In a speech delivered at the Government Palace just months after being elected President of Chile, Ricardo Lagos laid out his vision for his six years in office. “If we all work together,” he proclaimed, “we shall be able to take a better look at our future and be able to think that we shall truly have a better country by 2010, the year of our bicentenary.” While Chile faced a variety of challenges, for Lagos, radical reform of the country’s health sector would be central to this better future.

During his 1999 campaign for president, Lagos made health reform one of the main issues in the election, railing against the inequalities and inefficiencies of the system. When he began his term on March 11, 2000, Lagos’s focus on health presented both a strategic advantage and a personal burden. He found himself with both an impressive mandate for reform and high expectations for success.

Now, with Lagos’s final year in office nearing a close, talk of the president’s legacy has begun. Any perceptions of his presidency will be based in large part on the success of his health reform agenda. Despite impressive obstacles, Lagos has enjoyed political success in pushing several of his proposals through Parliament, and he now enjoys tremendous popularity. Still, it is less clear what effects the reforms have had and what the future portends for the health of the Chilean population.

Before Lagos assumed office, Chile arguably boasted one of the best health care systems in Latin America. It is one of the few countries in the world to posess a significant private sector health insurance market. In fact, 22 percent of the population is covered by government-regulated private health insurers called Isapres, while the rest of the population remains insured by a public fund called FONASA.

On the surface, Chile’s system appears to be efficient. The country spends only six percent of its gross domestic product (GDP) on health care. By comparison, the United States spends 13 percent on health care, while most Western European countries spend at least 10 percent of their GDP. In spite of this, Chile’s basic indicators of health are good: average life expectancy is 75.9 years, while infant and maternal mortality are among the lowest in Latin America. Based on these measures, it seems odd that President Lagos would make health care the central issue of his campaign.

The problem is that Chile’s averages conceal troubling inequalities. Chile has the 11th most uneven distribution of wealth in the world, and the health care system is no better. For instance, infant mortality rates for poorer rural communities in the South are four times higher than the national average and sixteen times higher than those in the prosperous Santiago suburbs. In a national survey, 45 percent of the population said that health was one of the three most important problems that the government should devote the most effort to solving, second only to employment and the economy.

For these reasons, President Lagos saw an area in which he could make a profound difference. He wanted to make his presidency the health care reform presidency.

A Vision to Reform

On October 31, 2000, President Lagos delivered a speech before members of the Parliament on his priorities for the coming year, including his health care program. Just two days earlier, members of his governing coalition won 52 percent of the votes in municipal elections across the country, and Lagos claimed a broad mandate for his legislative agenda. He described his primary goal in health reform: “We want to introduce an element of equality in health care.”

With this proclamation, Lagos indicated that the country had come a long way since the days of dictator Augusto Pinochet’s rule, when cost control was the mantra in the health sector. A group of conservative economists who advised Pinochet in the 1970s and 1980s and called themselves the Chicago boys—because they had studied at the University of Chicago in the United States—often said that health care was not a right, but rather a good to be purchased in the market. Lagos set out to eliminate the remnants of this perception from Chile’s system. For him, equality was priority number one.

Lagos also set out to improve the efficiency of the system. A recent survey by the Economic Committee for Latin America found that, although Chile’s health budget grew 210 percent from 1990 to 2001, its productivity increased by only 25 percent. According to the Liberty and Development Institute, a 10 percent increase in efficiency in public provision would generate savings of US$170 million. Public opinion seemed to reflect these numbers. A survey early in Lagos’s term found that 72 percent of the Chilean population disagreed with the statement that public hospitals were well-administered.

In addition to the public sector, Lagos aimed to improve the efficiency of the private sector. According to an article in The New England Journal of Medicine in 1999, the Isapres spent 19 percent of their expenditures for administrative and promotional costs. In a radio interview, Lagos said, “What I am telling the Isapres is exactly what we do in the government. A fundamental part of the reform is more efficiency. The Isapres should use their resources with more efficiency.” While the Isapres had witnessed yearly profit margins that dwindled to less than 1 percent in the year 2000, they had at times generated profits estimated at 40 percent, invoking the ire of the Chilean populace.

With these considerations in mind, Lagos sent five major reform projects to Parliament in May 2002: a Patients Rights Charter, a plan for greater autonomy for hospital administrators, a Compensation Fund to redistribute resources from the private to the public sector, and a tax plan to generate revenue. The centerpiece reform was a plan called Explicit Guarantees and Universal Access (AUGE) that would guarantee coverage under the public provision system for 56 of the country’s most burdensome diseases.

At the time, many did not give Lagos much of a chance to pass the majority of his reforms. Dr. Vito Sciaraffia, a health economist at the University of Chile in Santiago, commented, “Change does not come easy to my country. Reforming health care requires strong leadership and political consensus. We will see if the will is there.” Sciaraffia’s words would prove prophetic.