Reproduced with permission

Health Worker Salaries and Benefits: Lessons from Bolivia, Peru and Chile

Final Report

Gonzalo Urcullo, Julio Von Vacano, Carlos Ricse y Camilo Cid

April 2008

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Executive Summary The most common problems related to Health Workers Salaries and Benefits (HWSB) in

Bolivia, Peru and Chile are: i) shortage of health workers, disparity of skills (many specialized physicians, few general physicians or public heath specialists), ii) poor distribution of health workers, iii) inadequate working environments, including technological deficiencies; and, iv) low knowledge about the characteristic of HWSB, which impedes planning.

The data collected about Bolivia, Peru and Chile shows that in general, the wages of doctors during the last fifteen years have had to increase more than the wages of other works (a similar phenomenon occurring with education workers).

Health workers salaries respond to many different criteria. The basic salary represents between half and two-thirds of the total income. The rest is made up of time-on-the-job bonuses, bonuses for working in remote areas, adjustments for advanced studies and other special designations.

Several political and economic variables play in the determination of salary levels. Amongst the political factors are the bargaining power of unions and other groups (professional bodies, for example). In the economic arena, economic growth and inflation are important factors.

Regarding policies oriented to recruit and retain health worker, the public sector continues to be, in these countries, the largest employer and in general has no major problems finding employees, with the exception of specific specialties which arise from time to time. Retention, however, is growingly difficult due to the fact that the private sector offers better working conditions. In face of this, the public sector in these countries has chosen to allow health workers to make their services available both to the public and private sectors.

Table 1 shows main findings from the 3 countries of the study.

Table 1 Summary of Main Finding of the Study Topic Area Bolivia Peru Chile

Economic growth (1999-2008)

3.2 % 4.0 % 4.6%

General behavior of salaries

Real increase in minimum wage. Private salaries higher than public salaries, with slight trend towards equalization

Real increase in minimum wage. Private salaries higher than public salaries, with slight trend towards equalization.

Real increase in minimum wage. Private salaries higher than public salaries.

Public spending (WHO, 2004)

General government expenditure on health as % of total expenditure on health: 61%. Total public health spending USD 369 million (4.15% of GDP), USD 40 per capita.

General government expenditure on health as % of total expenditure on health: 47%. Total public health spending USD 1,384 million (1.93% of GDP), USD 48,64 per capita.

General government expenditure on health as % of total expenditure on health: 47%.Total public health spending USD2,670 million (2.9% of GDP). USD 48.41 per capita

Context

Financing of health care

Social security 35%, households 32%, Treasury 15%, external cooperation 15%

Households 37%, employers 35%, government 24%, others 4%

Public spending 44%, out-of-pocket spending 29%, private insurance 27%. Insurance coverage is 90%. The public insurer FONASA covers 80% of the population and the private insurers compete for the remaining 20%. Insurance is financed by an obligatory contribution equal to 7% of salary plus voluntary additional payments for expanded coverage. Insurers also demand copayments.

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Table 1 Summary of Main Finding of the Study Topic Area Bolivia Peru Chile

Supply of professionals

Health workers: 40,000. Professionals 39%, technicians 5%, aides 24%, administrators 17%, service workers 15%.

Health workers: 140,000. Doctors 17%, nurses 16%, midwives 3%, dentists, 7%, technicians and aides 36%, administrators 16%

Health workers: 69,000. Doctors 13%, paramedics 33%, administrators 32%, non-professionals (including some nurses and midwives) 16%, dentists 2%, others 4%.

Number of core health workers (WHO)

Year: 2001. Physicians 10,329. Nurses 18,535. Dentist 5,997

Year: 1999. Physicians 29,799. Nurses 17,108. Dentist 2,809

Year: 2003. Physicians 17,250. Nurses 10,000. Dentist 6,750

Density per 10.000 population of core health workers (WHO)

Year: 2001. Physicians 12.2. Nurses 21.9. Dentist 7.1

Year: 1999. Physicians 11.7. Nurses 6.7. Dentist 1.1

Year: 2003. Physicians 10.9. Nurses 6.3. Dentist 4.3.

Composition of salaries

Base salary 70% Health insurance 8% Pension 2% Housing allowance 2% Family allowance 1% Bonus for seniority 4% “Vaccination bonus” 2% Border bonus 2% escalafon 1%

Base salary, bonuses, and benefits. Because of inflation, the largest component of salary is specific bonuses and leveling adjustments.

Base (depending on grade), special bonuses (seniority, profession, new responsibilities, etc.), overtime pay.

Evolution of salaries

Increased share of national budget. From 9% of budget in 2001 to 10% in 2005. Salaries for the sector increased less than those of the education sector but were among those with the largest increases.

Increased share of national budget. From 13% in 2000 to 15% in 2007. Salaries for the sector increased less than those of the education sector but were among those with the largest increases.

According to household surveys, income of doctors fluctuated over the last 10 years, falling and then rising, but not recovering to 1996 levels (measured in equivalence in dollars). According to official statistics, real salaries of physicians in pesos increased between 1999 and 2006 by 6%, less than other sectors including teachers, tax auditors, and members of the judicial branch, whose salaries increased by about 30% over the same period.

Salaries

Special characteristics

The ministry has 43 salary levels. Salary differences are substantial among physicians but less notable among other health workers.

The salaries of doctors are triple those of the other health professionals and quintuple those of technicians and aides. Salary differences are substantial among physicians but less pronounced among other health workers. ESSALUD workers earn more than their Ministry of Health counterparts (from 50% to 100% more, depending on the area).

Chile attracts medical professionals from other countries. Most of these practice in primary care, where salaries are lower than those of specialist physicians.

Merit-based bonuses

Nonexistent Payments for productivity Part of salary is linked to performance

To recruit health workers

Increase the public budget for the sector

Flexible contracts for non-personal service workers

A firm general policy with allowed flexible contracts on a small scale

To retain health workers

Immobility of functionaries. Bonuses for seniority.

None. Immobility is limited because the majority of workers are under non-personal service contracts. Many health professionals emigrate, although the flow has decreased in recent years.

There is a career ladder. Flexible schedules for doctors and the option to do shift work, allowing doctors to work in both the public and private sector at the same time.

Policies

To train health workers

Assign points and receive bonuses for training. Training is not adequately planned.

None. The available formation often fails to meet local needs, and tends to focus on training workers who will work in the exterior.

Minimum required hours for training for each functionary. Training is focused on the topics of greatest interest to the country.

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Below we summarize the main characteristics of health workers’ salaries and benefits in Bolivia, Peru, and Chile.

Bolivia. No information is available regarding the private health sector in Bolivia. Salary scale information for the public health subsector is limited to a classification of personnel by function, level of care, and municipality in which they work. This affects the ministry of health’s ability to make informed decisions on the allocation of human resources. The ration of human resources for health and population served began to improve in 2002 in all three levels of care, although unfortunately the emphasis has been on tertiary care rather than primary.

The distribution of human resources for health is inequitable. In the municipalities of the two poorest quintiles, 63% of the personnel is nursing staff, whereas among the richest quintiles there are more physicians per inhabitant. The distribution of human resources is concentrated in urban areas, at the expense of rural areas, especially in terms of physicians and licensed nurses. Physicians, licensed nurses, nutritionists, and pharmacists are in higher demand in the social security system.

The current salary system does not provide performance incentives or incentives to work in underserved areas. This contributes to the low quality of care in the public health subsector and the lack of human resources in rural areas. Other factors also impact the productivity of human resources in the public health subsector, such as high turnover of personnel and the concentration of morning shifts.

The average annual growth rate for human resources from 2201 to 2005 has been 5.2%. The number of health professionals has increased more rapidly than that of other professions. Due in part to the increased supply of health services, such as care provided by the Universal Maternal and Child Insurance package, the National Health System requires more human resources and a better methodology for efficiently allocating existing human resources in order to reach its goals.

Peru. Salaries in the Peruvian health sector are not determined by an express policy but are the result of the evolution of various policies (fiscal austerity, mainly) or legislation (regarding public employment, professional regulations, etc.). This has meant that the supply of human resources is regressive in terms of the needs of the population (because there is no difference between salaries in urban and rural zones, human resources are concentrated in the cities, although there is a greater need for them in rural zones).

Currently Peru is a middle-income country, but the salary situation described above is the result of more difficult times in the Peruvian macroeconomy. Because of their fiscal impact, appointments, salary raises, and new bonuses have been prohibited. This has led health personnel to seek different mechanisms (including union strikes) for increasing their income, with an ever-decreasing margin for maneuvering as the State continued to control the situation. This issue must be resolved so that the population of Peru can receive quality, compassionate care regardless of income.

Chile. There is a scarcity of certain health workers, such as specialist physicians, primary care physicians (PHC), medical technologists for radiology, specialized nurses, and emergency medicine physicians. In addition, despite some advances, the current institutional framework remains lacking in terms of incentives that would attract and support human resources more in accordance with the health needs of the population.

Salaries in the health sector depend on the type of worker and on various technical parameters, but also on the pressure and protest power that workers are capable of exerting on the public sector. Various laws have been established in order to provide salary bonuses and criteria for performance evaluations; but in practice salaries don’t depend on the workers performance.

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Salaries of health workers are greater than those of the average Chilean workers, but lower than professionals in other areas. Similarly, although in recent years the real salaries of health workers have increased more rapidly than those of the average Chilean worker, they have increased more slowly than the real salaries of professionals in sectors such as education. Furthermore, there are large salary gaps among the various types of health workers. For example, salaries of physicians are nearly 3 times higher on average than those of their closest colleagues (university-educated nurses).

Main conclusions and recommendations of this study are show in Table 2:

Table 2 Main conclusions and recommendations Bolivia Peru Chile

Number of health workers

There are insufficient numbers of health workers; however, the greater problem is the inequity of their distribution. There are many qualified personnel in urban areas and very few in the rural areas.

In the last 15 years, there has been disorganization within the field of human resources for health in Peru, resulting in gaps between need, demand, and supply. Today the supply of health education produces graduates and licensees far in excess of the demand for health services. Strangely, this already inflated supply offered by universities and institutions of higher learning is still insufficient to meet the demand for health education, and so these institutions continue to open more and more slots. This has created a mismatch between the working world and the health education world.

During long periods there have been shortages of human resources for health. In these cases, supply has driven the market, which has been problematic for the public sector. However, MINSAL has developed methods for addressing this problem, using payment mechanism and incentives. The various forms efforts to address the shortage have included different contract modalities, such as 22-28 hour weeks for physicians, increasing nurses’ salary grades, rotating remote assignments, assistance with job placement for a spouse when a specialist is transferred, etc. The immigration of foreign doctors into Chile (mainly Ecuadorian) has also been a key factor in sustaining and developing PHC.

Salary composition

Salaries are not based on a policy that provides productivity incentives but rather rewards seniority and professional merits. This situation is difficult to change due to the existence of powerful unions that defend this system of pay and oppose performance evaluations.

Salaries of personnel named under the public regimen include: a basic salary, bonuses and benefits. Salaries of health workers are different according to the institution where they work. It would be advisable to develop a unified policy for the various labor regimens with transparent salaries and bonuses.

The composition of public health functionaries' salaries includes dispositions from ad-hoc legislation that regulates the labor market, which differentiates this sector from other professions (with the exception of certain sectors such as the armed forces). The composition of salaries includes: grade (each group has different grade scales), base salary, salaries by profession, salaries according to seniority, raises for increased responsibility, overtime hours, and other special dispositions.

Evolution of salaries

The most significant change during the period analyzed was that the salaries of the rest of the public health sector were brought to the levels of those of social security employees. However, while the nominal salaries of these health workers increased 10 to 15% annually, on average, in real terms salaries have remained very low.

There are no reliable statistics regarding the evolution of health sector salaries. An indirect measurement of their progression would be the evolution of the public budget allocated for health workers’ salaries and bonuses. The health sector grew rapidly from 2000-2007, with its budget increasing by a factor of 2.5. (Given that in this period the average increase in personnel was less than 10%, it may be inferred that salaries increased by nearly 100% over the period.) In this period the health sector’s budget (and the salaries of its personnel) grew more rapidly than did those of other public sectors such as education (which grew by a factor of 1.7), defense and security (1.24), and justice (2.0).

Between 1994 and 1998, real salaries of health workers increased between 11% and 19% and allowances by 9%. Between 1999 and 2006 their salaries increased by 5%. However, this increase has been less than that of the salaries of workers in other sectors. The data show a relative disadvantage in the salary increases of physicians within the public health system. In comparison with teachers’ union members, for example, the difference between 1999-2006 was about 23.5%.

Incentives to recruit, train, and retain health workers

There are no incentives to recruit or train health workers. Retention of workers is carried out via the escalafon and seniority benefits. Hiring in the public sector is often not merit-based.

The main incentive for a worker in Peru is salary. Salary raises are traditionally approved to maintain purchasing power in times of inflation or as a response to union pressure. One method of obtaining a raise is through promotions; but, the Laws of Public Budgets in recent years established that promotions – as well as salary raises – were

The policy in Chile for recruiting human resources for health is based on a general norm regarding contracting of personnel, along with some legal instruments that allow for contracting key personnel at the margins of the limits of the general norm. Chile’s policy for retaining workers is also related to the legislation to make the norms that govern

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Table 2 Main conclusions and recommendations Bolivia Peru Chile

prohibited. As promotions and therefore salary raises are restricted, the remaining form of incentive for human resources is bonuses. None of bonuses are linked to the worker’s performance.

salaries more flexible, allowing payments beyond the general standard. Chile’s policy for training personnel is, by law, that all functionaries must be trained.

