social issues.Some of the protest objectives are contradictory and most were not fully developed with clear specific demands.Many protesters summed up these concerns with an attack on the extreme neoliberal free-market and privatization policies initiated in the dictatorship of General Augusto Pinochet (1973-1989) and continued in modified fashion by subsequent democratic governments.They also called for a new constitution to replace the one established under the dictatorship that had been a public agenda item for several administrations without visible progress.The plebiscite to approve a constitutional convention was scheduled for April 2020 but has been postponed due to the COVID-19 pandemic to October and, if approved, will set in motion a long, complicated process for a new constitution.The protesters hope that a new constitution will allow for more radical reforms than the modest reforms of the post-Pinochet period, since it could remove some of the limitations of the current political institutions, although it is not clear what actually will emerge from the constitutional process.
6][7][8] This reform prioritized a set of health conditions with legal guarantees regarding access, quality, financial protection, and opportunity. 9,10Given the political limitations at the time, observers felt this reform was an incremental step forward that would improve access and quality of services for all Chileans, especially the poor and disadvantaged.It made improvements in the two-tiered system that had been established under the Pinochet military dictatorship.The Pinochet reforms had replaced a single social insurance system that allowed some use of private providers but mainly used public clinics and hospitals, with a system in which the wealthier population could opt out of the social insurance system and purchase private insurance that, in turn, primarily uses private providers.
Even at the time of passage, the Lagos reform in 2005 was limited as it retained the two-tiered system with around 20% of the population having access to private insurance and mainly private providers while the rest of the population was covered by public insurance and mainly public providers.The 2005 reform significantly improved funding of the public sector and made a priority package of services available with guaranteed quality-the AUGES/GES conditions-based on clinical protocols, defined waiting times for diagnosis, treatment and rehabilitation and limited out-of-pocket payments.This package originally included 40 health conditions but was gradually expanded to 85 by 2019. 11he Chilean health system has shown important improvements over the past 50 years: sharp declines in infant mortality reduced the country's mortality rate, generating a constant increase in life expectancy. 12,13In recent decades other achievements, such as reduction in mortality rates due to non-communicable diseases, and increasing access and better quality of services, are also observed.However, several important issues remain pending. 5,7,14or example, waiting times for specialist and hospital services for non-AUGE/GES conditions grew, in many cases to years, for non-emergency services.4][15][16][17][18][19] While most public health experts recognized these problems and there were several attempts to develop initiatives involving significant new reforms, there was little sense of urgency, lots of discussion of alternative options and not much action. 6The social crisis and widespread protests in 2019 changed this complacency and put health reform back on the political agenda.
This article reviews some of the explanations for the rise of the protest movement, discusses one theory of how health reform rose to the public agenda, reviews several options for a new reform, and concludes with an assessment of the potential for adoption and implementation of a consensus reform.

The Social Crisis
The social crisis in Chile was still palpable in early 2020, months after the initial protests, with thousands of protesters of all ages, and often exploding into violence and destruction of businesses and public transportation.Opinion surveys repeatedly showed over 50% support for the protests three months after the initial explosion. 20Even after the rise of COVID-19, support for the protests remained above 50%. 21The government's first repressive response in October 2019 was to characterize the protests as foreign inspired and requiring a "war" on the protests, including a curfew.This brought out images of the military in the streets reminiscent of the 1973 coup against the government of Salvador Allende that heralded 18 years of severe dictatorship under Pinochet. 22s the protests continued after October to gain wide social support, the government and opposition parties began to try to address the main concerns of the protesters.The current government of Sebastián Piñera proposed a new social reform agenda and made a significant change in cabinet membership in October 2019.The government and political parties in Congress quickly agreed on a plebiscite, originally to be held in April 2020, to approve a process of creating a new constitution over the following year.This was a major step and heralded a sense of progress in responding to the protests.The Piñera government proposed a series of specific reforms-labeled as the New Social Agenda that included social, economic, health, and security reforms-attempting to address some of the key problems.However, in the Chilean presidential political system, although major new laws can be initiated by the President they need approval by a bicameral Congress, in which the current President does not have a majority.The divided Congress remained a major obstacle to these reforms. 23olitical economy and social theories about the causes of the unanticipated and widespread social unrest point to at least four basic issues that can help understand the recent social outbreak in Chile. 4The first explains the protests as a result of the rapid and sustained achievements of the remarkable economic growth and social policies that reduced poverty from 40% to 8% in the 30 years since the restoration of democracy in 1989. 24he growth has slowed recently but the expectations of continued improvements have been frustrated by an accumulation of recognized problems in all social sectors and in the perception of continuing inequality in access to services, each of which were perceived by the general public not to be addressed by government policies. 2,4his response also calls for a new constitution that will recognize rights to better social services.
