US Health Sector Reforms Pre-Analysis: BBA/MBA Report

At present, health-sector reform in the countries of the Americas constitutes one of the most important processes in the realm of social policy, given the Region’s economic, state, and social transformations. The meeting became a most appropriate opportunity to analyze the reforms and their implications for health personnel at a very special time in history. On one hand we are about to witness the end of a century, with the premonitory messages and inevitable balances it entails; on the other hand, new paradigmatic changes are occurring in the understanding of development, the role of the State, and the participation of both subjects and collective actors in social life.

In observance of the mandates of its governing bodies and in response to its Strategic and Program Guidelines, PAHO/WHO has established technical cooperation in the field of national sectoral reform processes as an essential axis for its action. Consequently, within the framework of the Systems and Services Development Division planning of activities oriented towards sectoral reforms, the Human Resources Development Program organized this meeting, heeding the call of several countries and representative regional organizations involved in training health personnel. This event was held in coordination with the national sectoral departments responsible for human resources and those responsible for the reforms.


The great lesson learned is that the change in the health scene shall be accomplished with the people already there, with the existing staff. This human resource is the great capital required for change. The question was how to generate favorable and stable conditions–encompassing all possibilities, such as subsidies, recognition, incentive systems, improved working conditions, but, above all, staff education–to ensure staff participation in such change?


sector reform processes are aimed at introducing substantive changes at different levels of the sector, as well as in its relations and functions, with the purpose of increasing benefit equity, efficiency in its administration, and effectiveness in its services, to satisfy the population’s health needs. The final objective is to help improve the population’s living conditions and health, through the reduction of inequality and the improvement of health care. Thus, there are efforts to modernize public institutions, search for new relationships between actors, and seek a new balance among the public domain, the private domain, and the necessary financial sustainability.

Justification for the reforms lies as much in the need to confront the health situation as to improve performance, results, and the quality of care that the health services provide. The redefinition of health care models, the eradication of existing inequality, the resolution of efficacy and efficiency problems, and the improvement of effectiveness can no longer be postponed.

The analysis of the reforms must consider macroeconomic adjustments, changes in the role of the State, democratization and political governance processes, changes in fiscal and investment policies that the countries have experienced, and new technological developments. However, equally important are the hopes for and citizen’s mobilization towards equity and quality in health care, based on improvements in the problem-solving capacity and sustainability of the health care services.

It may be inferred from the regional experience that the reforms are built upon five governing principles:

× equity;
× effectiveness and quality;
× efficiency;
× financial sustainability; and
× intersectoral action and community participation.

The main characteristics of the reform processes are defined on the basis of these principles, as regards the organization of systems and services, sectoral financing, and the strengthening of the governing function. In this context, certain important changes in the regional scene must be pointed out:

– progress made in the decentralization of the State;
– action by new public and private actors;
– decentralization and/or spreading out of public health services, health regulations, and the provision of health care services to the population; and
– separation of the financing, insurance, and service provision functions.


Concerning the exercise of sectoral leadership, the following basic functions must be mentioned:

– sectoral guidance;
– sectoral regulation and development of essential public health functions that pertain to the health authorities;
– modulation of sectoral financing;
– insurance monitoring; and
– harmonization of service provision.

The development of human resources in the reform processes constitutes a great challenge. It is necessary to consider that the orientation of personnel development must respond to several processes, such as the orientation and complexity of institutional changes; scientific progress; changes in work processes (including making it more flexible), decentralization of health management, and changes in professional practices. The scenario is complex and conflictive, and the coordination among the main collective actors having an interest is required if such a challenge is to be met.

This challenge implies changing certain criteria of educational policy towards a functional (not disciplinary) approach, going beyond initiatives that are limited to curricular changes, and educational programming according to requirements derived from the exercise of the governing function, the provision of public health services, and the provision of health care services.



Present in the international context in which sectoral reform processes take place are certain situations and conditions that influence in a determining manner their orientation and feasibility, and of which the following must be pointed out:

3.1 State Reform and Human Resources(3)

An analysis of the subject shows that the human resources issue figures importantly in debates at the economic level in general, and at the microorganizational level. The importance of instituting personnel policies consistent with the organizational changes is unquestionable.

It is interesting to point out that the debates on the role of the State demonstrate a reassessment thereof, although from a perspective other than that of the all-powerful State that prevailed in the 1960s, and in opposition to the trend towards dismantling the State hailed during the 1980s. The World Bank, in another moment of its pendular movement, now proclaims that “without an efficient State, neither sustainable economic nor social development is possible.” There is also a trend towards revitalizing public institutions, highlighting their managerial specificity, which signals a departure from the much-praised private management concept.

