Barbara Anderson

Medicine almost as a luxury item

Year after year, the cost of any care in a hospital outside the public system rises above the country's average inflation rate.

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One of the issues that many insurers have been discussing is medical inflation in the private sector in our country.

Without a clear and transparent control of the fees for services, year after year the cost of any care in a hospital outside the public system rises above the average inflation of the country.

Over the last two decades, private medical inflation has averaged between two and three times the National Consumer Price Index.

"The cost of medicine in private hospitals is one of the best-kept secrets," Daniel Bandle, ceo of Axa Mexico, explained to me.

The numbers of this insurer can be a good thermometer of the increase in Major Medical Expenses (the Bermuda Triangle of medical service costs), since it has 1.5 million policyholders in this area, and is the second largest in the country with 22% of the market.

While in 2020 (in the middle of the pandemic, without vaccines, with saturated hospitals) a respiratory disease had an average cost of 158 thousand pesos, in 2021 it was 255 thousand, that is, an increase of 61% year on year. Well, not even Argentina beat us in this inflation rate.

A major medical expense linked to hematology had a cost increase in the same period of 43%, a newborn, 36%; any bone ailment (shoulder, knee, hip) was 30% more expensive in 2021 than in 2020 and if it is about spine the inflation was 25%.

This undoubtedly affects the cost of policies in a very small sector: today only one out of every nine Mexicans has major medical insurance.

According to the Mexican Association of Insurance Institutions (AMIS), the average cost of private medical services in the sector was 17%.

If we take this into account and go back to 2015 (with a medical inflation of 6.5%) we could say that the cost of private medicine has almost tripled in just six years.

The inflation that takes place in the private hospital chains at the time of insurance is directly transferred to the cost of each beneficiary's premium.

And that's not the only thing where health gave us a bump in our income.

Because, as you know, major medical expenses are precisely "major", that is, everything that is ambulatory/non-surgical/non-complex studies has to be paid separately, such as a simple and helpful medical consultation.

This, which is known as "out-of-pocket spending," also increased. According to the Center for Economic and Budgetary Research, in 2020 the average out-of-pocket spending per person on medical care and medicines increased 40% from 2,358 pesos in 2018 to 3,299 pesos in the first year of the pandemic.

The reverse Covid effect

2021 ended up being more expensive for some insurers, such as AXA, than the fateful year 2020 of the pandemic.

One might imagine that such a health crisis would trigger the costs of care, as in the rest of the countries in the world, but no. In our case, the year 2021, with fewer infections/deaths thanks to vaccines, was the most expensive for this company. In our case, the year 2021, with fewer infections/deaths thanks to vaccines, was the most expensive for this company.

The reasons?

1) Major medical clients are generally part of a medium/medium-high job benefit. This group of employees were the first to move to work in a home office, so their level of exposure and contagion was lower.

2) Many of the "non-Covid" diseases were left on standby in 2020 due to hospital saturation and the enormous risk of attending a clinic and getting infected when no one had been vaccinated yet. These ailments (in many cases surgeries, hip replacement, special treatments) were postponed to last year, when the vaccination process was already starting to free up space in medical centers.

3) Medical inflation. If we add this double-digit cost increase to the increase in treatment, operations and postponed studies, it ended up being the perfect storm of cost increases for AXA.

In the case of Covid-19, the insurer chaired by Bandle had a total of 4,700 clients diagnosed throughout the pandemic.

The average cost of care for a patient with coronavirus was 840 thousand pesos (when the overall non-pandemic average is 60 thousand pesos); the highest amount paid for a patient was 55 million pesos.

Also since March 2020 to date, 4 thousand clients have been indemnified in the Life Insurance segment, totaling one billion pesos.

An interesting fact regarding the "new normal" is that, although it is true that vaccination is voluntary, in the case of AXA, if a patient becomes infected and is not inoculated, his coverage is capped at 300,000 pesos."I am convinced that this is the right thing to do, because one of the principles of insurance is solidarity, mutuality should be solidarity; then, in a country where vaccination is universal and free, it does not seem right to me that the vast majority who are vaccinated should finance those who are not vaccinated", says Daniel Bandle, leaving a topic for a table-top debate.

The truth is that private healthcare is a sector that is almost alien to the Mexican reality, with its own inflation and scarce coverage, which must at some point be taken seriously with legislation that allows for transparency in the true costs of care in hospitals outside the public system.