The second set of theories about the crisis might be called "fear-based populism."This is driven largely by the former poor who have just entered the lower middle class but are faced with mounting credit card debt, low pension prospects, poor education prospects for their children and long waiting times for specialists and surgeries.This population is afraid that their new social position is at risk and that they may fall again into poverty. 25 third set of theories about the crisis is that over the last at least ten years many public institutions, especially politicians in the executive branch and in Congress, as well as the Church, have lost legitimacy.7][28][29] The heavyhanded responses of the police and military to the protests have also contributed to the decline in legitimacy of public institutions.Opinion polls in January 2020 found approval ratings of most institutions in the single digits. 17The long-established and once well-disciplined political parties, Democracia Cristiana, Partido Socialista, Partido por la Democracia, Renovación Nacional, and the Unión Democrática Independiente, are now fragmented and challenged by new amorphous and changing "movements" and the once solid coalitions of political parties needed for governance have also broken up and been replaced with weak party alliances. 30,31In addition, public opinion polls show a significant decline in party identification, from 48% of the population without political party identification in 2005 rising to 81% in 2015. 32inally, recent political economy approaches have raised the issue of "political settlement" by which major political actors, or interest groups, come to an agreement on the political institutions that are established to cope with their political disagreements and agree not to use violence to address differences. 33hese institutions can endure for a period but, at least in the case of Chile, enshrined a status quo that prevented sufficient policy change to address the changing social and economic conditions.The political institutions created by the Constitution established at the end of the Pinochet period were designed to make it difficult for major new policies to change the prevailing neoliberal market economy policies and to challenge the status quo of the established elites.The Constitution requires super majorities for major legislation and over-representation of the political parties on the right. 34As part of the "political settlement" called the "pacted transition" between the military dictatorship and the opposition democratic forces to open Chile again to democratic practices, all political actors accepted this institutional structure.For more than 20 years the democratic governments managed to make marginal changes that brought some social progress but also engendered the frustration expressed in the protests.This political settlement contributed to both the fear-based populism and the loss of legitimacy, which contributed to the proposal to create a new constitution.

Health Reform in Chile
Many proposals over several administrations have been offered to address the key problems of the health system that was created by the Pinochet regime: inefficiency, segmentation, inequality and lack of solidarity. 6his two-tiered system involves a large publiclyfinanced social insurance fund (Fonasa) that covers roughly 80% of the population.Fonasa funds a large network of public hospitals and primary care clinics, covering private healthcare under its "free choice" option.The neoliberal free-market technical team around Pinochet created a separate sphere of competing private health insurance companies (Isapres), which purchase care mainly from private hospitals and outpatient clinics. 35The Pinochet system had serious flaws that allowed cherry picking by private insurance of the wealthier and healthier population and little transparency in the private insurance system, relegating a large majority of the lower income population and those with the costliest health risks to the public system. 15,35hile AUGE/GES introduced improvements, there were also growing problems in both public and private systems, and growing resentment over the two-tiered system.Several subsequent administrations, from both the moderate right and moderate left, formed presidential commissions to propose new health reforms.These commissions were asked to address the inequities of the two-tiered system, the problems of long waiting times for the health problems not included in the AUGE/GES priority package, high out-of-pocket payments, and the beneficiaries selection and lack of transparency in the Isapre system.The proposals included a wide range of alternatives from modest reforms of the Isapre system to a return to a single-payer system.7][38] None of the commission proposals achieved sufficient support in Congress to be seriously considered. 6he 2019 social protests placed the issue of health reform back on the public agenda.The political economy theory proposed by Kingdon may be a useful lens to explain the processes involved in placing a viable reform on the public agenda with a good chance of being adopted.Kingdon proposes three "streams" of policy relevance that need to come together in a "window of opportunity" to place a technically viable proposal on the public agenda with a reasonable chance of adoption and implementation. 39First a "problem" stream identifies key issues that many stakeholders recognize need new policies to address.Second, in a "policy" stream, technical experts need to develop a relative consensus on a viable set of policy initiatives that can address the problems.Finally, in the "political" stream, key political actors who can propose and adopt new policies need to consider and modify the technical proposal and move it along the processes of adoption and eventual implementation.
