What next for Brazil’s healthcare experiment?

A return to neoliberal policies could threaten the future of universal healthcare in Brazil

Valbona MuzakaIt is impossible to tell what the final outcome of President Rousseff’s impeachment process will be. With less difficulty, the crisis that has engulfed the Brazilian executive can be seen as the outcome of a political manoeuvre – not even a very sophisticated one at that – to end PT’s (Partido dos Trabalhadores) hold on power. Those interested in the levers that were pulled to set in motion the impeachment process may want to read these three excellent pieces by Perry Anderson, David Miranda and Armando Boito and Alfredo Saad-Filho. My intention here is not to reiterate these arguments, but to raise questions about the consequences of Rousseff’s impeachment on one area of social and economic policy for which I am currently in São Paolo: Brazil’s ‘health-industrial complex’.

Developing Brazil’s health-industrial complex was an effort by PT policymakers to emulate the economic effects of the US military-industrial complex in order to tackle the country’s daunting social issues, the most obvious of these being inequality. Whilst Brazil is no longer at the top of the inequality league table as in the late 1980s, years of social policies targeted towards the poor, especially those under the PT that have so enraged the pro-impeachment camp, have yet to resolve this crucial problem.  Although during the 2000s poverty levels fell and the Gini coefficient was reduced for the first time in decades, income inequality remained stubbornly high: in 2007, for instance, the income shares of the poorest and richest 10% were 0.9% and 44%, respectively.

Building a health-industrial complex in Brazil was not entirely a new aim or idea, but prior to the presidencies of Lula and Rousseff no policies had managed to create a strong health-pharmaceutical industrial base, or significantly improve the health of the population. The fortunes of the Brazilian pharmaceutical sector from the end of WWII onwards had perhaps never been as bad as in the mid-1990s, when only one of the top 20 pharmaceutical companies was nationally owned.  For most of the 20th century, a private healthcare system co-existed with a much meager public one, but neither was available to the vast majority of the Brazilian population who, due to not being formally employed or not having the means to buy private healthcare insurance, relied on a mixture of familial or philanthropic care, if available.

The catalyst for change came from the movimento sanitário (healthcare movement) that, having been one of the most organised social movements that led to the overthrow of the military regime in 1984 and to the new 1988 Constitution, achieved perhaps the most radical institutional rupture in Brazilian social policy: universal and equitable healthcare for all. For the first time, the Brazilian state was called upon to guarantee free and universal healthcare for nearly 200 million Brazilians through the Unified Health System (Sistema Único de Saúde or SUS).  Upon taking office in 2003 the immediate aim of the PT’s health-industrial complex initiative was to improve the productive capacities required to keep the SUS afloat.  The more widely the SUS was rolled out, the more the sectoral trade deficit grew.  But the initiative’s aims went beyond reducing such deficits.  Indeed, it was an industrial and economic strategy that put the social unashamedly at its core: to provide free and universal healthcare to all Brazilians in a way that was sustainable and made economic sense.  Developing the productive capacities in the health-pharmaceutical sector meant not only strengthening this particular industrial (and service) domestic sector, but also creating various backward and forward linkages, ‘virtuous circles’ that would improve Brazil’s overall economic fortunes and the health of the population simultaneously.

What have been its successes to date? Healthcare has improved and the SUS has a number of notable achievements to be proud of.  The most important are in primary healthcare, prenatal care, vaccination and the free-for-all National AIDS Programme.  Given the enormity of the SUS, it is not surprising that it still suffers from a number of persistent problems, such as gaps in coverage, regional disparities and barriers to accessing specialist and complex care.  The domestic health-pharmaceutical productive capacities have also improved.  Having been singled out as a strategic sector in each of the industrial policies of the PT government from 2003 onwards, and benefiting from state financial support measures, most notably the BNDES Profarma Programme, its fortunes changed in the late 2000s.  In 2008, for instance, 88% of the domestic generics market was controlled by Brazilian firms, a notable improvement compared to the previous decade, even if the share of the generics markets was around (a relatively low) 17% of the total pharmaceutical market that same year.

Despite these cautiously positive indicators, the Brazilian health-industrial complex experiment is likely to fail if Rousseff is impeached and her deputy-cum-chief accuser,

Michel Temer, becomes president. The programme Un Puente al Futuro (A Bridge to the Future) launched at the end of 2015 made clear what the economic platform of Temer’s government-in-waiting would be: a return to the neoliberal policy menu of the 1990s.

Of the many problematic policies of that decade, those most likely to damage the health-industrial complex, should it survive a change in government, are the underfunding of healthcare and the de-universalisation of social rights. Both trends, which were not significantly reversed during the PT administrations, took root during the 1990s.

Healthcare underfunding became a problem as soon as the ink on the new 1988 Constitution dried. Despite the constitutional principle of an integrated social security system, in practice, healthcare, social assistance and social insurance (pensions) were separated and, apart from pensions, were severely underfunded as debt repayment took precedence.  The main social contributions to the state – payroll taxes – were largely earmarked for pension payments.  Moreover, up to 20% of total social contributions were regularly (and unconstitutionally) channeled towards debt repayment, and only about a third of the new tax levied on financial transactions in 1996 to deal with funding shortage in healthcare was used for this purpose.  Many of these problems were not resolved by the PT.  As a result, federal spending on healthcare has remained practically unchanged since 1995 at around 1.8% of GDP.  In 2012, total public healthcare expenditure was less than half the 8.3% average in countries with a similar commitment to universal healthcare.

That the financial base of the Brazilian healthcare system is incompatible with the constitutional commitment to universality is also visible in the high share of private healthcare expenditure. Less than 30% of Brazilians use private health insurance and facilities, yet they account for between 55-65% of the total healthcare expenditure in Brazil.  These indicators point to the wider problem of the de-universalisation of social rights, a trend also set in train during the 1990s.  Although social spending grew during that decade, it remained woefully inadequate to support the universal social security rights guaranteed by the Constitution.  Social policy was in practice one of ‘inclusive liberalism’ whereby various conditional cash transfer programmes targeting the poorest sabotaged the achievement of universal social rights guaranteed by the Constitution, including that of health.  Despite the success of PT administrations in a number of social policy areas, the tendency of social spending to reinforce the de-universalisation of social rights has not been significantly reversed.  On the contrary, the strong expansion of private social services and the continued preference for conditional cash transfers targeting the poorest continued to compromise the constitutional universality of social rights.

A return to a neoliberal policy menu akin to that of the 1990s will likely exacerbate these trends. Should this occur, SUS risks becoming an inferior subsystem that caters predominantly to the needs of the poorer segments of society.  With it, the rationale for supporting an experiment like the health-industrial complex will be significantly weakened, if the idea of having an industrial policy like this survives the change of government at all.  Rousseff’s fate will be determined in the coming weeks and months, but the effects of unraveling the health-industrial complex initiative and its impact on universal healthcare could have social and economic impacts that will be felt in Brazil for years, and potentially decades, to come.