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Table of Content 1. Introduction ................................................................................................................... 1 2. Objective ....................................................................................................................... 1 3. Methodology ................................................................................................................. 2 4. General characteristics of the countries......................................................................... 3 5. Bolivia ........................................................................................................................... 4

5.1 Health System....................................................................................................... 5 5.2 Economic context ................................................................................................. 6 5.3 Salaries of health workers................................................................................... 11 5.4 Incentives and policies to recruit, retain, and train health workers..................... 19 5.5 Conclusions and recommendations .................................................................... 20

6. Peru.............................................................................................................................. 21 6.1 Health System..................................................................................................... 21 6.2 Economic context ............................................................................................... 22 6.3 Salaries and benefits for health workers ............................................................. 31 6.4 Incentives and policies to stimulate human resources ........................................ 47 6.5 Conclusions and recommendations .................................................................... 51

7. Chile ............................................................................................................................ 53 7.1 Health System..................................................................................................... 54 7.2 Economic context ............................................................................................... 56 7.3 Salaries of health workers................................................................................... 59 7.4 Incentives and policies to recruit, retain, and train health workers..................... 72 7.5 Conclusions and recommendations .................................................................... 73

8. Bibliography................................................................................................................ 75

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List of Figures Figure 1 GDP growth rate (%) ........................................................................................................... 6 Figure 2 GDP Participation by Economic Activity............................................................................. 7 Figure 3 Average monthly salary in Bolivia’s public and private sector (Current USD) ................... 8 Figure 4 Total Health Spending as % GDP (2004) ........................................................................... 10 Figure 5 Evolution of Public Health Workers’ Salaries and Items ................................................... 14 Figure 6 Real monthly income of social sector: health, education workers and all workers, 1997-2005 (International dollars 2000)...................................................................................................... 16 Figure 7 Nominal monthly income of private social sector/health and private education workers, 1995-2005 (Base index 1995 = 100) ................................................................................................. 17 Figure 8 Nominal monthly income of different health workers, 1995-2005 (Base index 1995 = 100)........................................................................................................................................................... 18 Figure 9 Evolution of the Gross Internal Product (GDP) 1990-2007 (change in annual percentage)........................................................................................................................................................... 23 Figure 10 Growth of GDP and urban employment in companies with 10 or more workers (annual change in percentage)........................................................................................................................ 24 Figure 11 Employment in companies with 10 or more workers in major cities (annual change in percentage, 2006/2005) ..................................................................................................................... 25 Figure 12 Annual Evolution of Urban Work 2000-2006 and 2006-2007, in Lima and Regions...... 26 Figure 13 Labor productivity in Latin America (percent change) .................................................... 27 Figure 14 Average public and private sector income from 2000-2007 (in USD) ............................ 28 Figure 15 Financing and Health Spending Assignment .................................................................... 30 Figure 16 Health Professional Rate by South American Country, 2004........................................... 32 Figure 17 Health Professional Rate Evolution per 10,000 population, 1980-2004........................... 33 Figure 18 Distribution per Quintile Health Professional Rate per 10,000 population, 2004 ............ 35 Figure 19 Distribution of health and education workers by decile of income per capita (average between 2003 and 2007) ................................................................................................................... 46 Figure 20 Internal User Satisfaction, MINSA 2003.......................................................................... 48 Figure 21 Perception of Progress Opportunities, Salaries and Incentives, MINSA 2003................. 48 Figure 22 Structure of financing for public health spending............................................................. 55 Figure 23 Structure of heal spending 1998 – 2004 (percentage)....................................................... 55 Figure 24 Growth of the GDP in Chile, 1999-2006 (percentage) ..................................................... 56 Figure 25 Evolution of central government spending (as a percentage of GDP).............................. 58 Figure 26 Evolution of nominal salaries by economic activity......................................................... 66 Figure 27 Evolution of nominal indexed salary by economic activity (base 1994=100).................. 67

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Figure 28 Evolution of nominal salary in the communal, social, and personal services category, by occupational group ............................................................................................................................ 67 Figure 29 Evolution of nominal indexed salary in the communal, social, and personal services category, by occupational group ....................................................................................................... 68 Figure 30 Monthly per capita income of health workers, 1996-2006 ............................................... 68 Figure 31 Income per capita per month for public and private sector physicians............................. 69 Figure 32 Distribution of health workers by income decile per capita (average from CASEN surveys 1996 and 2006).................................................................................................................................. 69 Figure 33 Monthly income per capita for health workers, by education level, 1996-2006............... 70 Figure 34 Growth rates for productivity, real salary, and economic growth, 1998-2006 ................. 72

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List of Tables Table 1 Summary of Main Finding of the Study.................................................................................. i Table 2 Main conclusions and recommendations .............................................................................. iv Table 3 Main indicators for Bolivia, Peru y Chile .............................................................................. 3 Table 4 Purchasing power ................................................................................................................... 4 Table 5 Percentage of workers by economic activity.......................................................................... 7 Table 6 Evolution of minimum monthly wage in Bolivia and inflation rate (current Bs.) ................. 7 Table 7 Average Monthly Salary in the Public Sector by Institutional Group (current USD)............ 9 Table 8 Average Salary in the Private Sector by Economic Activity (current USD) ......................... 9 Table 9 Composition of Social Spending 2004................................................................................. 10 Table 10 Permanent Human Resources of the Health Public Sector 2006 ....................................... 12 Table 11 Distribution of Human Resources in Health by Department, 2005 ................................... 12 Table 12 Composition of health salaries, 2001 ................................................................................ 13 Table 13 Evolution of Spending and the Public Sector Salary Schedule of the Different Sectors 2000–2005 (current millions Bs.)...................................................................................................... 14 Table 14 Evolution of Spending and the Public Sector Salary Schedule of the Different Sectors 2000–2005 (as percentage total salary schedule) .............................................................................. 14 Table 15 Evolution of monthly base salaries for certain categories of workers in the public health sector (in current USD.) .................................................................................................................... 15 Table 16 Summary of Incentives (in 2001 USD).............................................................................. 19 Table 17 Decomposition of the growth by demand sector 1997-2006 (GDP points) ....................... 23 Table 18. Decomposition of by supply sector 1997-2006(GDP points) ........................................... 23 Table 19 Metropolitan Lima: Distribution of Employed EAP by market structure , 2001-2005 (percentages) ..................................................................................................................................... 27 Table 20 Evolution 1990-2006 of minimum living wage, inflation, and exchange rate................... 28 Table 21 Average monthly income by economic activity (in thousands of current S/.) ................. 29 Table 22 Social spending by major component (in millions of 2001 S/.) 1/ ..................................... 29 Table 23 Main indicators related to health spending 1995-2000 ..................................................... 30 Table 24 Health Spending by Provider 1995-2000 (percentage) ...................................................... 31 Table 25. Departmental Distribution of Health Professional Rate per 10,000 population, 1980-2004........................................................................................................................................................... 34 Table 26 Spending on Public Sector Salary Schedule by Country Region, 2000–2007 (millions of current S/.)......................................................................................................................................... 35 Table 27 Amount of monthly Bonuses for Ordinary Public Hospital Guards by Health Professional, 2005................................................................................................................................................... 37 Table 28 Detail Medical Monthly Remuneration Schedule by Public Institution, 2006 (in S/.) ...... 38 Table 29 Detail Public Non Medical Professional Monthly Remuneration Schedule, 2006 (in S/.) 38

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Table 30 Normative comparison ....................................................................................................... 40 Table 31 Salary Schedule in Health Sector by Public Institution, 2006 (in current S/.) ................... 42 Table 32 Average ESSALUD worker’s salary by occupational group, 2005................................... 43 Table 33 Spending on Salary Schedule by Principal Sector, by Expense Category, 2000–2007 (in millions of current S/.) ...................................................................................................................... 44 Table 34 Public Workers: Average Monthly Income in current USD .............................................. 44 Table 35 Number of individuals interviewed in the Encuesta Permanente de Empleo, 2003-2007. 45 Table 36 Number of individuals interviewed in the ENAHO 2005.................................................. 45 Table 37 Evolution of nominal, real, and inflation-adjusted salaries, (1995-2006).......................... 57 Table 38 Evolution of tax income and spending on personnel, 1999–2006 (in 2006 Chilean pesos)........................................................................................................................................................... 58 Table 39 Total Spending and Sources of Financing within the Chilean Health System, for the year 2000 (in millions of year 2000 pesos) ............................................................................................... 59 Table 40 Main Norms and Laws Governing Human Resources for Health in Chile........................ 60 Table 41 SNSS workers in Chile, 1999............................................................................................. 60 Table 42 Physicians per 10,000 inhabitants in selected South American countries.......................... 61 Table 43. Chile: Number of health workers 1999-2007.................................................................... 61 Table 44 Chilean physicians by specialty, 2000-2004 ...................................................................... 62 Table 45 Public Health System Figures, Chile, 1998........................................................................ 62 Table 46 Change in number of contracted physicians in SNSS........................................................ 63 Table 47 Change in number of contracted physician-hours in SNSS (per week) ............................. 63 Table 48 Distribution of medical personnel by Regional Counsel, 2006.......................................... 63 Table 49 Composition of health workers’ salaries ............................................................................ 65 Table 50 Descriptive statistics on monthly salaries of hospital workers 2007 (current Chilean pesos)........................................................................................................................................................... 65 Table 51 Evolution of public sector readjustments and CPI (measured for the periods form January – November of each year) ................................................................................................................. 70 Table 52 Nominal cumulative adjustments 1999-2006 (various sectors) ......................................... 71 Table 53 Absolute differences between cumulative salary raises in three public health subsectors, 1999-2006 ......................................................................................................................................... 71 Table 54 List of Interviewed people for the study ............................................................................ 77

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List of Acronyms AETAS Extraordinary Stipend for Work in Health PHC Primary Health Care Bs Bolivianos (Bolivian currency) CLAS Local Communities for Health Administration DIRESAs Regional Health Departments ELITES Itinerant teams in remote zones ESSALUD Social Security in Peru EPS Health Service Providers in Peru FF.AA Armed Forces FONASA National Health Fund HIPC Heavily Indebted Poor Countries Initiative INEI Peruvian National Institute of Statistics ISAPRE Chilean Private Health Plan Provider MAI Institutional Care Modality MEF Ministry of Economy and Finance MLE Free Choice Modality MINSA Ministry of Health in Peru MSD Ministry of Health and Sport in Bolivia GDP Gross Internal Product EAP Economically Active Population PNP National Police of Peru S/. Nuevos Soles (Peruvian currency) SBS Basic Health Insurance SIL Disability subsidies NPS Non-personal services SNSS National Health Services System SUMI Universal Maternal and Child Insurance SII Internal Taxation Service UCAP Professional Training and Accreditation Unit UDAPE Social and Economic Policy Analysis Unit USD United States Dollars

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1. Introduction Many countries are met with obstacles to improving their health systems due to the

problems regarding their health workers. These problems include an insufficient supply of workers, poor distribution of workers within the county, lack of needed workers in specific specialties, weak ministries of health and institutions in general relating to the health sector. There is also a problem of low morale among health workers, due to poor working conditions and low salaries, which are often lower than those of other professionals with similar levels of education and training. The combination of some or all of these problems leads to an inadequate supply of health care services. This study focuses on the issue of salary and benefits for health workers.

The classic economic theory indicates that workers’ salaries depend on the supply and demand for their services in the market, which is often segmented into specialties and niches. According to Marx, the existence of an “industrial reserve army” means that in a capitalist economy, salaries will be barely sufficient to stimulate the work needed. According to J.M. Keynes, salaries are flexible upwards but inflexible downwards. Currently there is a new stream of thought that explains the behavior of salaries as a function of the negotiating power of the workers, particularly collective negotiation. In this study, above and beyond the theoretical models, we analyze the behavior of health workers’ salaries in three Latin American countries: Bolivia, Chile, and Peru, based on empirical experience.1 The analysis for each country is detailed in a separate chapter, each following the same structure. First we describe the Heath System and the economic context of each country. Next we analyze the salaries of the country’s health workers. Then we describe the incentives, the factors that affect the productivity of these workers, such as policies adopted by the three countries to recruit, retain, and motivate health workers.

The sections that describe the economic context address issues such as economic growth, generation of sources of employment, behavior of salaries, and public and social spending. The sections that analyze salaries within the health sector explain the health market of each country, the number of health workers, the categories of workers, the composition of salaries (seniority, bonuses for rural clinics, bonuses for specialty clinics, overtime pay, health insurance benefits, disability, retirement, and life insurance, subsidies, etc.) and their determinants (negotiation, pressure, legal dispositions, ability to hold both public and private jobs, social and/or macroeconomic factors, etc.). These sections also describe the evolution of health workers’ salaries, comparing it with the evolution of salaries in other sectors of the economy, including an analysis of the main National Surveys. The final section of each chapter describes the incentives, factors that affect productivity, and the policies adopted to train, retain, and motivate health workers.

The present study relied on diverse publications and recent studies, as well as in-depth interviews.2

2. Objective The general goal of this research was to offer useful policy-oriented information to

health sector decision-makers by collecting information on the patterns and trends of health worker salaries and benefits and analyzing their determinants and impact in Chile, Peru, and Bolivia.

The specific research objectives were to:

a. Collect data and analyze current salaries and benefit levels and trends in Bolivia, Peru and Chile.

1 Countries are sorted from low to high level of human development. 2 See Appendix A.

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b. Describe the structure of health worker salaries in those three countries. c. Analyze the determinants of salaries and employment levels. d. Analyze policies to enhance the productivity and quality of human resources. e. Analyze incentives for health workers to move to and remain in rural areas. f. Analyze policies oriented to recruit, train and retain —in general, to

motivate— health workers.

3. Methodology To meet the specific objectives (a) and (b) we collected data mainly from the following

sources: National Statistical Institutes; Ministries of Health; Superintendence of Health (in the case of Chile); public insurers; private insurers; research centers; and publications. On the basis of these data we compared health worker salaries with those of workers from other sectors. We assessed the nominal and real evolution of health and non health workers salaries over time. To obtain qualitative data, we held personal interviews with key staff from the above institutions. Some of the key questions that guided our research to understand current salaries and benefits levels and their trends over time were:

• Is there a law that determines civil servant salaries and benefits and what does it state?

• Are health workers hired under the same conditions as other workers in the public sector? If not, what are the differences?

• Are health workers salaries adjusted periodically and how? • Do health workers work solely in the public sector? Or can they or do they also

work in the private sector? Can they legally do so? • What are the salary differences between the public and the private sector for health

workers? • What are the salary differences with a sector? • What variables (experience, seniority, etc) are considered in salary determination? • What other non-monetary benefits do government health workers receive and how

do these benefits impact on their motivation?

To analyze the determinants of salaries and employment levels (objective c), we reviewed existing studies of the determinants of salaries and benefits and complemented them with interviews with MOH staff, health workers’ unions and associations, independent health workers and research centers. Specifically, we attempted to answer the following key questions:

• How are health workers salaries and benefits determined? • What kinds of assessments are in place to evaluate health worker performance?

How are salaries adjusted on the basis of observed performance? • Can workers who perform poorly be fired easily? How easily can health workers be

promoted, receiving monetary or other benefits or incentives when they perform well?

• Do health workers have trade unions or health workers associations? How much power do these unions or associations have?

• Are health workers supervised? By whom?

To analyze policies to enhance the productivity and quality of human resources (objective d), we reviewed existing research and conduct interviews of key health sector decision-makers and researchers. Some of the questions that guided these interviews were:

• What human resources policies related to health workers have been implemented to support health policy objectives?

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• What is the full set of formal and informal incentives conferred to government health workers?

• What attempts have been made to improve the productivity and quality of human resources in the public health sector?

• What incentives have been implemented to align health worker and health policy objectives?

• How effective has been the measurement of health worker performance and its retribution through salaries and other incentives?

• To what extent have salaries and other incentives been modified in practice in response to changes in health workers’ performance?

• What consequences have these salaries and incentives had on performance? • What has been the cost of salary/incentive measures to promote health worker

performance? How do those costs compare with the benefits, measured as improved performance?

To analyze incentives for health workers to move to and remain in rural areas (objective e), we identified effective policies to allocate health workers to all regions within each of the three study countries (in particular to rural areas), through a bibliographical review and through interviews with MOH staff.

