When Curbing Spending Becomes the Top Priority: Colombia Tries to Balance Health Needs and Fiscal Capacity, 2013 – 2017

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Abstract 

In 2012, Colombia’s public health system was headed for bankruptcy. The country had made significant progress on important public health priorities: expanding immunizations, reducing infant mortality, and attaining near-universal insurance coverage. But a Constitutional Court ruling that the government had to pay for almost all health services and technologies for those it subsidized, combined with rising pharmaceutical prices, was pushing the budget into deficit. Economist Alejandro Gaviria became minister of health and social protection amid that simmering crisis. To contain spiraling costs while enabling the sector to focus on some of its priorities, he worked to create new legislation that would limit the services the government would cover, regulate the drug market, and adjust an incentive structure that had lowered accountability and encouraged excess. In parallel, budget officials in the health ministry, the Ministry of Finance and Public Credit, and the National Planning Department tried to improve financial management of the system in order to increase efficiency and reduce costs. In the end, some of Gaviria’s efforts paid off and the ministry averted immediate insolvency, but as of 2018, the viability of Colombia’s health-care system remained in doubt even as health indicators improved.

Gordon LaForge drafted this case study based on interviews conducted in Bogota, Colombia in September 2018. Case published November 2018.

Keywords 
health care
budget
decentralization
priority setting
national planning
public financial management
drug price reform
pharmaceutical pricing
MTEF (Medium Term Expenditure Framework)
IFMIS (integrated financial management system)
Focus Area(s): 
Centers of Government
Financial Management
Critical Tasks: 
Expenditure frameworks
Priority setting
Core Challenge: 
Capacity (capability traps)
Coordination
Reducing capture
Country of Reform: 
Colombia
Type: 
Case Studies
Author: 
Gordon LaForge