The operators' loss rates and the adjustments in health plans have had repercussions on the entire society and are burdening the SUS due to the departure of beneficiaries. This stress of scenery post-pandemic and population aging show that the current model is unsustainable, leading the market to seek possible alternatives.
In an exclusive interview, Luiz De Luca, Advisor and advisor in the sector, in addition to being a member of the investment committee of Green Rock, reflects on this context, raises possible alternatives and draws a parallel with the international scene.
Below are the main excerpts from the interview:
How do you assess the current landscape of health plans in Brazil?
I have said that supplementary health care in Brazil is collapsing, and this occurs for a reason of asymmetry. There is the first point, which is information asymmetry. The payment models, whether an insurance/ operator/ cooperative, and the providers, have different information about the same process. In other words, when a patient is assisted in a hospital, when sending information, an asymmetry occurs, since not everything described there is what in fact represents adequate care. That's a big point. This information can also bring about behavioral asymmetry, because sometimes the doctor or institution has one purpose, while the operator has another. Unfortunately, the processes are not transparent, as the codifications do not represent the clinical condition involving numerous epidemiological variables. There is asymmetry due to lack of transparency and incentives.
The stimuli are different. One is measured by producing more, while the other tries to prevent this from happening in an irrational and uncontrolled way, which is the operator's issue. Whatever I put in as an operator, we will assume that it is group medicine, an insurance company, a cooperative, etc., who would be the financing agents of the process. We always seek to have the best care behavior. However, we also need to produce.
Also, over time, the list of procedures increased and depending on the period in which the insured entered, they did not pay for this increase in activities or new service provision. We call this actuarial risk, which is the relationship between the control of the assistance risk established in the previous model, on a previous time base. But that time base changed, new drugs and equipment came and new technologies were incorporated. As a result, this static actuarial model was outdated. So, today, actuarial models should even follow other considerations. In individual plans, there is a fixed price regulation in relation to the age group, but the age group is not necessarily consistent with the individual's illness or health process.
So these considerations lead to an avalanche process, on all sides. An avalanche occurs over a very large volume, due to lack of resources and increased costs. And the model is the same as 25 years ago. This process is bringing about a collapse and we are experiencing it. From there, obviously, other fronts arise that can be presented as alternatives.
What is the way out for health in the short and medium term? We understand that, as the situation is, it is difficult to continue like this even thinking about the next 2, 3 years.
The way out is not so simple, otherwise we would have already left. I will bring up two topics: supplementary health and public health. Supplementary health is politicized. We even followed the new procedures added to the list last year. I don't think there's a one-size-fits-all product. The product that encompasses everything should have a price for whoever covers everything.
If you want to have car insurance Full If you pay for everything that may happen, you will pay for a higher price. The same thing should happen when managing health insurance products. Then there should be an aspect of limited coverage that would bring greater predictability and greater adjustment. Consequently, everything that has a greater aspect in terms of adjustment and limit, needs to have greater control. It can be a pay-per-use called co-participation, it can be a control by usage model, which is through primary health care, a family doctor, a regulated system.
We think of a model that is less centralized in a hospital base and more pulverized in the outpatient aspect. Then you get outpatient prevention, outpatient and home care, less use of high-cost structures. It is necessary to dilute this. Then those would be exits. It's very easy to say but very complex to articulate.
We are seeing the emergence of some operators with the purpose of managing their lives better, but they are struggling both to close accounts and to grow. How do you see this context?
I think that, in the case of these operators, the problem of gaining growth scale comes from the fact that they are still being compared in their model with the traditional ones. These operators are trying to grow in an environment of high competition where the population itself sees little attraction to change these models, either because of behavior or because of incentives from the healthcare network itself, the doctors themselves.
There is another important point, which is the distribution. These companies sometimes try to distribute through their own networks. But we have a controlling agent in the market called a broker. For the remuneration of this distribution market, brokerage firms earn two or three times an installment, sometimes they have lifetime income while holding this portfolio, so there is no interest in changing. So, these new operators try to work with their own sales. Moral of the story: There is no incentive for brokerage firms to make this distribution.