To analyze policies oriented to recruit, train and retain —in general, to motivate— health workers (objective f), we reviewed existing studies and complement their findings with interviews. Here we asked the following key questions:

• What are the main problems to recruiting and retaining health workers? • Have there been policy changes to solve the problems? • Is there a brain drain? If so, what are its causes, possible solutions and

consequences? What measures have these countries implemented against it? What are the results and lessons from these experiences?

• What are the main policies and conditions that favor health worker training?

4. General characteristics of the countries To illustrate the similarities, differences, level of development, and degree of

advancement achieved by the health systems of the countries analyzed, Table 3 shows some of the main demographic, socio-economic, and health indicators of each country.

Table 3 Main indicators for Bolivia, Peru y Chile

Latin America and

the Caribbean Bolivia Peru Chile Demography and surface area (2005) Population, total (million) 549.0 9.2 27.3 16.3 Population growth (annual %) 1.3 1.9 1.2 1.1 Fertility (number of children per woman) 2.4 3.7 2.6 2.0 Economy (2006) GNI per capita, Atlas method (current US$) 4,767.3 1,100.0 2,710.0 6,980.0 GDP growth (annual %) 5.5 4.6 6.4 4.0 Inflation (annual %) 6.5 12.2 3.4 11.7 Education School enrollment, primary (% gross) 117.6 114.8 116 100.3 School enrollment, secondary (% gross) 87.6 80.0 92.4 90.8 School enrollment, tertiary (% gross) 29.3 35.7 34 47.8 Health status and health care Life expectancy at birth (years) 72.5 64.8 70.8 78.2 Infant mortality rate (per 1,000 live births) 26.2 52.0 23 8.0

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Table 3 Main indicators for Bolivia, Peru y Chile

Latin America and

the Caribbean Bolivia Peru Chile Prevalence of HIV/AIDS (% of total population) 0.6 0.1 0.6 0.3 Immunization, DPT (% of children ages 12-23 months) 91 81 97 91 Health financing (2004) Health expenditure per capita (current US$) 272 66 125 359 Health expenditure, total (% of GDP) 7 7 4 6 Health expenditure, public (% of total health expenditure) 52.0 61.0 49 47.0 Health expenditure, private (% of total health expenditure) 48.0 39.0 51 53.0 Out-of-pocket health expenditure (% of private expenditure on health) 74 82 80 46

Source: The World Bank

To facilitate the comparisons among the three countries, Table 4 presents some relevant measures regarding purchasing power. Given that the main objective of this study is to compare the incomes of health workers in the three countries, one of the most relevant data points is the relationship to price levels. Using 2005 data, Bolivia is 69.4% cheaper than Peru; Peru is 39.4% cheaper than Chile; and Bolivia is 136.2% cheaper than Chile.

Table 4 Purchasing power Bolivia Peru Chile Real per capita expenditures 100 158 257 Purchasing power parity 100 197 279 Price index 100 169 236 Source: Authors, based on United Nations data

5. Bolivia Since the early nineties, Bolivia has executed a series of political, economic, and social

reforms. These reforms have included changes to the health sector and public administration, such as strengthening civil services. In spite of the modernization of the economy, which has including shrinking the public sector, this segment of the public sector has remained substantial, although it has turned its focus towards the social sector and has practically retired from productive activity.

In the public health and social security sectors, there is a surplus of doctors in urban areas and a deficit in rural communities. Because of this fact, the Unit of Social and Economic Policy Analysis (UDAPE), the government’s think tank, suggests that it is possible that at least part of the need for health workers in Bolivia could be covered via a better distribution of existing personnel among the various levels of care.

One problem that Bolivia faces is continual strikes among health workers. On average, these workers strike 4 to 7 weeks out of the year.

Another problem often cited by those involved in the health sector is a shortage of personnel, which in Bolivia is referred to as a shortage of items (one item being equivalent to one full-time worker in the public sector). According to a study carried out by the World Bank in 2002, there is a deficit of 3230 full-time workers in primary and secondary health facilities.3 However, using funds from the Heavily Indebted Poor Countries Initiative II, of which Bolivia was a beneficiary, the country increased the ratio of personnel-population in these health facilities.4 The increase in items in tertiary-care facilities was more that the amount established

3 World Bank (2002) 4 The HIPC program arose as an initiative of international financing organizations and of some

developed countries to forgive some or all of the external debt of the poorest highly indebted countries, with the condition that these nations use the funds that would have been used to pay the debt for social sector investments, with the goal of relieving poverty.

5

in the National Dialogue law, the legal instrument developed to determine distribution of the HIPC funds.

5.1 Health System

The Bolivian national health system consists of various public and private entities, institutions, and organizations that provide health services, under the regulation of the Ministry of Health and Sports. The system includes the Public System, short-term Social Security, churches, private for-profit and non-for-profit institutions, and practitioners of traditional indigenous medicine. The national Bolivian health system has four levels of administration:

• National, corresponding to the Ministry of Health and Sports (MDS) • Departmental, corresponding to the Departmental Health Services (SEDES),

which are dependent on the Prefecture • Municipal, corresponding to the Local Health Directories (DILOS) • Local, corresponding to the health facility in its area of influence and mobile

brigade at an operative level

The three levels of care are structured in practice according to the Health Networks’ organization:

• First level: The supply of services is focused on health promotion and prevention, outpatient services, and mobile hospital units. This level of care is carried out by practitioners of traditional medicine, the mobile health brigades, health posts, doctors’ offices, health centers with or without inpatient beds, and polyclinics. This level is the entry point to the health care system.

• Second level: This level includes more complex outpatient services and hospital stays in the basic specialties of internal medicine, surgery, pediatrics, obstetrics and gynecology, and, optionally, traumatology. The operative unit on this level is the Basic Auxiliary Hospital.

• Third level: This level consists of specialist and subspecialist inpatient and outpatient consults, complementary diagnostic services, and treatment with advanced technologies. The operative units on this level are the general hospitals and specialty hospitals and institutes.

Administratively, the system is structured according to the Health Networks. Each Network consists of a number of public and private health centers providing different levels of care at various levels of complexity. There are two types of Networks:

• The Municipal Health Network, which consists of one or more first-level Health Care Centers (Health Centers and Health Posts) and a Basic Auxiliary Hospital to which the centers may refer patients. A Network Administrator is responsible for managing the network.

• The Departmental Health Network, consisting of Municipal Networks and third-level Health Care Centers, which are located in the capital cities of each department. A Technical Director of SEDES is responsible for managing the network.

Health financing. The total expenditure of the Bolivian health sector was US$ 323 million in 1995 (4.7% of GDP), or $44 per capita on health per year. The main instrument for financing national health spending is social security (35%), followed by households (32%), the General Treasury of the Nation (15%), external cooperation (15%), and finally, the municipalities (3%). Excluding external cooperation, total spending on health would be $275 million per year (4% of GDP), or $37.5 per capita. Public spending on health (General Treasury

6

of the Nation, municipalities, and companies via social security contributions) reached $170 million (2.5% of GDP), of $23 per capita.

There is a relative stability in the financing of the health sector. The ability to increase spending substantially would depend on increased income, whether at the household level, via companies, or at the government level, either national or municipal. Give the current limits, there are major inequities in the financing system. One concrete example is Social Security, which accounts for 35% of the spending but only covers 20% of the population. Measures to reduce these gaps could include redistributing the financing or broadening the coverage of social security.

Salaries. Health workers in the public subsector and in social security are paid fixed monthly salaries that do not provide productivity incentives. In the private subsector there are mixed salary mechanisms, with fixed and productivity-linked components.

5.2 Economic context

Economic growth. In recent years the Bolivian economy has registered positive growth rates. The increase in GDP in the 1990s fluctuated between 4% and 5%; at the end of the decade until 2003 the growth rate fell to levels between 1.5% and 3%. From 2004 to 2007, the GDP returned to a growth rate of 4% to 5%.(Figure 1)

Figure 1 GDP growth rate (%)

0,00%

1,00%

2,00%

3,00%

4,00%

5,00%

6,00%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Source: National Institute of Statistics

Sectoral dynamism. The composition of the GDP shows that in recent years manufacturing and agricultural activities have decreased in importance, overcome by more dynamic activities such as public administration services, mineral mining, and production of petroleum and gas.

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Figure 2 GDP Participation by Economic Activity

0% 20% 40% 60% 80% 100%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004 (p)

2005 (p)

2006 (p)

Participacion en PIB según Actividad Económica(%)

Industrias manufactureras

Agriculrura, silvicultura,caza y pesca

Servicios de la Administración Pública

Transporte y Almacenamiento

Comercio

Servicios comunales, sociales, personales ydoméstico

Propiedad de Vivienda

Minerales Metálicos y no Metálicos

Servicios Financieros

Petróleo Crudo y Gas Natural

Servicios a las Empresas

Restaurantes y hoteles

Construccion

Electricidad gas y agua

Comunicaciones

Source: National Institute of Statistics. (p) Preliminary

Generation of sources of employment. The majority of the population is employed in the agriculture and livestock sector, commerce, restaurants and hotels, public administration, and industrial manufacturing. The importance of public administration as an employer has grown in recent years while that of the manufacturing sector has decreased. The mining sector (exploitation of mines and extraction of hydrocarbons) has increased its share of the GDP but reduced the number of workers it employs.

Table 5 Percentage of workers by economic activity Economic Activity 1999 2000 2001 2002 2003 2005 2006 (p)

Agriculture and livestock sector 39.95 38.94 41.02 42.39 39.97 38.61 39.50 Commerce, restaurants and hotels 20.11 19.82 20.26 18.81 20.31 18.81 18.33 Industrial manufacturing 11.40 10.12 10.33 11.17 10.65 10.93 10.50 Construction 5.84 6.65 4.81 5.38 6.56 6.47 5.45 Transport and communications 4.98 4.32 4.72 4.60 4.52 6.02 5.53 Financial and enterprise activity 2.50 3.23 2.63 2.50 2.20 2.77 3.85 Exploitation of mines and extraction of hydrocarbons 1.45 1.44 1.14 0.99 1.17 1.67 1.22 Electricity, gas and water 0.22 0.47 0.38 0.21 0.37 0.33 0.29 Source: UDAPE, Based in National Institute of Statistics data

Behavior of salaries. The minimum wage in 2007 was set at Bs. 525 ($US 68). Table 6 shows the evolution of the minimum wage in Bolivia along with inflation, allowing us to evaluate the real evolution of this variable.

Table 6 Evolution of minimum monthly wage in Bolivia and inflation rate (current Bs.)

Year Bs Growth of

minimum wage Inflation

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Table 6 Evolution of minimum monthly wage in Bolivia and inflation rate (current Bs.)

Year Bs Growth of

minimum wage Inflation

1991 120 - -

1992 135 12.5% 10.5%

1993 160 18.5% 9.3%

1994 190 18.8% 8.5%

1995 205 7.9% 12.6%

1996 223 8.8% 8.0%

1997 240 7.6% 6.7%

1998 300 25.0% 4.4%

1999 330 10.0% 3.1%

2000 355 7.6% 3.4%

2001 400 12.7% 0.9%

2002 430 7.5% 2.5%

2003 440 2.3% 3.9%

2004 440 0.0% 4.6%

2005 440 0.0% 4.9%

2006 500 13.6% 5.0%

2007 525 5.0% 0.0% Source: Based in National Institute of Statistics data

While real minimum wage has increased, the average salary in dollars has decreased both in the public sector and in the private sector (Figure 3). In general, salaries in the private sector are higher than those in the public sector; however, the gap between the two sectors has decreased. This is due mainly to a more pronounced drop in private sector salaries than in public sector salaries. The average private sector salary in 1996 was $US 331; 10 years later, in 2006, the average private sector salary was $US 245, a 26% drop. In the public sector, the average 1996 salary was $US 213, dropping to $US 184 in 2006, a fall of 14%. In both cases, private and public sectors the number of observation is statistically representative.

Figure 3 Average monthly salary in Bolivia’s public and private sector (Current USD)

0

50

100

150

200

250

300

350

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006(p)

Public sector Private sector

Source: Based in National Institute of Statistics data. (p) Preliminary

9

The poorest-paid public sector employees are those that work in central administration. Workers in the decentralized administration sector receive markedly higher salaries, nearly three times higher than those of their counterparts in central administration. On the other hand, the highest-paid public sector employees are those that work in public financing institutions, followed by university functionaries. These data are shown in Table 7.

Table 7 Average Monthly Salary in the Public Sector by Institutional Group (current USD) Institutional Group 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

General 213 212 204 196 191 190 194 203 187 179 184 Central Government

Central Administration 158 160 154 141 138 133 140 157 145 137 145 Decentralized Administration 547 563 571 620 518 482 523 517 495 433 420

Territorial Government Regional Government 478 491 471 447 381 355 334 265 261 253 245 Municipals Government 286 295 295 309 306 311 303 280 264 257 237

Social Security and Universities Social Security Institutions 305 309 304 333 316 338 330 328 302 292 309 University 412 411 408 454 477 525 547 524 490 469 453

Public Non Financing Enterprises Public Enterprises 449 491 441 444 507 495 508 471 401 371 329

Public Financing Institutions Financing Institutions 700 726 768 716 681 714 683 613 580 579 538

Source: UDAPE, Based in National Institute of Statistics data (Three-monthly Labor Survey, Salaries and Public Sector Salary) and Ministry of Labor (Administrative Register from Private Sector).

On average, the poorest-paid private sector employees are those that work in restaurants, bars, and cantinas; metal working; lumber exploitation; and the food industry. The highest-paid private sector workers are those that work in the petroleum industry, communications, basic services, and financial services. These data are shown in Table 8.

