December 11, 2020 | 9:13 am
By: Verónica García de León *
Our capacity for wonder diminishes the more we are exposed to bad news. But recently, a piece of data crossed my threshold of surprise and concern: the private medical inflation index, that is, the rise in the cost of hospitals, drugs, treatments and consultations.
This year, that indicator closes with an increase of 17% and the forecast for the following year is 16%. The first piece of information comes from Gabriela Ruiz, Deputy Director of Benefits at Mercer Marsh Benefits Mexico, and the second was mentioned by Daniel Bandle, CEO of AXA Mexico.
The numbers in brief reflect higher prices for private health services, which directly affect our wallets, and more in a context of unemployment and more infections. To better understand the magnitude of the problem, it must be said that the level of medical inflation is more than five times higher than the level of headline inflation, which was 3.3% year-on-year in November.
Gabriela Ruiz explained to me that part of the increase in the cost of private medicine is explained by an increase in the exchange rate from 2019, as many medical supplies are priced in dollars. But it also has to do with the health emergency.
And yes, the rise in medical inflation this year contrasts with that of 2018 and 2019, of 13 and 14% respectively, when the new coronavirus was not yet known. And how could it not have an impact if the average cost of hospital care for COVID-19 is 390,000 pesos? And not only that, more than 60% of hospital cases with insurance for major medical expenses exceed that level as they had to be taken to intensive care where the average cost is 920,000 pesos, according to the Mexican Association of Insurance Institutions (AAN MIJN)
Who Loses to Medical Inflation?
Such an aggressive rise in the price of medical services is worrying in itself in a country like Mexico, where the population is forced to resort to private medicine because of the inadequacy and poor quality of public services, in addition to the fact that 17 in the 100 Mexicans are not affiliated with any public health facility. That explains why cash expenditures on this issue in Mexico are among the highest in the world.
In all fairness, there are plenty of reasons to choose private medicine, but for now, it’s enough to know that Covid’s death rate in a public hospital is 10% versus 5% in a private, AMIS said. Which would you choose?
Another important effect of medical inflation is the insurance of large medical costs incurred by 11 million Mexicans. Daniel Blande, director of AXA, says affection is inevitable. “We need to pass such significant health service increases to our policyholders through premium increases,” he told me in an interview. They are expected to rise to double digits next year.
Ultimately, insurers pay for their clients’ hospitalization and treatment in the event of an accident or illness, and higher prices for services imply higher costs and less utility because while they can increase their premiums, they cannot do so in the same proportion.
For Blande it is essential to keep medical inflation in check and so he suggests that there is some body that regulates the private health system, that there is “a Health Profeco,” he says. In addition, it is more transparent in the rates it charges, it opens up to the public how much its treatments are worth and how prices are evolving. It also suggests that the most common terms have a maximum price.
Whichever way you currently control medical inflation should be a priority. And while that happens, it wouldn’t be a bad thing for hospitals and insurers to penalize their profit margins more on behalf of the population, or for the government to allow an additional deduction for their own private medicine expenses, since it ultimately complements public health services.
* Verónica García de León is a journalist specializing in economics and finance. You are interested in explaining and analyzing economic issues with a social impact. He studied the specialty in Dissemination of Economics and won the IE Business School Prize for Economic Journalism. She was editor of Fortune en Español.
Twitter: @vgarciadeleon
This text is an opinion blog. Its content is the responsibility of the author and does not necessarily represent THE CEO’s position.