The theory of the spillover of economic growth benefits is also discarded as this century comes to a close, due to overwhelming empirical evidence showing a growth in poverty, the intensification of social inequality, growing unemployment, etc. The social element is pointed to as a lever for sustainable development, and as a responsibility of that new, efficient State, within the framework of new alliances with the civil society.

Another very important change is the reassessment of the public sector’s human resources. An essential condition within the perspective of the new effective and efficient State is for public personnel to be qualified and motivated. It is accepted that in order to secure the services of human resources meeting such specifications, it is indispensable to develop personnel policies based on the following requirements: a) a merit-based system, b) appropriate remuneration, and c) encouragement of solidarity in job performance and within the organization. Abundant empirical evidence also is available to support this principle; however, it also shows that to the extent that changes in solidarity imply changes in the power structure of organizations, there is great opposition to them.

The effective State desired also implies the development of social policies and social management. The idea of an efficient social management is based on an alliance between the civil society and the State, which differentiates it from mere conventional managerial efficiency.

The Latin American challenge is enormous, the numbers are overwhelming, and the times are critical. The challenge public human resources face regarding inequality and poverty in the Region also implies the adoption of new values along the lines of an “ethic of celerity.”

3.2 Educational Reforms(4)

The challenges for education are enormous and strategically important in the previously described context. The greatest challenge consists of equipping all future citizens with new critical skills for the future, upon which are based a highly-developed capacity to define problems and the assurance of the capabilities required to confront them (i.e., raising performance standards in everyday life).

The analysis of educational indicators in Latin America (adult literacy or educational levels) is discouraging from the perspective of the forthcoming century’s requirements. The payment of such debt to the future will demand sustained educational development in the medium term to improve the universal levels of essential literacy: literacy per se, literacy in informatics, and literacy in biodiversity (an appropriate relationship with the environment).

Facing the challenge of the future requires capabilities in what is known as “infonautics.” Individuals must be able to navigate the information highway and work within organizations that are homologous to the human brain (beyond conventional mechanical and informatics conceptions), they must be capable of self-organization, focused on learning, and network-based.

A number of governing principles of a new educational perspective emanate from this organizational (cerebral) perspective, such as the networks principle, the capacity to deal with new situations, learning with the entire brain and with the two hemispheres in balance, double-loop (Kolb) learning, flexibility in the management of learning and information, thinking and dealing with complexity, and the principle of enlightenment (adding value and satisfaction to service based on knowledge).

On the subject of higher education, the dilemma is between the dinosaur or the infonaut. To overcome this, a change in direction is needed in:

– mathetics (i.e., the art of learning in organizations that learn) a step beyond
– quality, including the definition of quality standards;
– the use of technological changes with regard to distance education and so- called virtual universities;
– paradigmatic changes in organizations (based on mathetics).

3.3 Labor Change Trends in Health Services(5)

Health reform experience in Europe and the United Kingdom clearly shows the need to consider organizational changes at the macro level, and those that occur with human resources processes in the analysis of sectoral reform.

In the European experience, emphasis is placed on the importance of in-depth analysis of four substantive processes: restructuring the public sector, privatization-commercialization of services, labor flexibility, and changes in the workplace.

Through an analysis of the restructuring of the public sector, it is possible to single out, firstly, the obligations resulting from budgetary restrictions (due to globalization commitments), their impact on salary levels, and the definition of new guidelines related to productivity and work conditions. Secondly, public services were reorganized in response to market competitiveness conditions, decentralization or the return of authority and responsibilities, and the establishment of service performance and production goals. The administrative dimension comes in third in the restructuring scene. Here changes have taken place in the direction of administrative strengthening, and in the impact of the new game rules on professionals and their associations and trade unions.

The British experience in privatization of services illustrates different forms of privatization: from the provision of services financed with private funds, to the externalization of services or contracts to third parties outside the public sector, to the structuring of internal markets. The impact that third party intervention had on performance, quality, and labor flexibility must be stressed. In terms of this one effect, the experience varies, and a specific analysis would be required for each particular case. The other effect was on employment terms and conditions. The organization of internal markets made it possible to bring into focus job performance, the capacity to manage amid uncertainty, and the appearance of labor instability. There, as in Latin America, temporary contracts flourished and a trend towards instability developed.

The question of labor flexibility expressed itself in three forms: the so-called numerical flexibility, which implied the growth of temporary contracts and part-time work; functional flexibility, with its impact on personnel performance (in new abilities and in the broadening of the performance spectrum), changes in the composition of the work force, and modification of occupational frontiers and duties; and economic flexibility, which altered remuneration systems by emphasizing payment for performance instead of the traditional concept of payment for time and seniority.