Table 8 Average Salary in the Private Sector by Economic Activity (current USD) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

GENERAL 331 332 322 322 304 299 286 282 273 255 245 Restaurant, Bar and Cantinas 108 106 108 119 115 108 112 93 84 77 90 Metal Products 135 118 130 122 118 116 110 103 104 102 105 Wood Production, Except Furniture 150 167 154 154 138 124 111 101 92 82 79 Textiles, Clothes, Leather Products and Shoes 165 156 148 152 146 145 146 140 144 140 136 Sugar and Sweet Products, Noodles 200 203 187 180 176 161 168 140 153 127 140 Flour and Bakery 195 201 193 182 187 183 171 163 148 152 162 Meat Preservation and Meat Products 193 212 221 214 195 185 174 151 162 161 146 Social Services and Health 193 210 214 204 186 186 176 167 157 157 162 Construction 195 193 204 189 176 166 179 179 192 169 175 Hotels 247 238 227 213 191 189 181 172 164 159 152 Dairy Products 303 252 222 207 196 179 193 156 172 162 156 Movies, Radio, Television and Other Entertainment 262 258 245 242 227 208 189 179 176 143 161 Manufacture of Minerals non Metallic Products 209 224 227 226 226 243 235 182 197 166 172 Education for Adults and Other Education 249 246 254 257 222 190 187 187 179 184 188 Primary, Secondary and Superior Education 238 239 238 246 242 240 230 220 229 221 207 Exploitation of Mines 255 269 269 265 241 242 227 218 228 244 227 Commerce 297 300 285 273 258 263 254 241 228 206 198 Real State Services, Enterprises and Renting 349 352 339 271 264 248 247 232 237 240 210 Paper Products and Editing and Printing Activities 309 318 294 293 289 291 268 254 252 234 215 Substances and Chemical Products 301 317 321 323 275 276 267 267 245 230 223 Various Food Products 346 332 282 282 287 297 289 328 316 315 350 Drinks and Tobacco Products 411 414 388 379 362 312 309 303 336 309 304

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Table 8 Average Salary in the Private Sector by Economic Activity (current USD) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Transport and Storage 454 458 449 431 409 399 376 346 340 323 304 Financial Intermediary 699 695 610 662 624 610 571 599 492 453 426 Production and Distribution of Electricity, Gas and Water 799 791 759 733 683 668 609 605 565 519 518 Communications 726 764 714 687 635 748 661 608 586 559 616 Exploitation of Oil and Natural Gas 838 813 781 784 716 809 769 852 760 448 460

Source: UDAPE, Based in National Institute of Statistics data (Three-monthly Labor Survey, Salaries and Public Sector Salary) and Ministry of Labor (Administrative Register from Private Sector).

Public spending and health spending. Public spending on health rose between 1995-2002, with an especially significant change between 1997 and 1999, with the implementation of the public insurance programs such as the Basic Health Insurance (SBS) package and the Universal Maternal and Child Insurance (SUMI) package launched in 2003.

Figure 4 Total Health Spending as % GDP (2004)

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%

10.0%

Arge

ntin

a

Para

guay

Col

ombi

a

Braz

il

Boliv

ia

Mex

ico

Chi

le

Vene

zuel

aR

B

Ecua

dor

Peru

Source: World Economics Indicators 2005

Total health sector spending in Bolivia was US$ 323 million in 1995 (4.7% of the GDP), or $44 per capita. The main financing instrument for national health spending is social security (35%), followed by household spending (32%), funds from the National General Treasury (15%), external cooperation (15%), and, finally municipal contributions (3%). Not counting external cooperation, total health spending was $275 million per year (4% of GDP), or $37.5 per capita. Public health spending (National General Treasury, municipal contributions, and companies via social security) was $170 (2.5% of GDP), or $23 per capita. The composition of social spending for 2004 is shown in Table 9.

Table 9 Composition of Social Spending 2004 Indicator Value (2004)

Total expenditure on health as percentage of GDP 6.8 General government expenditure on health as percentage of total expenditure on health 60.7 Private expenditure on health as percentage of total expenditure on health 39.3 General government expenditure on health as percentage of total government expenditure 12.8 External resources for health as percentage of total expenditure on health 9.1 Social security expenditure on health as percentage of general government expenditure on health 65.3 Out-of-pocket expenditure as percentage of private expenditure on health 82.5 Private prepaid plans as percentage of private expenditure on health 8.8

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Table 9 Composition of Social Spending 2004 Indicator Value (2004)

Per capita total expenditure on health at average exchange rate (current US$) 65.8 Per capita total expenditure on health at international dollar rate 185.9 Per capita government expenditure on health at average exchange rate (US$) 40.0 Per capita government expenditure on health at international dollar rate 112.9 Source: PAHO/WHO

There has been a relative stability in the financing of the health sector. Increasing spending substantially would require increasing the capacity for spending, either on the part of households, companies, or the government, both at a national and a municipal level. Given current limits, there are major inequities in financing; one concrete example is the social security system, whose spending comprises 35% of the total, but whose coverage only extends to 22% of the population. Measures to bridge these gaps could include redistribution of financing and broadening the coverage of social security.

5.3 Salaries of health workers

Health market. In Bolivia, there are three major segments within the health market: the public sector, social security, and the private sector (both profit and non-for-profit). The Bolivian health system is divided into three levels of care. The Ministry of Health and Sport (MSD) is charged with sectoral regulation, policy development, national norms, and implementation. The provision of health care services is the administrative responsibility of the municipal government. The public services provided by MSD covers 43 to 48% of the population; social security covers 22%; and the private sector covers 10%. It is estimated that 20 to 25% of the population goes without access to health services, due mainly to the fact that much of the rural population lives very far from any health center, sometimes with major geographical barriers in the way. There is also an issue of exclusion due to social, economic, and cultural barriers, such as discrimination, use of a language other than the official language, or beliefs or adherence to indigenous medicine.

Health workers. According to the Employment Census of 1996, 2.46% of the Economically Active Population (PEA) belongs to the health sector. This represents 39,957 individuals linked to this sector of the labor market. The Registry of Professionals of the Unit of Professional Training and Accreditation of the MSD lists 32,684 individuals. Of these, 13,374 are doctors, 5,569 are biochemists or pharmacists, 5,166 are dentists, 4,270 are licensed nurses and 3,742 are nursing assistants. The public sector is the largest employer with a total of 60.83%. The rest are distributed among social security, non-governmental organization, and the private sector. There is no information available regarding the percentages employed in these subsectors.

In the municipalities, of the two poorest quintiles, 63% of personnel are in nursing. This explains part of their low resolutive capacity. In the richest quintiles there are a greater number of physicians per capita.

The annual growth rate of human resources between 2001 and 2005 has been 5.2% on average, and health professionals have had a higher growth rate than other areas. However, there has also been an increased demand for health services, occasioned by the creation of SUMI and its broadening in 2005 to provide coverage to women of reproductive age and the creation of the Health Insurance for the Older Adult program for citizens over 60 years old. Therefore, the national health system requires more human resources as well as a method to effectively distribute existing human resources and guarantee adequate implementation of these initiatives. Similarly, the government’s proposal to implement new public insurance programs targeted to the population between 5 and 60 years should be taken into account when evaluating the demand for health personnel.

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Regional distribution. Sixty-one percent of the human resources of the public subsector are concentrated in the “backbone,” which includes the departments La Paz, Cochabamba, and Santa Cruz. These data are shown in Table 10. The departments Beni and Tarija have the largest number of personnel financed by TGN resources, 95% and 92%, respectively, while in Cochabamba only 82% of personnel are financed by this source. The “backbone” possesses 62% of the country’s full-time doctors and 74% of part-time doctors (nine departments).

Table 10 Permanent Human Resources of the Health Public Sector 2006

Department Number of personnel

financed by TGN (average/month)

Beni 1,158 Chuquisaca 1,540 Cochabamba 2,351

Oruro 849 Pando 339 La Paz 3,701 Potosí 1,399

Santa Cruz 3,878 Tarija 1,314 Total 16,530 Source: Treasury, Ministry of Economics.

The distribution of human resources in health by department is unequal. In analyzing the distribution by inhabitant, the departments with fewest doctors per capita are La Paz, Cochabamba, and Santa Cruz. According to the charges registered on the salary scale for 2005, the department Pando had the highest number of personnel for every 10,000 inhabitants; however, the budget assigned to human resources is the lowest of the nine regions (1.5 million dollars). On the other hand, the departments La Paz and Santa Cruz have the lowest number of human resources per 10,000 inhabitants, but theses departments spend a greater percentage of their budget on health workers’ salaries. This difference is explained by the large numbers of technical personnel (54%) in Pando and the greater numbers of professionals in La Paz and Santa Cruz (39% and 36%, respectively). These data are shown in Table 11.

Table 11 Distribution of Human Resources in Health byDepartment, 2005

Department Health Professional

Technical Personnel

Administrative Staff

Total

Chuquisaca 34% 41% 25% 100% La Paz 39% 37% 24% 100% Cochabamba 37% 42% 21% 100% Oruro 34% 44% 21% 100% Potosí 32% 49% 19% 100% Tarija 33% 40% 27% 100% Santa Cruz 36% 44% 21% 100% Beni 28% 51% 21% 100% Pando 29% 54% 16% 100% Source: Ministry of Health and Sport.

In the opinion of the experts interviewed, it is important to study the current distribution of human resources in terms of cost, facility, and place of work, in order to quantify the country’s needs and efficiently distribute human resources within the public health subsector. The national human resources in health policy should include a method for assigning personnel

13

at both a departmental and municipal level, taking into account the types of health facilities in each area.

Categories of health workers and salary differentials. The salary scale for MSD for 2005 included 43 salary levels, distributed among three areas: i) health professionals; ii) health technicians; and iii) administrative support. According to UDAPE, the gap between the maximum and minimum salary is $US 950. The gap is smaller within the areas of health professionals and health technicians, reaching US$ 150 and US$ 100, respectively.5 The excessive quantity of salary levels negatively affects the management ability of MSD.

Composition of health salaries. In 2001, 70% of the total cost of human resources corresponded to basic salaries, 30% to long and short term social security contributions, housing subsidies, family allowances, “vaccination” (worker’s union) bonuses, border bonuses, professional specialization bonuses, and escalafon (professional ranking) bonuses. This composition has not changed significantly to date.

Table 12 Composition of health salaries, 2001 Description Thousand USD (000) Percentage

Basic Salaries 42,501 70% Health Insurance 4,844 8% Social Security Contributions 947 2% Housing Subsidies 969 2% Family Allowances 541 1% Seniority Premium 2,629 4% Vaccination (worker’s union) Bonuses 1,100 2% Border Bonuses 1,313 2% Professional Specialization Bonuses 5,498 9% escalafon (professional ranking) Bonuses 550 1% Total 60,892 100% Source: Health sector reform in Bolivia: Analysis on decentralization context, World Bank 2004

The evolution of health workers’ salaries, reflected by the percentage increase in resources devoted to total payroll payments, compared to the growth of the number of these workers, represented by the number of items, shows that there is no correlation between these two variables, as shown in Figure 5. In the opinion of those interviewed, the salary increases of the health workers is linked to economic cycles and policy negotiations between the sector and the government in office. According to these experts, increases in salary are not linked to real growth of the salaries in response to increased productivity.

5 UDAPE (2006).

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Figure 5 Evolution of Public Health Workers’ Salaries and Items

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

1998 1999 2000 2001 2002 2003 2004 2005 2006-

5,000

10,000

15,000

20,000

25,000

Number of items %Salary increase

Source: MSD

Evolution of health salaries and comparisons with other sectors. Table 13 and Table 14 show the evolution of spending and the salary schedule of the different sectors of the Bolivian economy, in nominal and percentage terms, respectively.

Table 13 Evolution of Spending and the Public Sector Salary Schedule of the Different Sectors 2000–2005 (current millions Bs.)

Sector 2000 2001 2002 2003 2004 2005 Education 1,919.3 2,090.6 2,483.8 2,764.5 2,965.7 3,085.3 Health 362.2 406.8 504.1 554.1 596.2 626.9 Police 392.3 421.3 449.1 485.1 515.1 533.2 Defense 700.8 762.3 799.4 840.6 869.8 888.1 Others 610.5 706.6 637.7 811.2 961.7 1,082.1 Total 3,985.1 4,387.6 4,874.1 5,455.5 5,908.5 6,215.6 Source: Ministry of Economics and Budget Vice Ministry

Table 14 Evolution of Spending and the Public Sector Salary Schedule of the Different Sectors 2000–2005 (as percentage total salary schedule)

Sector 2000 2001 2002 2003 2004 2005 Education 48.2 47.6 51.0 50.7 50.2 49.6 Health 9.1 9.3 10.3 10.2 10.1 10.1 Police 9.8 9.6 9.2 8.9 8.7 8.6 Defense 17.6 17.4 16.4 15.4 14.7 14.3 Others 15.3 16.1 13.1 14.9 16.3 17.4 Total 100 100 100 100 100 100Source: Ministry of Economics and Budget Vice Ministry.

The percentage of spending on payroll is particularly high in the education sector, where it represents 50.2% of total public spending on salaries. Health sector spending on payroll represents 10.1 per cent of total public spending on salaries.

Table 12 presents the evolution of base salaries for 5 categories of health workers:

• Doctors (1) refers to general practitioners

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• Nurses refers to licensed nurses • Doctors (2) are general practitioners within the escalafon, that is, those with

seniority or merit awards • Doctors (3) refers to specialists within the escalafon • The category “nursing assistants” has no special specifications

There are four noteworthy findings in the table below. First, the salary differential among doctors can be over 100%, and the differential between a doctor and a nursing aide can be nearly 1000%, that is, 10 times higher. Second, for a number of years in a row, the base salary remained the same, although in other sections we saw that income varied from year to year. This indicates that adjustments in income were due to bonuses and other allocations rather than to raises in base salary. This is likely because adjustments in the base salary entail labor costs, whereas adjustments to other components of income do not. For example, an institution would pay increased social security taxes if it raised a worker’s salary, but not if it gave out a bonus. Third, salaries are not always adjusted at the same time in all the categories. Sometimes one category receives a raise while the others do not. Fourth, adjustments are not always proportionally equivalent across categories.

Table 15 Evolution of monthly base salaries for certain categories of workers in the public health sector (in current USD.) Year Doctors (1) Nurses Doctors (2) Doctors (3) Nursing Aides

1990 220 110 280 560 60 1991 220 110 280 560 60 1992 260 110 280 560 60 1993 260 110 280 560 60 1994 260 110 280 560 60 1995 260 110 280 560 60 1996 260 110 280 560 60 1997 280 140 370 740 80 1998 280 140 370 740 80 1999 280 140 370 740 80 2000 280 140 370 740 80 2001 350 180 460 920 110 2002 350 180 460 920 110 2003 350 180 460 920 110 2004 350 180 460 920 110 2005 350 180 460 920 110 2006 350 180 460 920 110 Source: MSD

National survey analysis. Although several household survey databases were made available by Bolivia’s National Statistical Institute, we could not use them properly because of lack of documentation. Neither the questionnaire nor variable dictionaries were available for the Encuesta Nacional de Empleo (National Labor Survey), the Encuesta Integrada de Hogares (Integrated Household Survey) or the Encuesta Continua De Hogares 2003-2004 (Continuous Household Survey). However, we were able to use the National Statistical Institute web site’s statistical generation facility, which allowed us to generate income data down to the social/health sector level, and income variation data down to the type of worker level. Unfortunately, the statistical generation facility only provided health worker data in the private sector. Public sector health worker salary information was not available.

Figure 6 shows the historic trends in monthly income of private social sector and health workers, compared to private education workers and the average Bolivian private and public worker (inclusive of social sector/health and education workers). Here, monthly income refers

16

to the gross cash income received by workers, before any deductions by the employer. It includes the base salary, bonuses, commissions, etc. During the 1997-2005 period, health workers’ income has stayed lower than education workers’ and the average Bolivian worker. The fact that the average Bolivian worker’s income is 60-70 percent higher than health workers is explained in great part by the high salaries of workers in the energy production sectors. This gap has widened with time.

