Which healthcare system was up against coronavirus in Brazil?
By Ana Paula Guidolin, Grazielle David and Pedro Rossi
The understanding of the Brazilian healthcare system history and financing is essential to comprehend its reach and limits in guaranteeing the right to health in “normal” times and in the coronavirus pandemic. The Brazilian Unified Health System (SUS) was already fragile as a result of chronic underfunding and austerity policies when the country was hit by Sars-CoV-2. Besides that, the Brazilian Gross Domestic Product (GDP) level had not yet recovered from the economic crisis that began in 2014-2015 when the crisis caused by the pandemic started.
Within the proclamation of the Federal Constitution of Brazil in 1988, a social security model that aims to universalize the right to health through a public healthcare system emerged. Despite the legal statement that social and economic policies must ensure the Unified Health System (SUS), the Constitution did not precisely define the modus operandi of the health financing policy. Specially for the federal government, there was a lack of definition until the approval of the Constitutional Amendment n. 29/2000, which defined that the minimum amount would be equivalent to the amount committed in the previous financial year plus, at least, the percentage of nominal GDP variation that occurred in the previous year of the Annual Budget Law (LOA). The next legal improvement came with the Complementary Law n. 141/2012, which defined rules of inspection, evaluation, and control of health expenses. However, there was no substantial expansion of SUS federal financing, despite constant demand from the Sanitary Reform Movement and other sectors of society.
In 2015, the first institutional step in the budgetary contraction for health was taken, embodied by Constitutional Amendment n. 86/2015, which defined the minimum value allocated to health by the Federal government as a percentage of 13.2% of the Current Net Revenue (RCL). This percentage would be progressively expanded until reaching 15% of the RCL in 2020. The budgetary contraction is revealed by the data pointed out by the National Health Council (CNS) that, in 2014, SUS were financed with 14.38% of the RCL of the year: the establishment of 13.2% of the RCL for 2016 would represent a contraction in the health budget, that still would be aggravated by the drop in tax collection given the crisis situation (CNS, 2015). Thus, in response to Direct Unconstitutionality Action (ADI) n. 5595, Supreme Court Minister Ricardo Lewandowski granted an injunction establishing that the minimum allocated would be 15% of RCL since 2016 already. Nevertheless, this rule was quickly substituted by a harsher one.
The current rule for SUS’ federal financing is inserted in Constitutional Amendment n. 95/2016, named “Expenditure Ceiling”, which instituted the New Fiscal Regime (NRF) valid for 20 years until 2036. According to this regime, the primary expenditure of the federal government – which excludes the payment of interest on public debt – is limited in real values, that is, the expenditure of the previous year is readjusted only by the accumulated inflation measured by the Broad Consumer Price Index (IPCA) in the last 12 months up to the month of June of the previous year. In practice, under the Expenditure Ceiling, there will be a reduction in public spending in relation to GDP and the number of inhabitants. This measure was inspired by the idea of an expansionary fiscal contraction, which means that austerity was placed as a driver of confidence among private agents, thus leading to economic recovery.
The fiscal austerity policy compromises the fulfilment of the right to health both through the restriction in the supply of public goods and services – mainly the SUS – and by the consequences on demand that aggravate and are aggravated by the increase in unemployment due to the economic policy (Furceri; Loungani; Ostry, 2016). As outlined by Vieira (2016), the combined effects of the economic crisis and fiscal austerity measures result in financial and material losses, impoverishment, bigger exposure to risk factors and diseases and a decrease in the ability to pay for health offered in the private sector. This combination of determinants converges to increase the demand for public health services while the response capacity of the health system – embodied in the access and quality of services – decreases (Vieira, 2016).
That was the scenario in Brazil when the pandemic started. Labor underutilization in 2019 reached 24.4 million of Brazilians, more than double the level of 2014. Since 2015, extreme poverty reached record levels year after year – at the end of 2019 there were 13.88 million of people living in miserable conditions. The rate of coverage of private health insurance that was increasing continuously since 2003, decreased 6.6% between 2014 and 2019 due to a loss of jobs and income. In addition, there is a demographic movement in the direction of an aging population that brings with it a change in the epidemiological profile, demanding more public health for the population; in turn, the evolution in the cost of inputs, materials, medicines and health technologies that have a continuous increase in their relative prices, is also not being considered. In the current pandemic scenario, poverty is known as a risk factor for death from coronavirus infections as those employed in low paid work could not retreat to make-shift home offices, and so they face high levels of exposure to Covid-19 (Hall et al., 2020). In addition, poor communities like favelas already have precarious conditions of housing and sanitation (Oliveira, 2020).
Analyzing the federal budget execution on SUS financing – considering the total paid amount in real terms – it is clear that the annual real growth rate has been dropping rapidly since 2015, moving away from the 5.7% average real annual growth between 2004 and 2014 to an average of 0.2% between 2015 and 2019. This “zero growth trend” is now officially institutionalized with the Constitutional Amendment n. 95/2016.
The financing of SUS in relation to GDP is below the 6% target set by Pan American Health Organization (PAHO/WHO) and is also low compared to other countries that have universal health systems. The use of budget loopholes, such as the registration of unpaid commitments, that can be extended indefinitely without being adjusted for inflation or even canceled, serves as a subterfuge for compliance with the minimum level of federal expenditure with ASPS – measured by the amount committed – and concomitant generation of primary surplus, despite the non-realization of the expense implying the non-offer of healthcare to the population. Such mechanisms tend to be exacerbated as long as the mandatory health spending is determined at the commitment stage and not at the payment stage.
Among all the legal frameworks analyzed, the “Expenditure Ceiling” traces the worst possible horizon. However, the feasibility of this logic was built over time with budget rules that tied SUS funding sometimes to GDP growth and sometimes to a percentage of current revenue. Therefore, the right to health was subjugated to economic variables taken for granted, hiding the autonomous character that the State has, the multiplier effects that social spending generates on the economy as a whole and, finally, the prohibition against social regression that is widely guaranteed in international human rights agreements (UN, 1966). Constitutional guarantees of a budget were seen in these three decades as an achievement that could guarantee resources for social areas considered as priorities, including health. However, as this guarantee was cut by the “Expenditure Ceiling”, it is time to discuss a new rule for real growth in SUS financing, so that the economic cycle interferes as little as possible in the health of the population. Tax breaks for private health insurance and openness to foreign capital should be reviewed. Objective parameters – such as recurrence of epidemics, goals of prevention campaigns, aging of the population, evolution of health technologies and correction of historical failures in the coverage of SUS – should prevail to determine the amount invested.
No country was really prepared to overcome Covid-19, but Brazil could be better prepared if it were not for the erosion of its health care system by chronic underfunding and recent austerity policies.
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- International Covenant on Economic, Social and Cultural Rights. Organização das Nações Unidas. 1966.
VIEIRA, F. S. Crise econômica, austeridade fiscal e saúde: que lições podem ser aprendidas? Nota Técnica n. 26, IPEA. 2016.
Ana Paula Guidolin is a Master’s student and Researcher at the Institute of Economics at the State University of Campinas (UNICAMP)
Grazielle David is a PhD student in economic development at the Institute of Economics at the State University of Campinas (UNICAMP) and Advisor to the Red de Justicia Fiscal de América Latina y Caribe
Pedro Rossi is a Professor at the Institute of Economics at the State University of Campinas (UNICAMP)
From: pp.8-9 of WEA Commentaries 10(4), December 2020