As of this writing in May 2020, there is a clear recognition in Chile that the multiple problems in the health sector are of sufficient magnitude that, taken together, all stakeholders recognize problems that need to be addressed. 6The accumulation of frustration over the inequities of the two-tiered system, long waiting times for many health conditions not covered by AUGE/GES priorities, and high pharmaceutical prices in private pharmacies, have been articulated repeatedly in the protests, in news programs and other media. 2,3he "policy" stream is less clear in that there still are advocates for immediate removal of the Isapres and incorporation of the contributions of the wealthier population into a single social insurance pool.7][38] The major technical proposals have been made by the Centro de Estudios Públicos (CEP), Escuela de Salud Pública Dr. Salvador Allende de la Universidad de Chile (ESP-UCh), Colegio Médico (COL-MED), and the Instituto de Salud Pública de la Universidad Andres Bello (UNAB).These proposals include four main points: First, address the waiting time problem by requiring public providers to purchase services from the private providers to reduce waiting times when the basic package is expanded to most services (now called the Universal Plan).Second, address high pharmaceutical prices by allowing bulk purchase by CENABAST, the government-purchasing agent, which would provide drugs to private distributors who would have to sell them at fixed prices.Third, increase the public budget for the health system.Fourth, reduce inefficiencies in both the public and private health provider systems through a series of measures to improve management and realign incentives, especially in payments to providers.
Most proposals for reform also include some mechanism for bringing the public and private systems together either through a compensation fund that would reduce incentives for private sector cherry picking low-risk patients, or through creating a single payer but allowing the Isapres to administer the plans and to offer complementary plans to cover non-essential services and copayments.One clear agreement that was lacking in earlier periods is the acceptance of a large sector of private providers at least in the short-term.There is a debate about whether the public single payer should be a longterm objective or whether incremental reforms should be phased in and decisions about whether a single payer is needed should be made after the incremental reforms have been implemented.Although the technical experts make much of their differences, advocates for each of these reforms meet regularly and have individually expressed to the authors a general willingness to compromise in order to move forward.
It is the "political" stream that is the most problematic for the current reform process, since the "political settlement" established political institutions that prevent major reform and now there is little agreement among the political parties in Congress and little support for the executive branch initiatives.These issues have supported the discussion about changing the Constitution, seen as the main source of status quo in the country.The current Constitution provides at least two mechanisms that obstruct change.4][45][46] The most salient example of this working the other way was when discrimination in health insurance was declared as "unconstitutional," forcing Isapres to change the way they set premiums and starting a still present judicial process in the courts. 6econd, the Constitution constitutes a barrier to change by requiring large Congressional majorities to make changes in some topics. 4,47dditionally, the traditional political actors and interest groups that agreed to the "pacted transition" have been unable to develop agreement on the kinds of reforms that the technical consensus mentioned above suggests.They however were surprised that the moderate reforms that had been passed were not sufficient for a large segment of the population.There seems to be some support for the protests from the members of the former Concertación coalition, although some fear the protests might lead to a return of a military dictatorship.The coalition supporting the current Piñera government tends to oppose the protests and to support minor reforms that appear to address the protests without major changes in policies.