The changes that occurred at the workplace derived from decentralization and the strengthening of the local managerial capacity. One effect has been a trend towards decentralization of collective negotiations, which has translated into local agreements with the labor force, and an important change in human resources management.

3.4 Human Resources for Public Health and the Teams Question(6)

The new trends in the organization of work, and in institutional architecture and dynamics, bring back into focus the matter of teams in public health work. This old ever-mentioned and never-accomplished objective is now revitalized thanks to evidence provided by the changes that have taken place in organizational styles, and the exploration of similar changes in health institutions. The subject of teamwork currently does not refer to an instrumental arrangement to obtain different or better results within the framework of conventional organizations. The current challenge is to use teams as a possible tool to prevent fragmentation of work, that is, as a unifying value in the labor force within the framework of different institutions.

Evidence from progressive organizations that place teams at the core of their development is abundant. On another front, and in relationship to the impacts of the technological revolution



Alternative Health Care


Calls for employers to offer insurance coverage for nontraditional health care practices will increase as the popularity of alternative medical treatments continues to grow. According to a New En gland Journal of Medicine study published in 1993, close to one-third of all Americans have tried unconventional medical therapies, including massage, acupuncture, hypnosis, herbal medicine, homeopathy, and chiropractic treatment. The most common illn esses or conditions for which alternative health care therapies were used included back problems, headaches, anxiety, chronic pain and cancer. Experimentation with such therapies occurred across all racial, gender and age lines, but was most common in wh ites between 25 and 49 years of age who had college educations and incomes above $35,000 per year.

Until recently, most Americans interested in alternative health care therapies had to pay the cost of such treatments themselves. In 1990, for example, only $2.4 billion of the estimated $12.7 billion spent on alternative health care was covered by insur ance. Several states and insurers are taking steps to reduce the out-of-pocket costs of alternative health care therapies, however. In Washington state, as of January 1, 1996, health care insurers are required to cover any alternative health care treatme nt performed by a licensed practitioner, including acupuncture and massage therapy. In Hawaii, a bill that requires all health insurance policies issued or renewed after January 1, 1997 to offer coverage for acupuncture services is pending before the stat e legislature, and in California, a bill proposing the inclusion of acupuncturists as physicians for the purpose of treating injured employees entitled to workers’ compensation benefits is under consideration.

Insurers are also taking a closer look at coverage for alternative health care therapies. In October 1995, Kaiser Permanente opened an Alternative Medicine Clinic in Vallejo, California which provides acupuncture, nutrition counseling and relaxation ther apy. Later this year, the clinic will add hypnosis, biofeedback and herbal medicine. Blue Cross of Washington and Alaska has also started coverage for alternative medicine, including acupuncture, homeopathy and naturopathy. And, in the eastern United St ates, Oxford Health Plan, one of the region’s largest HMOs, has formed an Alternative Medicine Division to investigate the feasibility of offering coverage for alternative health care benefits. As a result, human resource professionals can expect to see a rise in the number of employee health care claims filed for alternative health care therapies. Over the next few years, as states enact legislation requiring insurers to recognize alternative health care practitioners and honor claims filed for services performed by them, employer-sponsored health insurance benefits will extend to alternative health care treatments.



hen a few companies began offering benefits for domestic partners more than a decade ago, some workplace experts cast a cautious look at what may have initially seemed a passing fad. But today more companies are considering benefits for same-sex and opposite-sex partners as they scramble for new ways to attract and retain employees.

“There continues to be a great deal of interest in domestic partner benefits among employers,” says Andrew D. Sherman, senior vice president in the Boston office of The Segal Co., a New York-based HR consulting firm.

Carol Hickman agrees. Hickman is the senior manager of benefits and HRMS at Ben & Jerry’s Homemade Inc. in South Burlington, Vt. More than 10 years ago, Ben & Jerry’s became one of the first privately held firms to offer spousal benefits to same-sex and opposite-sex partners and their dependent children. The company served as a model for other pioneering companies, such as Levi-Strauss and Co. and Lotus Development Corp., says Hickman.

Since then, other organizations have followed the lead and the trend appears to be catching on, albeit slowly.

For example, fewer than a half dozen U.S. employers offered “spousal equivalent” benefits in 1990, according to the Policy Institute of the National Gay and Lesbian Task Force (NGLTF) in Washington. Today, however, the same group reports that domestic partner benefits are offered by:

  • 87 cities, counties and states.
  • 141 colleges and universities.
  • 570 companies, foundations and nonprofits.