Figure 6 Real monthly income of social sector: health, education workers and all workers, 1997-2005 (International dollars 2000)

0

200

400

600

800

1000

1200

1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Mon

thly

wor

ker

inco

me

(Int

erna

tion

al

dolla

rs 2

000)

Private sector social services and health workers Private sector education workers All workers

Source: Instituto Nacional de Estadística, Bolivia, 2008

Although smaller, the gap between education and social sector/health workers has also increased, reaching a maximum of $274 international dollars in 2004. The difference in income variation between health and education workers is better seen in Figure 7, which shows monthly income expressed as an index number instead of international dollars. The index’s base is 100 in 1995 for both types of workers. Interestingly, social sector/health worker income increased faster than education worker income in the period 1996-1999. However, this tendency reverted in the fourth trimester of 1999. Social sector/health worker income decreased abruptly, while education worker income continued to increase steadily. Although social sector/health worker started increasing again in 2000, it did not reach the 1999 levels until 2002 (and this, only in nominal terms). Also, the growth rate of these workers’ income has slowed down, widening the gap with education workers. Possible causes for the 1999 inflection are: the Asian crisis, which affected Bolivia’s main commercial partners, Brazil and Argentina; cocaine production eradication policies; and fiscal deficit caused by pension system reforms. These economic crises might have reduced demand for health services, directly affecting salaries in this sector. Demand for education, in contrast, is less prone to an economic crisis.

These economic crises may reduce income of both private health and education workers, but the income of private education workers is more stable than the income of private health workers. This happens because the income of private health workers is often determined on a fee-for-service basis. This means that reduced demand for health services -as a consequence of the economic crisis- will instantly reduce these health workers’ income. On the other hand, the income of private education workers is normally determined by long-term contracts, and is thus not immediately affected by reduced demand for education services as a consequence of the economic crisis. The graph shows a pattern consistent with this hypothesis.

17

In 1999, the income of private health workers dropped suddenly, while the income of private education workers remained practically unchanged.

Figure 7 Nominal monthly income of private social sector/health and private education workers, 1995-2005 (Base index 1995 = 100)

0

50

100

150

200

250

4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 3 4 1 2

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year / Trimester

Mon

thly

wor

ker

inco

me

(Bas

e In

dex

1995

= 1

00)

Private sector social services and health workers Private sector education workers

Source: Instituto Nacional de Estadística, Bolivia, 2008

The analysis of income variations by type of health worker shows differences in the way that clinical professionals (doctors and nurses) and other health workers saw changes in their income. During 1998-1999, all health workers’ salaries, except doctors’ and nurses’, increased slowly and then decreased slowly. In contrast, doctors’ and nurses’ salaries increased abruptly at the beginning of 1998, and fell in the same way at the end 1999. This could be explained by the fact that doctors’ income tends to be more variable than other health workers’ income. In fact, doctors’ income is likely to be more prone to health service demand shocks, because many doctors charge fees for services. Other health workers, on the contrary, tend to get paid fixed salaries, which respond more gradually to health service demand variations. If health service demand decreased during this period as a consequence of the economic crises, gradualism and shock differences between types of health worker could be explaining the observed trends. Another result is that administrative manager income has seen slow increase in the 1996-2005 period when compared to other health workers.

18

Figure 8 Nominal monthly income of different health workers, 1995-2005 (Base index 1995 = 100)

0

50

100

150

200

250

4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 3 4 1 2

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year.Trimester

Mon

thly

wor

ker

inco

me

(Bas

e In

dex

1995

= 1

00)

Administrative managers Clinical professionals Other professionals

Clinical non professionals Other non professionals

Source: Instituto Nacional de Estadística, Bolivia, 2008

Governance of salary policies. In Bolivia, the crisis in the 1980s led to a decreased flow of state funds to the health sector, to nearly half of what it had been in the previous decade. This meant a significant decrease in per capita spending, from about US$ 16 in 1980 to about US$ 4 by the end of the decade. At the beginning of the decade, most health spending was supported by state resources from within the country, but by the end of the decade, half of total health spending depended on funds from international cooperation.

The crisis had an effect on both physical and human terms: by the end of the 1980s, the number of physicians per 10,000 inhabitants was under 5, one of the lowest rates in Latin America. Furthermore, the rate failed to increase during the decade, in contrast to most countries, who saw an increase in doctors per capita in spite of the crisis. There was also a shortage of other health professionals.

The salaries of health personnel in the public sector remained at the same levels as in the 1980s until 1996. The government tied salary increases to inflation and the US dollar, resulting in nominal annual increases of 5 to 10% but no real increases in US dollars. In 1996, salaries were raised about 20% in the sector, which did result in an increase in real salary.

The second major change occurred in 2000, when the public subsector leveled the salaries of its workers with those in the social security subsector, who had been earning higher salaries.6 This matching of salaries continues to date. In the same year, the workday was changed to 6 hours, also to match the social security subsector.

The health reform to date has failed to create meaningful incentives for productivity. Even when new financial resources become available for the health sector, as in 2001 with the funds from the debt-relief program, or in 2006, with the resources from the Direct

6 Social Security workers are public employees and represent a subset of public health workers.

The salaries of social security workers are greater than those of other public workers. This decision was aimed at bring the salaries of other public health employees to the levels of the public social security workers.

19

Hydrocarbons Tax (IDH), the funds are used to create new items (job positions) to cover the deficit of health workers, a product of the 1980s crisis, rather than to increase salaries.

5.4 Incentives and policies to recruit, retain, and train health workers

Incentives. The composition of health workers’ salaries in Bolivia includes other components apart from the basic salary. The escalafon or professional ranking system provides rewards for scientific activity and years of service in the sector. There is also a bonus for working near the border, a “vaccination” bonus for all personnel affiliated with the workers’ union, and a seniority bonus paid according to number of years working within the system. Finally, the sector pays for health insurance, pensions, and housing subsidies according to the corresponding legal dispositions. This remuneration system fails to take into account the performance (output or productivity) of the human resources.7 Table 16 summarizes the incentives provided to Bolivian public health sector workers.

Table 16 Summary of Incentives (in 2001 USD)

Benefits Doctors Professional

Nurses. Nurses

Assistants Incentives Description

Basic Monthly Salary $440 $292 $188

Seniority Premium $6-$65 $6-$65 $6-$65 Bs. 43 to 430 depending on the years worked in the health system

Vaccination (worker’s union) Bonuses N.A. N.A. $14

Bs. 1.150 (USD 160) (once a year), conditioned to the worker’s union affiliation (CSTSB)

Border Bonuses $88 $58 $38 20% of the basic salary for working in the border area or in Beni/Pando

Professional Specialization Bonuses $264-$440 $175-$292 N.A.

60%, 80% to 100% of the basic salary for 1, 2 or 3 years of additional education (Professional Specialization or magister degree)

escalafon (professional ranking) Bonuses $101 $67 N.A.

23% of the basic salary against 51 gained points through academic and scientific work, positions with higher responsibility, union activities and/or work in rural areas (4 years).

Maximum Salary $1.134 $775 $305

(% of Basic Salary) -258% -265% -162%

Source: Based in information from MSD; basic salaries and exchange rate year 2001. N.A. Not Available

The available incentives do not necessarily succeed in improving professional performance, either in terms of productivity or quality of services provided. One clear example of this is the workers’ union bonus. For the seniority and specialization bonuses, one could suppose that more years of experience and a higher level of formal education would improve the functionary’s performance, and therefore improve quality of care; however, a worker can perform poorly and still continue to accumulate academic degrees and/or seniority and receive the bonus.

Productivity. The key players interviewed by the authors in Bolivia have identified the following factors that negatively affect the productivity of health personnel:

• Absences from work on the part of functionaries, due to the lack of adequate measures to monitor the attendance of personnel.8

7 Starting in the year 2000, MSD’s Extension of Coverage to Rural Areas program was

developed to create an economic incentive for workers; however, this was not adopted systematically by the municipalities involved. Therefore the only incentive to broaden coverage in underserved areas is the border bonus, granted to personnel who work within 50 Km of any border.

8 There are no official data, but some specialists estimate that due to the lack of control mechanisms, up to 50% of public health functionaries fail to complete their entire assigned workday.

20

• Frequent strikes, both within the sector and in other areas that affect the sector, such as the regional work stoppages

• Frequent training courses for personnel that occasion absences from work and whose content is not necessarily applicable to the worker’s area

• High turnover rates, causing shortages of specific skills among personnel • Concentration of personnel in morning shifts in health facilities, leaving gaps

in afternoon coverage

Policies. The policies applied in Bolivia to recruit human resources for the public sector basically consists of increasing the budget for the sector, by increasing the percentage of the total budget allocated for health. The availability of resources generated by the HIPC II program encouraged this approach. When the Bolivian public health sector contracts health workers, it normally does not subject them to merit-based competition.

The policy applied by the public health sector in Bolivia to retain human resources basically consists of immobility of functionaries. This approach has been followed since the 1980s. Basically, when a health functionary enters the system as an item, he or she cannot be removed from his or her post, only transferred, except in cases of proven negligence or other severe faults. This disposition is heavily controlled by the respective professional colleges. The other policy of retention is an incentive structure that rewards seniority, professional specialization, the escalafon, and even belonging to a union.

The policy applied in Bolivia to train human resources for the public sector basically consists of a point system, based on the academic hours put in by a functionary; cumulatively these allow the worker to climb the professional ladder or escalafon. The more academic hours in health courses a functionary takes, the higher he or she climbs on the ladder and the larger his or her bonus. However, the country has not developed a structured training policy on a national level for these professionals. The courses or seminars must follow the initiatives of the various MSD units, to prepare workers to implement new policies or provide updates on special topics. Other continuing education institutions are the scientific medical societies, which also offer these training courses and have the same point values for the escalafon.

5.5 Conclusions and recommendations

a) Number of health workers

There are insufficient numbers of health workers; however, the greater problem is the inequity of their distribution. There are many qualified personnel in urban areas and very few in the rural areas.

b) Salary composition

Salaries are not based on a policy that provides productivity incentives but rather rewards seniority and professional merits. This situation is difficult to change due to the existence of powerful unions that defend this system of pay and oppose performance evaluations.

c) Evolution of salaries

The most significant change during the period analyzed was that the salaries of the rest of the public health sector were brought to the levels of those of social security employees. However, while the nominal salaries of these health workers increased 10 to 15% annually, on average, in real terms salaries have remained very low.

d) Incentives to recruit, train, and retain health workers

There are no incentives to recruit or train health workers. Retention of workers is carried out via the escalafon and seniority benefits. Hiring in the public sector is often not merit-based.

21

6. Peru In the past decade, under the third generation of health reforms in Peru, health actions

have focused on economic efficiency and have put issues of public health and human resources for health on the back burner. The situation is complex; two decades of economical and sectoral reform have limited spending, frozen salaries, pushed workers into precarious jobs, restricted budgets in the public sector, and allowed a series of productive achievements without human development.

The larger cycle of human resources is characterized by regularities that feed back into the cycle. A means of regulation and self-regulation is needed to maintain the cycle, including not only juridical but also political, social, and cultural means. All studies of human resources in Peru in recent years have shown that aspects of this regulation – or de-regulation, we should say – has modified the status of health professionals and health education.

6.1 Health System

The Peruvian health services system is segmented and fragmented. The system is made up of two subsectors: public and private. The former consists of the Ministry of Health (MINSA), the Health Social Security System (ESSALUD), and the health services of the Armed Forces and the National Police. The latter consists of the private companies, non-for-profits, private practice physicians and paramedics, as well as providers of traditional or folk medicine.

Public subsector. The public subsector has three levels: central, regional, and local. MINSA functions as the head of the central level of organization, issuing policies, norms, and technical procedures to regulate activity within the sector. It is also the largest health services provider. The sector’s institutions are organized by level of care (specialized facilities, national hospitals, auxiliary hospitals, health centers, and health posts). However, the reference and cross-reference mechanisms remain deficient.

MINSA’s Decentralized Public Organisms – OPD – have administrative and budgetary autonomy.9 They are responsible for administering the financing of the variable costs of basic care for women, children, students, and adults in a social emergency situation (Integrated Health Insurance); scientific and applied health research on topics including traditional medicine and nutrition and the education of biologists (National Institute of Health); and the regulation of the health providers market (Superintendence of Health Providers – SEPS).10

The Regional Health Offices – DIRESA – are the health sector organisms in the regional governments. They also have administrative and budgetary autonomy and provide health services at regional hospitals, auxiliary hospitals, rural hospitals, local hospitals, health centers, and health posts. On a local level, the municipalities and welfare societies are responsible for the administration of and budgeting for certain health facilities.

The health services of the Armed Forces and the National Police provide health services to its members, immediate family, and employees at its own health facilities. They are financed mainly by funds from the public treasury, and less significantly, by copayments from family members of policyholders.

9 The salaries of OPD functionaries are not fixed by the institution itself but rather by the

disposition of Legislative Decree No. 728, which will be explained in greater detail below. The economic incentives for workers within this regimen are greater than those for MINSA functionaries.

10 One OPD is SEPS, the entity responsible for regulating the Health Service Providers (EPS), the private entities authorized by SEPS to provide ambulatory low-complexity services to ESSALUD beneficiaries who opt for the “simple coverage” modality. The EPS receive an ESSALUD transfer for at least 30% of the insured worker’s contributions.

22

Health Social Security System. ESSALUD is the main entity in this system. (Until 1996 it was called the Peruvian Social Security Institutes – IPSS). By law, this institution provides health, economic, and social services to complement its role as an insurer. ESSALUD beneficiaries are primarily workers within the formal sector of the economy and their immediate families, and the system is financed with contributions in the form of payroll deductions. The system provides health services at specialized institutes, national hospitals and hospital networks, polyclinics, medical centers, and health posts. Social security is complemented by EPS that are accredited by SEPS, who provide lower-complexity interventions at private facilities.

Private subsector. The formal private providers are the private specialized and general practice clinics, medical centers and polyclinics, doctors and dentists offices, laboratories, diagnostic imaging service providers, and health facilities for certain mining, petroleum, and sugar companies (called autoproductoras). Both for-profit and non-for-profit (classically represented by NGOs) organizations provide some primary care services. Informal providers include practitioners of traditional medicine, healers, bonesetters, and midwives.

These private providers are funded in three ways: 1) direct out-of-pocket payments for each service provided; 2) sale of services to private insurers; and 3) sale of services through prepaid programs, not including private insurers. In this context, ESSALUD has begun to purchase certain services (for example magnetic resonance imaging studies) from some private providers.

Health financing. The largest portion of health spending in Peru comes from direct out-of-pocket payments from households (37.3%), followed by contributions from employers (35.0%), and finally the government (24.0%), according to data from 2000. As far as where these resources end up, families use 55% of their out-of-pocket payments on medications, while only 7% of the government’s funds are used for this purpose.