That way, they keep doing what I call “robbing”. When a company prices a high readjustment of a particular operator, the broker says “look I have an alternative: instead of readjusting by 20%, this one is keeping you at the current price”. The current operator charges a 20% adjustment, but the new operator will not charge any adjustments. That's what I call “mountain robbing”. This model will have to end, because this portfolio of lives is not being properly controlled. Therefore, the following year, this claim should be priced at a high readjustment again.
Faced with this scenario, where is health heading? What's the trend?
Despite all this complex scenario, I remain a motivated person. I don't believe in the current model and I think that there must be a transformational process. Are there any exits? I think that there are alternatives that should work on transformational processes both from the point of view of the operator and the providers. These transformational processes can begin with the aggregation of intelligence and automation in both the operator and the provider. There are processes to achieve greater efficiency, greater controls, data integrations, etc. I believe that this will lead to benefits that will lower costs. Obviously, when you integrate more information, you tend to decrease asymmetries, because they are connected. It is not a solution, but they are activities that will minimize this avalanche process.
The problem is that the system is still very fragmented. We should have more interchangeable information bases. I'm not going to talk about Open Health which is still a bit of a utopian aspect, but one of information that can migrate. I'll give you an example. Green Rock has plan X, which asked for a 30% increase. Another operator is considering offering a better price for the company, but in order for it to be able to price Green Rock, it should understand what the portfolio's claim was. Those data that are with the operator should be accessible, but by regulation, they are not.
The ANS does not allow access to these Green Rock accident data. Then the operator pays for doing research, actuarial assessment of age groups, of pre-existing diseases. It is an assessment “in the dark”, despite the fact that the portfolio already has an accident rate and a usage profile. If this data is open, the process is more transparent and the pricing is more assertive.
I think that Digital Health it's going to be a cog of transformation. I very much believe that the Healthtechs Or the Healthfintechs, who are other funding agents, will remove a burden from this cost that currently exists attached to the current system to bring greater efficiency, therapeutic and care alternatives, reducing this cost as a whole.
Many ask “why doesn't the operator manage chronic diseases?”. She manages the chronic condition in extreme cases, because if the person changes to another operator in six months, all that control is lost.
And how do you compare with the international scene?
I will start with a model very close to ours, which is the North American one. The big difference lies in the coverage structure: here, approximately 20% of the population has health insurance coverage, while in the United States the opposite is true. There, 80% have health insurance coverage. If I have a hospital in a certain region of the USA and it has a deficit, it closes. The government understands that health is private. In other words, if you are a user of a health plan that had a certain hospital that deactivated it, the problem is yours. And that has happened a lot in the USA. North American models, because they have greater insurance coverage, are less dependent on the State and less regulated. Therefore, the pricing agencies are different. Still, the North American model is already applying the outpatient process, the migration of In-Patient For the Out-Patient. Hospitals are reducing the number of beds and opening more outpatient clinics.
The most successful models, although they have their deficiencies, are those that have the greatest control of the State or greater controls by private companies that manage State resources. So is the Canadian model. I'm not saying he's better, but he has the most control over it. The problem with the Canadian model is the queue, because since you have a smaller offer of services through a regulatory process, you end up standing in lines and everything is slower. It is worth remembering that a behavioral expectation in Latinos is to want immediate things.
But you have different models in other Latin American countries that have the control of private companies in managing public resources. This is a good path. The English model that was always considered very efficient, which was the most socialized model, is now becoming more hybrid. So they are trying to work better with coding, greater control of outcomes, but they are experiencing similar difficult situations, even because of aging. All of these countries are experiencing situations of population aging, which brings a drag on costs. These models need to be reviewed globally. When we say that private health undergoes a global process of transformation, this is a true consideration.
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