The Human Rights Campaign, an equal and gay rights advocacy group in Washington, reports similar numbers. As of May 5, 1999, the group estimates that domestic partner benefits were offered by:

  • 67 state and local governments.
  • 90 colleges and universities.
  • 483 private-sector employers.

The SHRM Benefits Surveys also show a slow upward trend in the number of employers offering domestic partner benefits-from 6 percent in 1997, to 7 percent in 1998 and 9 percent in 1999.

However, the trend is by no means universal. Of the 829 HR professionals responding to the 1999 survey, 86 percent said their firms don’t offer domestic partner coverage.

The SHRM statistics may suggest that employers continue to grapple with a host of issues related to the process of extending and designing the coverage. That conclusion becomes all the more believable when you consider that legal, administrative and other factors continue to muddy the waters of the domestic partner issue, making the decision to offer such benefits relatively complex.

For some employers, recognizing societal shifts may be at the root of the decision to offer such benefits. Not only are labor markets tight-and expected to remain so-but demographics also are at play. For example, the number of unmarried-couple households jumped from 1.6 million in 1980 to 4.2 million in 1998, according to U.S. Census Bureau data.

What Benefits Are Included?

The scope of benefits varies according to how a company defines a domestic partner. The majority of employers offering partner benefits (94 percent) provide health care coverage, according to a 1995 survey of 459 benefits professionals by the International Society of Certified Employee Benefits Specialists in Brookfield, Wis.

In addition, more than two-thirds of respondents (68 percent) offer non-health benefits to domestic partners, in the following proportions:

  • Life insurance (offered by 83 percent of organizations that provide more than just health care).
  • Invitations to employer functions (60 percent).
  • Employee assistance program services (58 percent).
  • Bereavement leave (56 percent).
  • Family/sick leave (56 percent).
  • Pension (42 percent).
  • Child-care services (27 percent).
  • Use of employer fitness facilities (25 percent).

How Policies Evolve

How do you know if your employees are part of the growing pool of Americans who may be interested in benefits for domestic partners?

One way is to listen. Employees typically bring the subject to management’s attention through diversity groups. At Coors Brewing Co., of Golden, Colo., for example, the company’s Lesbian and Gay Employee Resource group, known as LAGER, encouraged the company to consider domestic partner benefits. As a result, Coors decided to extend medical, dental and vision benefits to domestic partners in 1995, says Barbara Albanesi, manager of benefits.

Segal’s Sherman recommends getting specific feedback from your workforce to help determine employee interest in domestic partner benefits. Sherman also suggests that HR professionals ask themselves: What are the current participation levels in your benefits plans? Can you point to competitive reasons for adding such a policy?

Tower Records, the 218-store record and video retailer based in Sacramento, Calif., asked those questions before deciding to extend its coverage to domestic partners. “We have such a diverse employee population,” says Renee Gromacki, HR manager. “Upper management and employees alike felt it was an important issue that made sense for us as a company.”

Another factor driving acceptance of domestic partner benefits has been nondiscrimination policies, which have been widely adopted and amended to include sexual orientation in company handbooks and corporate mission statements. This focus has provided the impetus to move toward equal benefits for all, say employment attorneys.

“Our policies have always said we don’t discriminate based on sexual orientation,” recalls David Russo, vice president of human resources at SAS Institute Inc. in Cary, N.C. “But we were de facto doing just that because same-sex partners weren’t able to partake in a very generous benefits package here.”

So, eight years ago, the company added domestic partner benefits for its U.S. workforce of about 4,000 employees. From the start, the program included same-sex and opposite-sex partners in committed relationships.

“The real issue for us was to walk the talk,” Russo says. “The idea was to value all of our people the same; we certainly didn’t want to create a class of employees who didn’t have access to what the company provides.”

Sherman takes a similar viewpoint and says employers should strive to always let fairness and equity drive decisions. “Think about it not necessarily as changing benefits, but as changing eligibility,” he says. “That’s really what you’re doing.”

Cost Fears

Adding domestic partner benefits may have been tagged by some as radical and costly, but many employers have found the opposite to be true.

One reason is that some insurance companies initially feared higher costs and charged higher rates for domestic partner coverage, but in large part, the higher costs never materialized, consultants and HR practitioners claim.

Today, insurance companies rarely boost premiums because of domestic partner benefits, says Sherman. (However, the same may not be true of programs that extend coverage to blood relatives.)