Health spending. In terms of health spending according to service provider, the majority of funds are utilized in MINSA (26%) facilities, Social Security (ESSALUD) (25%), private organizations (23%) and pharmacies (18%). The government spends their resources on operation services (60%), administration and regulation (23%), investments (10%) and medications (7%). Households spends their resources on medications (45%), private care (38%) MINSA facilities (12%) and insurances (5%).

6.2 Economic context

Economic growth. Currently, the Peruvian economy is enjoying the longest expansive phase in its history, characterized by a favorable external context and the implementation of monetary and fiscal policies that guarantee the sustainability of current growth. Two fundamental characteristics define this episode. First, growth is impelled by private internal demand; in particular, there is a significant increase in private consumption and investment. Second, productivity has experienced a sustained growth, increasing by about 20% from 2001-2006.

These characteristics have permitted an increased growth rate for productivity, reflecting improved structural conditions underlying the productive capacity of the Peruvian economy. The Ministry of the Interior considers a baseline scenario to be one in which external and internal conditions remain slightly favorable over the next years, allowing the economy to grow at a rate faster than the current rate. In particular, they do not expect a drastic deceleration of the global economy, but rather a “soft landing” in which the main destabilizers of the industrial economies will gradually correct themselves. According to this hypothesis, the Peruvian economy is on a path to consolidate a process of expansion and sustained growth the likes of which are rarely seen in Latin America, estimating an average growth rate of at least 7% over the next years (see Figure 9).

23

Figure 9 Evolution of the Gross Internal Product (GDP) 1990-2007 (change in annual percentage)

-5,1

2,1

-0,4

4,8

12,8

8,6

2,5

6,9

-0,7

0,9

3,0

0,2

5,23,9

5,26,4

7,68,3

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Source: INEI. Projections of the Ministry of Economy and Finance (MEF)

Table 17 illustrates that the behavior of the most important component of the growth of GDP is internal private demand. The growth in this area has been impelled by investment and private consumption (internal private demand expanded by 9.1% since 2005). The consumption capacity of the population has increased by 5.6% (annual average) in the last five years, contributing to an average annual growth of 4.8% in economic activity over the same period.

On the other hand, exports only increased by 0.3% in real terms in 2006. Taken together with the real increase in commercial imports, the preceding figure means a negative contribution to the increase in economic activity.

Table 17 Decomposition of the growth by demand sector 1997-2006 (GDP points)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

PIB 6.9 -0.7 0.9 3.0 0.2 5.2 3.9 5.2 6.4 8.0

Private internal demand 6.2 -1.3 -3.9 2.8 0.4 4.5 2.9 3.8 4.1 9.1

Public internal demand 1.2 0.4 0.6 -0.5 -1.0 -0.1 0.4 0.5 1.2 1.2

Foreign trade -0.5 0.3 4.2 0.6 0.8 0.7 0.5 0.9 1.1 -2.2 Source: MEF

On the supply side, non-primary sectors represented over 70% of the economic activity, which is to be expected given that the main stimulus to growth of GDP is due to the performance of these sectors. The utilization rate for installed non-primary manufacturing capacity has registered sustained growth since 1999, reaching levels of 80% by then end of 2006. Furthermore, the sustained growth of construction activity during the last five years, especially in 2006, has been one of the driving forces behind the economic growth, which is consistent with the significant increase in private investment in the past year (20.2%). On the other hand, as shown in Table 18, primary sectors had an insignificant increase in 2006, as a consequence of reduced productivity in the mining sector growth.

Table 18. Decomposition of by supply sector 1997-2006(GDP points) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 GDP 6.9 -0.7 0.9 3.0 0.2 5.2 3.9 5.2 6.4 8.0 Primary sectors 0.9 -0.2 2 1 0.5 1.4 0.6 0.9 1 0.7 Non-primary sectors 5.1 -0.5 -0.6 1.6 -0.2 3.3 2.9 3.7 4.6 6.7

24

Table 18. Decomposition of by supply sector 1997-2006(GDP points) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Taxes on products 0.8 0 -0.5 0.3 -0.1 0.4 0.5 0.6 0.8 0.6 Source: Ministry of Economy and Finance

In summary, the current economic expansion is sustained by non-primary sectors, which works in the country’s favor as it involves value-adding activities. Furthermore, the growth is impelled by private consumption and investment, that is, by greater dynamism of internal demand.

Employment. After 2002, employment has recuperated, registering 47 months of continuous growth (its average annual growth over the past 19 months has been 4.9%), due to the favorable recent economic environment. Urban employment levels in large companies increased significantly on a national level, as shown in Figure 10.

Figure 10 Growth of GDP and urban employment in companies with 10 or more workers (annual change in percentage)

-10,0

-5,0

0,0

5,0

10,0

15,0

Ene-

01

Abr-0

1

Jul-0

1

Oct-0

1

Ene-

02

Abr-0

2

Jul-0

2

Oct-0

2

Ene-

03

Abr-0

3

Jul-0

3

Oct-0

3

Ene-

04

Abr-0

4

Jul-0

4

Oct-0

4

Ene-

05

Abr-0

5

Jul-0

5

Oct-0

5

Ene-

06

Abr-0

6

Jul-0

6

Oct-0

6

Empleo Nacional Urbano PBI Empleo Lima Metropolitana

Source: INEI and Ministry of Labor and Promotion of Employment

This increase in employment has been heterogeneous, in terms of economic sectors and geographic regions. The increase has been greater in the provinces than in Metropolitan Lima and has been concentrated in manual labor sectors.

On a regional urban level, employment has grown in a decentralized manner. The zones linked to export activities have had a significant growth (Trujillo, Talara, Sullana, and Ica), while the city with the sharpest dip in employment has been Chimbote. These data are shown in Figure 11.

25

Figure 11 Employment in companies with 10 or more workers in major cities (annual change in percentage, 2006/2005)

-6,9

-0,9

1,7

2,5

4,0

4,7

7,3

8,1

9,3

9,5

9,8

9,8

10,1

11,0

11,1

11,7

12,1

14,1

19,027,9

-10,0 -5,0 0,0 5,0 10,0 15,0 20,0 25,0 30,0

Chimbote

Iquitos Paita

Pisco

PucallpaPuno

Cuzco ChinchaHuaraz

CajamarcaChiclayo

Arequipa Piura

Tacna

HuancayoTarapoto

Ica Sullana

Talara

Trujillo

Source: Ministry of Labor and Promotion of Employment

The growth of urban employment has accelerated in the past year, in comparison with the previous five year period, and at a faster rate than the baseline for cities on the interior of the country, as shown in Figure 12

26

Figure 12 Annual Evolution of Urban Work 2000-2006 and 2006-2007, in Lima and Regions

LORETO

UCAYALI

PUNO

CUSCO

LIMAJUNIN

ICA

AREQUIPA

PIURA

MADRE DE DIOS

ANCASH

SAN MARTIN

AYACUCHO

HUANUCO

PASCO

CAJAMARCA

TACNA

APURIMAC

LA LIBERTAD

AMAZONAS

HUANCAVELICA

MOQUEGUA

LAMBAYEQUE

TUMBES

CALLAO

OCEANOPACÍFICO

Variación porcentual del empleo:ciudades de mayor crecimiento (2006-2007)

LORETO

UCAYALI

PUNO

CUSCO

LIMAJUNIN

ICA

AREQUIPA

PIURA

MADRE DE DIOS

ANCASH

SAN MARTIN

AYACUCHO

HUANUCO

PASCO

CAJAMARCA

TACNA

APURIMAC

LA LIBERTAD

AMAZONAS

HUANCAVELICA

MOQUEGUA

LAMBAYEQUE

TUMBES

CALLAO

OCEANOPACÍFICO

Variación porcentual del empleo:ciudades de mayor crecimiento (2000-2006)

Trujillo: 7,0%

Ica: 6,3%

Talara: 14,8%Sullana: 13,9%

Piura: 11,1%Paita: 2,1%

Chiclayo: 4,8%

Trujillo: 17,4%

Tarapoto: 6,2%

Lima: 8,4%

Huancayo: 7,4%

Cusco: 10,1%

Arequipa: 11,8%

Ica: 8,4%Pisco: 6,7%

Puno: 6,3%

* Crecimiento promedio anual 2001 -2006 ** Crecimiento acumulado Enero-agosto 2007/Enero-agosto 2006. -

2001-2006* 2007 **Perúú Urbano 14,8 8,2Lima Metrop. 21,6 8,5* Crecimiento promedio anual.**Acumulado Enero-agosto 2007 /

Enero-agosto 2006

LORETO

UCAYALI

PUNO

CUSCO

LIMAJUNIN

ICA

AREQUIPA

PIURA

MADRE DE DIOS

ANCASH

SAN MARTIN

AYACUCHO

HUANUCO

PASCO

CAJAMARCA

TACNA

APURIMAC

LA LIBERTAD

AMAZONAS

HUANCAVELICA

MOQUEGUA

LAMBAYEQUE

TUMBES

CALLAO

OCEANOPACÍFICO

Variación porcentual del empleo:ciudades de mayor crecimiento (2006-2007)

LORETO

UCAYALI

PUNO

CUSCO

LIMAJUNIN

ICA

AREQUIPA

PIURA

MADRE DE DIOS

ANCASH

SAN MARTIN

AYACUCHO

HUANUCO

PASCO

CAJAMARCA

TACNA

APURIMAC

LA LIBERTAD

AMAZONAS

HUANCAVELICA

MOQUEGUA

LAMBAYEQUE

TUMBES

CALLAO

OCEANOPACÍFICO

Variación porcentual del empleo:ciudades de mayor crecimiento (2006-2007)

LORETO

UCAYALI

PUNO

CUSCO

LIMAJUNIN

ICA

AREQUIPA

PIURA

MADRE DE DIOS

ANCASH

SAN MARTIN

AYACUCHO

HUANUCO

PASCO

CAJAMARCA

TACNA

APURIMAC

LA LIBERTAD

AMAZONAS

HUANCAVELICA

MOQUEGUA

LAMBAYEQUE

TUMBES

CALLAO

OCEANOPACÍFICO

Variación porcentual del empleo:ciudades de mayor crecimiento (2000-2006)

LORETO

UCAYALI

PUNO

CUSCO

LIMAJUNIN

ICA

AREQUIPA

PIURA

MADRE DE DIOS

ANCASH

SAN MARTIN

AYACUCHO

HUANUCO

PASCO

CAJAMARCA

TACNA

APURIMAC

LA LIBERTAD

AMAZONAS

HUANCAVELICA

MOQUEGUA

LAMBAYEQUE

TUMBES

CALLAO

OCEANOPACÍFICO

Variación porcentual del empleo:ciudades de mayor crecimiento (2000-2006)

Trujillo: 7,0%

Ica: 6,3%

Talara: 14,8%Sullana: 13,9%

Piura: 11,1%Paita: 2,1%

Chiclayo: 4,8%

Trujillo: 17,4%

Tarapoto: 6,2%

Lima: 8,4%

Huancayo: 7,4%

Cusco: 10,1%

Arequipa: 11,8%

Ica: 8,4%Pisco: 6,7%

Puno: 6,3%

* Crecimiento promedio anual 2001 -2006 ** Crecimiento acumulado Enero-agosto 2007/Enero-agosto 2006. -

2001-2006* 2007 **Perúú Urbano 14,8 8,2Lima Metrop. 21,6 8,5* Crecimiento promedio anual.**Acumulado Enero-agosto 2007 /

Enero-agosto 2006

27

Furthermore, this context has favored companies with 100 or more workers, impacting smaller companies on a more minor scale (see Table 19). Policies that encourage the growth of small companies should be considered, as these situations account for more than 50% of the employed population (although these jobs are often low quality and are usually informal, that is, without benefits or contracts).

Table 19 Metropolitan Lima: Distribution of Employed EAP by market structure , 2001-2005 (percentages)

Market Structure 2001 2002 2003 2004 2005 I. Public sector 9.6 9.0 7.8 7.8 7.6

II. Private sector 1/ 45.3 44.7 48.2 47.1 51.9 Micro-companies 22.4 18.6 20.0 20.0 21.4 Small companies 9.2 12.9 12.8 13.4 13.4 Medium and large companies 13.7 13.2 15.4 13.7 17.1 III. Independent 32.7 34.7 33.9 34.8 31.8 Professional, technical, and similar 3.9 3.2 3.5 2.8 3.1 Non-professional / non-technical 28.8 31.5 30.4 32 28.7 IV. Unpaid labor for family 5.3 5 3.8 4.6 3.9 V. All others 2/ 7.1 6.5 6.3 5.8 4.9

Total 100.0 100.0 100.0 100.0 100.0 Employed EAP 3, 411,790 3,334,304 3,361,308 3,366,936 3,400,312 1) Includes employers. Micro-companies have 2-9 workers, small companies 10-49, and medium and large 50 or more. 2) Includes household workers, interns, and others Source: Ministry of Labor and Promotion of Employment

Productivity. The growth in employment has been accompanies by increased productivity, as shown in Figure 13. In fact, Peru has shown one of the greatest increases in productivity in Latin America.

Figure 13 Labor productivity in Latin America (percent change)

0,61,0

3,6

0,90,30,4

1,8

-0,1

1,42,0

-0,50,00,51,01,52,02,53,03,54,0

Perú Colombia Chile Brasil México

Var. %

1990-1999 2000-2005

Source: Groningen Growth and Development Centre and The Conference Board (Total Economy Database)

However, the prevalence of precarious employment persists in various economic sectors. Although unemployment is low, currently invisible under-employment is around 30% of the EAP.11 This means that although more jobs are becoming available, one shouldn’t lose sight of the issue of the quality of those jobs. It is important to note that only one in five

11 Invisible under-employment refers to the percentage of Peruvians who work full-time (35 hours per week) but receive salaries below the minimum living wage.

28

salaried workers in the private sector has access to benefits such as disability insurance, a pension, merit bonuses, and others mandated by current legislation.

Salaries. The minimum wage in 2007 was S/. 550 (US$ 183). The following table shows the evolution of the minimum living wage, inflation, and the exchange rate with the American dollar.

Table 20 Evolution 1990-2006 of minimum living wage, inflation, and exchange rate

Year Minimum living wage (monthly

current S/.) Inflation Exchange rate

(current S/. by 1 USD)

1990 25 7481.7 0.21 1991 38 409.5 0.77 1992 72 73.5 1.25 1993 72 48.6 1.98 1994 132 23.7 2.19 1995 132 11.1 2.25 1996 132 11.5 2.45 1997 300 8.5 2.66 1998 345 7.3 2.92 1999 345 3.5 3.38 2000 410 3.8 3.48 2001 410 2 3.50 2002 410 0.2 3.51 2003 410 2.3 3.47 2004 460 3.66 3.41 2005 460 1.62 3.29 2006 500 2 3.27 Source: Developed using data from the INEI and the Central Reserve Bank

In general, salaries in the private sector are greater than those in the public sector. In both sectors, salaries have increased by more than 15% in recent years. Furthermore, the gap between the sectors has decreased slightly. The average private sector salary in 2000 was US$ 700, compared with US$ 243 in the public sector. In 2006, the average private sector salary was almost US$ 800, compared with US$ 300 in the public sector (see Figure 14).