Other stakeholders have also played a role and need to be considered when discussing the past and future of health reforms.On the one hand, many health sector stakeholders have continuously opposed structural reforms, arguing that the current system needs to be improved but not replaced. 48,49People who currently oppose the constitutional reform use a similar motto: "Rechazar para reformar" (Reject in order to reform). 50On the other hand, the public's preferences about the health system's structure are not clear.Surveys show that people want better healthcare quality, regardless of the institutional arrangement, although people seem to agree with the idea of implementing a "solidarity pool." 51,52Finally, even though satisfaction is low in both schemes, Isapres affiliates state that they are increasingly willing to join the public insurance fund Fonasa, compared to Fonasa's affiliates who are less willing to switch to private health insurance. 53,54rior to the October 2019 crisis, President Piñera proposed legislation to address some of the problems of the Isapres system.This proposal was put on hold in October in recognition of the need for key public sector reforms to address the protest issues.The new proposal called "Fonasa Reform" claimed to address the waiting times problem by, in essence, expanding AUGE/GES protocols on waiting times to most other health problems.The proposal also would inject additional funding into the public system and lower drug prices through CENABAST purchasing and price fixing. 55,56he proposed reform was similar to one suggested by the Piñera administration in 2018. 57This Fonasa reform has generated significant opposition because it recommended that the funds be used to purchase private sector services for waiting list patients that the public sector is unable to treat within reasonable waiting times. 58Even though the prices for services would be fixed at the same rate as the public sector, the opposition political parties and some protesters think that the funds should be used to increase the capacity of the public sector.][38] Significant presidential leadership would be required to pass even this modest reform, due to the lack of a majority of presidential supporters in Congress.President Lagos was able to pass the AUGE/GES reforms over significant opposition in 2005.Piñera might also be successful but he has very low approval ratings (6%) and has not yet shown ability to overcome fractious opposition in Congress. 20In any case, his reforms, although they appear to address two key protest demands (waiting lists and high pharmaceutical prices), do not go very far to address the fundamental inequities of the system called for by the protests against free market "neo-liberalism."Whether the reforms could quell the protests is therefore doubtful.
Chile has been a leader in Latin America with significant innovations in health systems. 5,59,60In the 1950s they adopted one of the first complex national health systems that combined public funded health services similar to the British National Health System with some aspects of Bismarkian social insurance allowing limited use of the private sector.The Pinochet reforms were also innovative in introducing private markets into the health system.The Lagos AUGE/GES reforms of 2005 were considered innovative in prioritizing health services without excluding other services.
It is possible that Chile could develop a new innovation in health systems as a response to the current social crisis and the COVID-19 pandemic.The structure of this innovative reform, however, is still unclear.It is unlikely that Chile can return to a single payer, at least in the short run.The costs of absorbing the waiting list patients as well as the Isapres members into the public sector and attempting to fund their expectations of high quality services could be hard to achieve without a massive increase in funding that is unrealistic, at least in the short run. 41It is also unlikely that Chile has a consistent network of information that would be required to develop an effective compensation fund between the private and public insurance systems.This would be necessary to provide incentives for private insurance to accept higher risk patients and therefore remove some of the dramatic inequalities of the two-tiered system.While an inter-Isapres compensation fund has been implemented and a compensation fund between Fonasa and Isapres has been proposed in the past as a way to increase the system pooling, it is unlikely that a major new compensation fund can be established for technical and political reasons. 42 compensation fund between Fonasa and Isapres was a proposal in the early development of the AUGE/GES reforms but was removed in the legislative process; it was also considered in the presidential commissions without succeeding.42 As the UNAB, CEP, ESP-UCh, and COL-MED proposals suggest, Chile could develop its own way to combine public insurance with private insurance into a single universal plan that covers most of the health services with a single or limited choice of health coverage plans.It could also regulate private insurance in more effective ways to remove some of the problems of transparency and risk-based premiums.
However, the harder part of reform will be to address the inefficiency and inappropriate incentives embedded in both the public and private systems.It is probably only through improving the management of both public and private hospitals that the system can partially address the waiting list problem by generating sufficient savings to cover the backlog.There is some evidence that management reforms have been effective in recent efforts to reduce the debts of public hospitals. 61,62Both public and private systems have clear areas of inefficiency.In both sectors there is considerable excess clinical capacity but especially in the public sector there is insufficient management authority and skills of managers at the facility level in autonomous public facilities to make choices that would improve efficiency.Even private hospitals lack the management skills and incentives needed to impose cost saving measures and motivate the workforce to be more efficient and provide higher quality.The payment system for individual doctors, nurses and other professionals is either salary, per capita or fee for service; all of these payment methods are ill-suited to improving efficiency and quality of services.Although the public system is introducing pay for performance and DRGs for hospitals the data networks needed for effective implementation of these payment mechanisms are still years away.If Chile is to provide a new innovative model it will have to address the issues of efficiency and quality with more concentrated initiatives and probably new funding for major changes.