Sherman adds that many employers were concerned that adding domestic partner benefits would incur steep bills for AIDS care. However, his company’s research shows that many common medical conditions-such as premature birth, heart disease or cancer-can be more costly than AIDS.

Another reason cost projections haven’t been as dire as anticipated is that employers initially overestimated participation rates. Businesses presumed that 3 percent to 4 percent of their employees would use health benefits for domestic partners, but the range has turned out to be from 0.5 percent to 1 percent, estimates Segal’s Sherman. For example, Coors enrolls less than 1 percent of its 5,500-employee workforce in its coverage for domestic partners, says Elaine Ellison, benefits analyst. It’s such a small participation, she says, that the company doesn’t focus on the minimal additional cost.

Tower Records estimates that the percentage of employees using domestic partner coverage has actually declined since the company began offering it to same-sex couples in 1997-from 1 percent of its covered population of 3,200 (5,500 total employees) to about .5 percent today, says Shauna Pompei, vice president of employee compensation and benefits.

In Tucson, Ariz., where the city government has provided benefits to same-sex partners since 1997, only 21 out of about 4,750 employees take advantage of it, according to city records reported in The Arizona Republic.

One reason for the low enrollment rates is that if both partners in a relationship are working, they are likely to have access to health insurance from their own jobs, say consultants.

Another reason may be that the value of employer-paid domestic partner benefits is taxable to the employee, unless there is a legally recognized marriage under state law or the domestic partner qualifies as a dependent under the federal tax code. The tax code rules stem from the federal Defense of Marriage Act, enacted in 1996, which prohibits recognition of a same-sex partner as a spouse for purposes of any federal law-unless the following conditions are met:

  • The taxpayer provides more than half of the individual’s support.
  • The partner’s principal residence is the taxpayer’s, and he or she is a member of the household.
  • The relationship doesn’t violate local law.

(Other tax and plan-design implications also can affect administration. For example, employers administering cafeteria plans should allow only the employee portion of the contribution to be pre-tax. Employers should deduct the remainder of the contribution-the domestic partner’s portion-on an after-tax basis.)

Prove It

In setting a policy, Sherman recommends that employers consider how they will define domestic partner benefits and monitor their administration. He suggests that employers make sure their summary plan descriptions clearly spell out what will happen if the domestic relationship changes or terminates.

Because the term “domestic partner” has no specific legal meaning, he adds, it is up to each employer to precisely define the criteria to be used to determine the existence of a domestic partnership.

Many employers require workers to provide proof of common residency before they can take advantage of domestic partner benefits, according to the 1997 SHRM Domestic Partner Benefits Mini-Survey. Of the 777 HR professionals responding to the survey, 42 percent said their organizations require proof of common residency, and 38 percent require a notarized affidavit of partnership status. (Of the respondents, 26 percent do not require any certification.)

Some employers, such as Coors, require both an affidavit and proof of joint residency. The brewer requires that an affidavit be signed by the employee and a Coors representative or notary. The affidavit states that the couple resides together and agrees that the company will be reimbursed for benefits costs if the relationship and the agreement are found to be invalid. Coors also asks for proof of joint residency in the form of rental agreements or mortgage documents, says Ellison.

Other companies require only that an affidavit states that the relationship has existed-personally and financially-for a certain amount of time. Some companies use the time delay as a way of reducing costs and the opportunities for abuse. Companies that offer benefits over and above health care generally ask that applicants go through a waiting period-most often between six months and a year-before applying for coverage.

For example, Tower Records requires employees seeking benefits coverage for domestic partners to wait 12 months before adding a new dependent to their policy. The company also requires proof of partnership and residence in the form of a joint checking account, lease or household bill, says Gromacki.

Businesses concerned with getting and tracking the documents needed to prove that a relationship exists may soon be able to rely on formal registries that are, in effect, centralized lists of couples in committed relationships. Los Angeles County’s newly developed registry, for example, requires partners to reside or work in the county and to check off 14 statements that define the relationship. (For example, one statement asserts that the couple jointly owns personal property.)

Other jurisdictions nationwide and some states already have similar registries, or are considering creating them.

On a positive note, employers report that abuse of domestic partner programs is rare. “People have to come forward and declare their relationship in order to secure benefits,” explains Coors’ Ellison. Because of that, she believes, they’re very unlikely to intentionally falsify documentation and voluntarily put themselves under increased scrutiny.

“It’s largely an issue of trust between employer and employee,” adds Tower’s Gromacki.

Russo of SAS Institute agrees. “We trust our employees to handle millions of dollars of equipment and to represent the company in so many ways. So, we feel we should trust them with something this important too,” he says.







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