Figure 14 Average public and private sector income from 2000-2007 (in USD)

0

100

200

300

400

500

600

700

800

900

Ene-00

Jul-0

0

Ene-01

Jul-0

1

Ene-02

Jul-0

2

Ene-03

Jul-0

3

Ene-04

Jul-0

4

Ene-05

Jul-0

5

Ene-06

Jul-0

6

Ene-07

Jul-0

7

Gobierno General Privado urbano

Source: Developed using data from the Ministry of Labor and Promotion of Employment

29

According to economic activity, the sector with the lowest income was agriculture, followed by transport, communication, and commerce. On the other extreme is the mining sector, which brought double the average of the other sectors, sustained by the strong increase in exports and the high prices of minerals in recent years (see Table 21). On average, during the period from 2000 to 2006, income has increased by about 10%.

Table 21 Average monthly income by economic activity (in thousands of current S/.)

Economic activity 2000 2001 2003 2004 2005 2006

Average of all activities 2.43 2.42 2.59 2.64 2.59 2.61

Agriculture 2.06 2.30 2.17 2.47 2.56 2.83

Mining 5.24 5.70 5.07 5.12 4.79 5.10

Manufacturing 3.02 2.96 3.13 3.33 3.10 3.06

Electricity, gas, and water 2.81 2.84 3.03 3.18 3.27 3.29

Construction 2.87 2.71 2.32 2.31 2.36 2.47

Commerce 2.69 2.71 2.44 2.67 2.61 2.63

Finances / insurances 3.47 3.66 3.36 3.42 3.20 3.14

Transport, storage, communication 2.64 2.65 2.86 2.89 2.72 2.69 Source: developed based on data from the Ministry of Labor and Promotion of Employment

Public and social spending. Basic social spending refers to the direct financing of goods and services that will reach the target population (for example, food rations, medicines, school books, payment for services provided by teachers and physicians, implementation of workshops and hospitals, etc.). It excludes, therefore, other spending such as administrative costs.

According to the data displayed in Table 22, total social spending reached about S/. 17,000 million in 2001, just over s/, 23,000 million in 2006, which in real terms represents a cumulative increase of 42%.

Table 22 Social spending by major component (in millions of 2001 S/.) 1/ 2001 2002 2003 2004 2005 2006 8/

Spending by central and regional governments 2/ 34,352 35,057 38,306 38,671 41,374 43,607 Total social spending 17,288 18,743 19,412 20,440 22,339 23,014 1. Social spending not including social insurance contributions 3/ 10,918 11,844 12,221 12,630 13,851 14,638 1.1 Basic social spending 4/ 4,608 4,733 4,823 5,038 5,569 5,845 1.2 Complementary social spending 5/ 6,311 7,111 7,398 7,593 8,282 8,793 2. Social insurance contributions 6/ 6,370 6,899 7,191 7,810 8,488 8,375 Social spending on social programs prioritized under PSPs 7/ 7,291 7,997 7,740 8,739 9,579 10,025 1/ A taxonomy of social spending based on typical records of the programs’ functional classification. 2/ Includes social programs administered by municipalities (Glass of Milk and other social programs developed during the recent decentralization) 3/ Includes administrative-type costs. 4/ According to the framework developed at the Oslo Conference, this is defined as spending on: Basic education (grade school and primary school); basic health, food and nutrition, water, and sanitation 5/ Refers to activities and/or projects of a social character that are not considered basic social spending, such as secondary education, higher education, social and productive infrastructure, rural electrification, rural highways, etc. 6/ Social insurance contributions (directed to ESSALUD), classified as administrative 7/ Such as typical and atypical budgetary chains. Includes administrative costs. 8/ Preliminary Source: General Office of Economic and Social Issues, MEF

Spending on health. Taking into account income from all subsectors, total health spending in Peru for the year 2000 was 8,738 million S/. (US$ 2,510 million), which was equivalent to 4.7% of the GDP, representing a per capita expense of US$ 97 per year. Although health spending increased in nominal terms between 1995 and 2000, in real terms it has

30

contracted slightly (see Table 23). The decrease is evidenced as well by the drop in per capita annual spending, falling behind per capita spending in Brazil (US$ 267), Venezuela (US$ 233) and Colombia (US$ 186).

Table 23 Main indicators related to health spending 1995-2000 Indicators 1995 1996 1997 1998 1999 2000

Spending on health (millions of current S/.) 5,413 6,173 6,849 7,484 8,483 8,738

Spending on health (millions of current USD) 2,404 2,521 2,575 2,558 2,509 2,510

Spending as a % of GDP 4.48 4.51 4.35 4.50 4.87 4.72

Real spending on health (millions of 1995 S/.) 5,413 5,440 5,351 5,379 5,560 5,299

Real spending per capita (1995 S/.) 227 224 217 214 218 204

Spending on health per capita (1995 USD) 101 104 104 102 98 97

Consumer price index (1995=100) 100 112 121 130 134 139

Source: National accounts 1995-2000. Ministry of Health and Pan American Health Organization. These are the most recent national accounts carried out in Peru.

The largest portion of health spending in Peru comes from direct out-of-pocket payments from households (37.3%), followed by contributions from employers (35.0%), and finally the government (24.0%), according to data from 2000. As far as where these resources end up, families use 55% of their out-of-pocket payments on medications, while only 7% of the government’s funds are used for this purpose (see Figure 15).

Figure 15 Financing and Health Spending Assignment

Represents 4.7% of GIP2610 million dollars

(year 2000)

1Households

37.3%

2Employers

35.0%

3Government

24.0%

4Ext Coop

1.8%

Who spends more?

Who spends more?

Medications45%

Private care38%

MINSA12%

Insurance5%

What do they spend

on?

What do they spend

on?

Private insuranceEPS

Self-insurancePrepaid insurance

10%

EsSalud82 - 90%

OperationsServices

60%Administration

Regulation23%

InvestmentOther expenses

10%

Medications7%

Represents 4.7% of GIP2610 million dollars

(year 2000)

1Households

37.3%

2Employers

35.0%

3Government

24.0%

4Ext Coop

1.8%

Who spends more?

Who spends more?

Medications45%

Private care38%

MINSA12%

Insurance5%

What do they spend

on?

What do they spend

on?

Private insuranceEPS

Self-insurancePrepaid insurance

10%

EsSalud82 - 90%

OperationsServices

60%Administration

Regulation23%

InvestmentOther expenses

10%

Medications7%

Source: Developed based in national accounts 1995-2000.

In terms of health spending according to service provider, the majority of funds are utilized in MINSA facilities, Social Security (ESSALUD) facilities, private for-profit facilities, and pharmacies, as shown in Table 24. From 1995 – 2000, national accounts show that funds

31

used at MINSA facilities remained stable, while funds spent at ESSALUD and private facilities increased.

Table 24 Health Spending by Provider 1995-2000 (percentage) Provider 1995 1996 1997 1998 1999 2000

MINSA 25,40 27,40 24,90 27,10 25,40 26,10

Health 5,00 4,60 4,40 4,60 4,30 4,10

Other Publics 0,80 0,60 0,40 0,40 0,30 0,10

Privates Nonprofit Organization 1,50 1,30 1,50 1,70 1,80 1,60

Privates Organization 18,30 19,20 21,10 20,80 22,00 23,60

Pharmacies 24,90 23,80 24,20 19,90 18,00 17,70

ESSALUD 20,80 19,70 20,40 22,80 25,70 25,10

Plan Administrator 3,30 3,40 3,10 2,70 2,50 1,70

Total 100,00 100,00 100,00 100,00 100,00 100,00

Total million 1995 soles 5.413 6.173 6.849 7.484 8.483 8.738

Total million 1995 dollars 2.404 2.521 2.575 2.558 2.509 2.510 Source: National Accounts 1995-2000. Ministry of Health and PAHO

Health spending is about 4.7% of the GDP of Peru, below the average for Latin America and the Caribbean, which is 7.3%. Health spending per capita has not significantly increased in 10 years, remaining at around 97 dollars per person, or around 2,610 million dollars annually.

6.3 Salaries and benefits for health workers

Health market. The Peruvian health sector is divided into 4 subsectors of providers: MINSA, Social Security (ESSALUD), health services of the Armed Forces and the National Police (FF.AA), and the private subsector. The private subsector includes various types of facilities and services: offices, clinics, insurance, and Health Service Providers (EPS).

Health workers. In the past 15 years, the number of human resources in the health sector has grown. In 1992, the total workforce for MINSA and ESSALUD was approximately 66,000 workers. By 1996, this number had grown to 101,000, and there are now about 128,000 workers between the two institutions. The Peruvian health system comprises an estimated 139,000 workers total.

On a national level, the total number of human resources in the health sector is 139,231 workers and professionals (in 2004), of which 97,382 work for MINSA (2005); 35,399 for ESSALUD (2004); and 6,490 for EPS. This last figure includes both personnel from EPS and affiliated doctors and professionals. The figure for MINSA’s human resources includes 29,119 contract workers providing non-personal services (NPS). It also includes workers within the Basic Health Program for All and CLAS (facilities whose administrated is shared with the community.

Of the total number of human resources in 2004, 22,763 (16.9%) were doctors; 21,332 (15.8%) were nurses; 8,104 (6.0%) were midwives; 3,614 (2.7%) were dentists; 8,871 (6.6%) were catalogued as other health professionals; 48,285 (35.8%) were technicians or assistants; and 21,874 (16.2%) were administrative or other.

Peru had 11.5 physicians per 10,000 inhabitants in 2004. This rate was nearly 4 times lower than that of Uruguay and 3 times lower than that of Argentina, the highest in the region. However, Peru did have one of the highest rates of nurses per inhabitant (80 per 10,000), four times higher than that of Paraguay and 1.5 times higher than that of Brazil. The rate of dentists

32

per inhabitant was low (1.1 per 10,000), 12 times lower than that of Uruguay and 9 times lower than that of Brazil, the countries with the highest rates. (see Figure 16).

Figure 16 Health Professional Rate by South American Country, 2004

05

1015202530354045

Uru

guay

Arg

entin

a

Bra

zil

Ven

ezue

la

Ecu

ador

Col

ombi

a

Per

u

Chi

le

Bol

ivia

Par

agua

y

Doctors Nurses Dentists

Source: PAHO. Health Situation in Latin America. Basic Indicators. WDC, 2004. Elaborated by IDREH

There are a total of 943 positions in specialized medical residency programs nationally, of which 61.8% are financed by MINSA, 20.5% by ESSALUD, 16.5% by the health services of the Armed Forces (FF.AA) and the National Police of Peru (PNP), and 1.2% by private funding.12 There is no residency program for other health professions. Of the funded medical intern positions in Peru, 965 are funded by MINSA and 130 by ESSALUD. In 2004, 2,308 positions were funded by the Rural Urban Marginal Service (SERUMS), 997 of which were for doctors and 1,311 for the other 11 professions.

Evolution of the number of workers. In the 1990s, there was an increase in the number of human resources, and in particular the number of contract personnel provided non-personal services. The number of salaried personnel increased by 27% from 1992-1996, while fixed-term contract workers increased by 68%, and workers contracted for non-personal services increased by 400%. The increase in this last group was so marked that the preponderance of fixed term contract workers in 1992 was surpassed in 1996 by the non-personal service workers. In ESSALUD, the fixed term contract modality predominates, while in the private sector and in MINSA non-personal service contracts are most common. The health services of the FF.AA and PNP were the only institutions whose increase in human resources was due to an increase in salaried employees (see Figure 17).

12 In Peru there are medical specialty programs funded by the State (such as for pediatrics,

cardiology, neurosurgery, etc.). There is an alliance among public hospitals (who provide care in the area of specialty) and universities (who guarantee academic quality). The State finances 943 positions per year for these programs.

33

Figure 17 Health Professional Rate Evolution per 10,000 population, 1980-2004

0

2

4

6

8

10

12

1980

1 981

1982

1983

1 984

1985

1986

198 7

198 8

1989

1990

1 992

1996

1999

2000

200 2

Doctors Obstetrics Dentists Nurses

Source: MINSA – Statistics and Informatics’ Office, ESSALUD 2005, EPS 2004. Developed by IDREH

In 1990, fiscal adjustments were applied with the aim of containing the hyperinflation experienced in Peru. These measures included reducing public spending (“fiscal austerity”), leading to a reduction in the number of personnel in the health sector and other sectors.

The reduction in personnel during the period of fiscal adjustments and other associated measures led to a series of social protests by health workers. After many years of constant physician strikes and union pressure applied by health workers, in 2005, as a reaction to the medical strikes, the Congress of the Republic issued a law governing MINSA physicians’ contracts and salaries, which applied to 3,693 physicians. This law was followed by similar laws applying to the other health professions. Within the ESSALUD system, the issue of contracts and salaries remains unresolved.

Distribution of MINSA and ESSALUD health workers.13 In terms of distribution by department, workers are concentrated in the capital (Lima), and in general show a marked centralism in distribution. Lima has a rate of doctors per 10,000 inhabitants 5.4 times that of Huancavelica (17.7 versus 3.3), and this rate is also higher than the national average of 11.5. Eight departments have a rate of nurses per 10,000 inhabitants that is higher than the national average: Arequipa, Moquegua, Tacna, Ayacucho, Lima, Pasco, Madre de Dios, and Ica. Nurses are also concentrated in urban areas, although there are significant numbers in some poorer departments. Of all nurses in Peru, 40.23% are found in Lima.

The distribution of midwives is more equitable. This is probably due to the fact that general practitioners, the main competition for midwives, are concentrated in Lima, and therefore the midwives disperse to the regions. The rate per 10,000 inhabitants is higher than the national average in 15 departments, and they are more concentrated in poorer and rural areas. Of all midwives in Peru, only 25.32% are found in Lima. The number of dentists per 10,000 inhabitants is lower than that of the previously-mentioned professions, and they show a centralized distribution as well. Dentists are basically concentrated in the coastal departments. Moquegua has the highest rate of dentists per inhabitant, 7 times greater than that of Cajamarca, the department with the lowest rate. Of all dentists in Peru, 44.25% are found in Lima (see Table 25).

13 There are no statistics regarding the geographic distribution of health workers in the private

sector. Nor is there available information regarding the health workers in the armed forces or PNP, for reasons of national security.