The Future for Chile's Health System
Meantime, Chile's protests continue in 2020.The proposed constitutional reform is facing resistance from the center and far-right parties (Renovación Nacional and Unión Demócrata Independiente).Little has been done to restore legitimacy to the key governmental and political institutions needed to make effective reforms.4][65][66][67] The proposed new constitution may offer an opportunity to create a new political settlement and new political institutions that can cope better with the needs for reforms to address the underlying inequalities, the fears of the populists and the need for legitimacy for key political actors. 4Although recent polls show that 65% of people favor changing the constitution, at the current time, 68 it is hard to predict whether the constitution emerging from the process will result in sufficient consensus on reforms or what shape the proposed reform will take, especially considering the new scenario of the COVID-19 pandemic.Moreover, it is not clear how legitimacy can be restored without significant and effective reforms that address the major social problems at the core of protests.Perhaps a major effort to create consensus on a far-reaching health sector reform can be part of a process of restoring legitimacy of government and institutions.
Once considered a model of progressive reform and significant achievements, Chile faces an uncertain future.Torn in 1973 by the long and painful dictatorship, Chile now faces another major turning point.Some fear that the protests, which currently seem in abeyance during the COVID-19 crisis, if they continue to be violent and unresponsive to modest reforms could generate a repressive backlash that could end the nation's democracy and create another dictatorship.While this is a danger, the current protests do not threaten the system in as profound a way as the Allende government policies did, and the military is not as threatened nor as strong as it was in the 1970s.In the medium run, it is more likely that Chile will find a series of moderate reforms that will begin to address the most glaring problems but will not really remove the public and private character of the health system.Those who attack the neoliberal approach do not question the role of capitalism, as did the Allende democratic road to socialism agenda.The protesters and the political parties may have to adapt to a strengthened regulatory system to change inefficiencies and incentives and partially address some key inequities considering the fundamental market-driven elements of the current Chilean system.
Our analysis in this paper suggests that a major effort in the political stream will be needed to find sufficient political support for the emerging technical consensus approach to health reform.Chile has an urgent need to reestablish confidence and legitimacy in the government programs, which might help forge consensus among the political parties to work together to avoid continuing protests and the threat of more violence and a repressive reaction.Even in the current "pacted transition" political institutions, an effective response to a significant farreaching health reform that addresses the fundamental causes of the protests about the health system could be a vehicle to restore legitimacy to the parties, Congress and government programs.The COVID-19 crisis may also be an additional shock that will support health reform on the political agenda as another element of the Kingdon policy stream of problem acknowledgment.Recognition by all key stakeholders that the current system needs significant reform and that moving to a single payer system will not gain sufficient political support to be adopted and implemented in the short run, could be the basis for adoption of the consensus model that public health experts have been developing over the last decade.With the delay in the process of creating a new constitution, it is hard to predict the form of the potential new "political settlement;" however a genuine effort to promote a major health reform might generate a consensus that can carry over into the new constitution.
The social crisis in Chile also has lessons for other countries.It appears that those who promoted the moderate reforms that were a feasible way to address major health system problems given political constraints at the time of the reforms in the early 2000s, need also to engage in longer term strategies to address emerging health problems that inevitably occur as reforms are implemented.Even with significant improvements, the enduring or emerging problem can become the Achilles heel of a reform.The potential exists that these problems that the system has failed to address could become part of a wider populist frustration and contribute to a declining legitimacy of the key actors responsible for the moderate reforms.The Chilean situation is similar in this respect to the recent reversal of the Seguro Popular reform in Mexico, 69 and the constant threats to reverse Obamacare in the United States (US), where populist rejection of moderate reforms were part of the change in governments that threatened (US) or eliminated (Mexico) those reforms.