34

Table 25. Departmental Distribution of Health Professional Rate per 10,000 population, 1980-2004 Department Doctors Nurses Midwives Dentists

Lima 17,7 10,4 2,4 2,0 Arequipa 16,0 14,5 4,5 2,7 Tacna 12.7 13.4 5.6 2.5 Ica 10.3 8.8 2.6 2.1 Perú 9.9 8.0 2.9 1.3 Moquegua 9.8 14.2 6.2 3.6 Madre de Dios 8.7 9.2 7.0 1.9 Lambayeque 8.0 6.6 1.5 0.6 La Libertad 7.7 6.2 2.1 0.6 Pasco 7.5 9.3 4.8 1.3 Ancash 6.4 4.6 2.6 1.0 Ayacucho 6.4 10.6 6.2 1.8 Tumbes 6.3 5.9 3.6 1.2 Ucayali 6.2 7.1 3.8 1.0 Piura 5.7 4.1 2.9 0.7 Cusco 5.3 7.5 2.6 1.0 Junín 5.0 7.9 2.4 1.0 Amazonas 4.6 4.4 3.4 0.9 Apurímac 4.4 6.6 3.9 1.4 Puno 4.1 6.5 2.6 0.7 Huánuco 3.9 6.8 3.4 0.6 San Martín 3.8 2.9 3.2 0.5 Loreto 3.7 2.9 1.4 0.5 Cajamarca 3.7 5.6 3.3 0.5 Huancavelica 3.3 4.5 3.3 0.9 Source: MINSA – Statistics and Informatics’ Office, ESSALUD 2005, EPS 2004. Developed by IDREH

In terms of distribution by poverty level, there are 3.7 times more doctors per inhabitant in the richest quintile than in the poorest quintile. There has been a trend towards more equitable distribution, as the ratio of doctors per inhabitant for the richest versus poorest quintiles was 17:1 in 1992 and 5.54:1 in 1996. For nurses, the ratio is 1.4:1. The ratio of dentists per inhabitant, while their absolute numbers are low, for the richest versus poorest quintiles is 1.43:1. In contrast, there are actually more midwives per inhabitant in poor regions (see Figure 18).

35

Figure 18 Distribution per Quintile Health Professional Rate per 10,000 population, 2004

02468

101214161820

Q1(poorest)

Q2 Q3 Q4 Q5(richest)

Doctors Nurses Obstetrics Dentist

Source: MINSA – Statistics and Informatics Office, ESSALUD 2005, EPS 2004. Developed by IDREH

Regional distribution. An analysis of the regional distribution of salary budgets, as illustrated in Table 26, shows that over 20% of the total budget is used to fund salaries and social benefits. Furthermore, this relative proportion has increased from 22% in 2000 to 27% in 2007 – there was an increase in total public budget (80%) and but an even greater increase in salary schedules (120%). As this tendency demonstrates, on the one hand, there is a sustained interest on the part of the political authorities in improving salaries, but on the other hand, this means that the budget has become more rigid in this same proportion at least.

Of the total salaries paid within the public sector, about 50% were through Regional Governments. Although regional salaries have increased by 100% (from S/. 3,230 million in 2000 to S/. 6,372 million in 2007), the weight relative to the total public sector salaries paid (S/. 6,283 and S/. 13,997 million, respectively), has decreased from 51% to 46%. This finding demonstrates that National Government (Ministries and Public Decentralized Organisms) policies had a greater impact on increasing salaries than has the incomplete decentralization policy, including financing in the department of Lima.14

Table 26 Spending on Public Sector Salary Schedule by Country Region, 2000–2007 (millions of current S/.)

Country Region 2000 2001 2002 2003 2004 2005 2006 2007

Total public sector 28,636.58 34,542.18 35,307.81 41,468.35 42,274.67 45,062.01 49,906.69 51,721.89

Total salaries and obligations 6,283.03 9,270.61 9,875.74 10,610.02 11,416.38 12,443.82 13,499.11 13,997.43

Total salaries in regions 3,230.06 3,358.03 3,892.26 4,222.25 5,010.29 5,614.79 6,043.83 6,372.41

Total health salaries in regions 449.50 461.51 562.71 596.34 744.45 881.42 957.06 978.59 Amazonas 7.37 8.05 10.13 10.47 13.47 15.78 16.87 17.12 Ancash 30.79 31.85 37.72 39.31 48.61 56.35 60.65 60.88 Apurimac 12.08 11.92 15.04 16.19 20.74 24.51 27.93 29.25 Arequipa 37.97 38.85 48.26 51.21 65.13 79.94 86.07 85.83 Ayacucho 17.52 17.95 22.34 23.73 28.91 34.03 41.75 46.74 Cajamarca 17.68 18.16 22.04 23.75 28.86 37.28 40.37 40.90

14 To convert S/. to aprox. equivalent in USD, divide by 3.

36

Table 26 Spending on Public Sector Salary Schedule by Country Region, 2000–2007 (millions of current S/.)

Country Region 2000 2001 2002 2003 2004 2005 2006 2007

Cusco 27.10 27.81 33.37 36.39 47.49 54.29 58.86 59.50 Huancavelica 8.83 9.43 11.14 11.39 15.54 21.36 20.36 21.08 Huanuco 16.45 15.73 19.02 20.01 24.58 29.10 32.05 31.40 Ica 28.05 28.94 36.72 37.90 47.18 57.83 58.25 58.88 Junín 36.66 37.48 46.06 48.02 60.84 68.00 76.66 73.69 La Libertad 33.02 33.81 40.54 41.26 53.12 63.71 68.94 72.74 Lambayeque 17.60 18.38 22.71 23.85 28.66 34.02 37.05 37.22 Loreto 17.96 18.26 21.48 23.45 30.30 36.05 39.87 40.54 Madre De Dios 5.18 5.78 7.87 8.34 10.93 12.19 13.98 13.34 Moquegua 8.72 9.04 10.71 12.50 15.24 17.96 19.07 19.28 Pasco 6.08 6.24 7.48 7.80 10.74 12.76 13.59 13.73 Piura 26.37 26.99 31.93 34.93 43.41 54.19 59.24 63.51 Puno 41.95 42.93 52.81 56.66 66.00 73.99 79.27 79.86 San Martin 19.73 20.09 23.57 24.30 30.10 34.74 37.42 37.75 Tacna 14.25 14.75 17.56 18.71 22.17 26.05 27.88 28.43 Tumbes 5.89 6.05 7.63 8.42 10.97 13.43 14.03 19.46 Ucayali 12,25 13,05 16,58 17,76 21,44 23,85 26,91 27,46 Source: Ministry of Economics and Finance’s Consulta Amigable (http://ofi.mef.gob.pe/transparencia/default.aspx)

The regional distribution shows that salaries are fairly proportional to population size, although the internal distribution (provinces and districts) is not homogenous, due to the tendency of human resources to concentrate in urban zones at the expense of rural zones. From 2000-2007, the public budget that financed the salaries and social benefits of health workers has also increased in each region by about 100%.

Composition of health salaries. In the public sector, the salary schedule for administrative workers and care providers is framed by the system established by Legislative Decree No. 276 (DL 276), which contains a section setting forth a “Universal Salary System (SUR).” Laws specific to certain professions provide additional benefits to those established by DL 276. In addition, other supplementary benefits and bonuses have been provided through other means as a way of recruiting and retaining personnel.

As with most public sector matters, the salary schedule is complex and not very transparent. Salaries are formally controlled by DL 276, but there have been numerous modifications and addendums. The SUR rewards seniority and strives for equalization. However, the “universal system” was never truly implemented as such. The emphasis on equalization was impeded by the disparate salaries in place before DL 276 was ratified (in 1984), and then by the hyperinflation and fiscal crisis, which forced the system to adopt emergency measures that further complicated and confused the system. The need to increase salaries without increasing the fiscal cost, due to mandates regarding leveling of retirement age as established in decree 20530, led to the practice of providing stipends, bonuses, and other types of payments.

The SUR organizes salaries into three main components: base salary, bonuses, and benefits. Because of the hyperinflation that Peru has experienced, base salaries have become inconsequential compared with the stipends, general increases, and sectoral increases (some of which are salary-based and subject to discounts and others not). Of the various bonuses, two stand out:

• Bonuses for “Guard Work,” defined as “activity carried out in response to a need, including multiple activities and/or activities distinct from everyday duties, not to exceed 12 hours.” Guard work is compulsory for professional

37

care providers and non-professional provider under 50 years old. Even if the duties are completed during the normal workday, workers receive a bonus. Law 28,167 gives special treatment to bonuses for ordinary hospital guards and establishes a pay scale for each type of guard: regular day shirt, regular night shift, regular Sunday and holiday day shifts, and regular Sunday and holiday night shifts.

Table 27 Amount of monthly Bonuses for Ordinary Public Hospital Guards by Health Professional, 2005

Health Professional Regular Day Regular Night Shift

Regular Sunday and Holiday Day

Shift

Regular Sunday and Holiday Night Shifts

Other professionals 59.70 79.60 99.50 119.40

Professionals: doctors, nurses and obstetrics 44.03 58.70 73.38 88.05

Technician 36.67 47.56 59.45 71.34

Auxiliaries 34.71 46.28 57.85 69.42 Source: Law 28167

• Equalizing salaries to the levels within Social Security – ESSALUD. The medical workers law established in 1990 set out to gradually bring up the salaries of physicians working in the health sector to the levels of salaries within the Peruvian Social Security Institute (now ESSALUD). In order to comply with this disposition, the concept of “IPSS Leveling” was introduced; however, salaries failed to equalize in the 1990s. In recent years, the country has made significant progress towards equalization. This topic has been a major issue during labor conflicts in the sector. Now, other professions are demanding the same benefit. The goal of fixed, homologous salaries should be reconsidered, given that the sources of financing are completely different.

Taking into account these various salary schedules, including base salaries and the multiple bonuses and stipends, the remuneration of physicians and other health professionals can be broken down as shown in Table 28 and Table 29.

38

Table 28 Detail Medical Monthly Remuneration Schedule by Public Institution, 2006 (in S/.)

Institution Career Level Basic

Remuneration (DS 028-89)

Basic Remuneration (DU 105-2001)

Reunified Remuneration(*)

Transport and Food

Compensation for Inflation (DL 559)

Special Allowance (DU 098-98 + DU

073-97 + DU 011-99)

Allowance 1st Segment DS 047-

2005/EF

Allowance 2nd Segment DS 047-

2005/EF

Allowance 3rd Segment DU 002-

2006

Allowance 4th Segment DU

003-2006 N5 0.06 50.00 45.84 5.01 1,598.04 924.89 410.00 100.00 200.00 116.00

N4 0.06 50.00 42.44 5.01 1,527.78 883.57 380.00 100.00 200.00 90.00

N3 0.05 50.00 40.52 5.01 1,465.76 847.70 360.00 100.00 200.00 40.00

N2 0.04 50.00 39.61 5.01 1,398.50 809.47 335.00 100.00 200.00 -

Doctors from MINSA and Public Decentralized Organization

N1 0.04 50.00 37.80 5.01 1,301.27 753.91 320.00 100.00 200.00 -

N5 0.06 50.00 45.84 5.01 1,598.04 924.89 560.00 100.00 200.00 116.00

N4 0.06 50.00 42.44 5.01 1,527.78 883.57 530.00 100.00 200.00 90.00

N3 0.05 50.00 40.52 5.01 1,465.76 847.70 510.00 100.00 200.00 40.00

N2 0.04 50.00 39.61 5.01 1,398.50 809.47 485.00 100.00 200.00 -

Doctors from Regional Governments

N1 0.04 50.00 37.80 5.01 1,301.27 753.91 470.00 100.00 200.00 - (*)This term represents the aggregation of several basic salary raises given out from the 1980s through 1991. Source: Remuneration System PHL 2006 – MINSA

Table 29 Detail Public Non Medical Professional Monthly Remuneration Schedule, 2006 (in S/.)

Occupation Career Level

Basic Remuneration

Reunified Remuneration

Special Bonus

Transport and Food

Life Expense

Special Allowance

Transport and Food

Special Bonus (Law 25671)

Allowance DS 081-93

Allowance DS 019-94

Allowance DU 080-94

Allowance DU 098-96

Allowance DU 073-97

Allowance DU 011-99

Allowance DU 105-2001

Allowance DS 122-2005

Allowance Law 28701 Total

14 0.06 42.44 28.35 5.01 47.00 35.00 3.10 60.00 70.00 124.00 156.00 91.35 105.97 122.93 50.00 50.00 991.21

13 0.05 40.58 27.79 5.01 47.00 35.00 3.10 60.00 70.00 120.00 151.00 89.52 103.85 120.46 50.00 50.00 973.36

12 0.05 39.64 27.51 5.01 47.00 35.00 3.10 60.00 70.00 118.00 148.00 88.53 102.69 119.12 50.00 50.00 963.65

11 0.04 38.69 27.22 5.01 47.00 35.00 3.10 60.00 70.00 115.00 144.00 87.21 101.16 117.35 50.00 50.00 950.78

Nurse

10 0.04 37.66 26.91 5.01 47.00 35.00 3.10 60.00 70.00 112.00 141.00 86.04 99.80 115.77 50.00 50.00 939.33

V 0.06 42.44 28.35 5.01 47.00 35.00 3.10 60.00 70.00 124.00 156.00 91.35 105.97 122.93 50.00 50.00 991.21

IV 0.05 40.58 27.79 5.01 47.00 35.00 3.10 60.00 70.00 120.00 151.00 89.52 103.85 120.46 50.00 50.00 973.36

III 0.05 39.64 27.51 5.01 47.00 35.00 3.10 60.00 70.00 118.00 148.00 88.53 102.69 119.12 50.00 50.00 963.65

II 0.04 38.69 27.22 5.01 47.00 35.00 3.10 60.00 70.00 115.00 144.00 87.21 101.16 117.35 50.00 50.00 950.78

Obstetrics

I 0.04 37.66 26.91 5.01 47.00 35.00 3.10 60.00 70.00 112.00 141.00 86.04 99.80 115.77 50.00 50.00 939.33

39

Table 29 Detail Public Non Medical Professional Monthly Remuneration Schedule, 2006 (in S/.)

Occupation Career Level

Basic Remuneration

Reunified Remuneration

Special Bonus

Transport and Food

Life Expense

Special Allowance

Transport and Food

Special Bonus (Law 25671)

Allowance DS 081-93

Allowance DS 019-94

Allowance DU 080-94

Allowance DU 098-96

Allowance DU 073-97

Allowance DU 011-99

Allowance DU 105-2001

Allowance DS 122-2005

Allowance Law 28701 Total

Dentist, Pharmaceutical Chemist

VIII 0.06 42.44 28.35 5.01 47.00 35.00 3.10 60.00 70.00 124.00 156.00 91.35 105.97 122.93 50.00 50.00 991.21

Health Engineer Doctor, VII 0.05 40.58 27.79 5.01 47.00 35.00 3.10 60.00 70.00 120.00 151.00 89.52 103.85 120.46 50.00 50.00 973.36

Vet, Biologist VI 0.05 39.64 27.51 5.01 47.00 35.00 3.10 60.00 70.00 118.00 148.00 88.53 102.69 119.12 50.00 50.00 963.65

Psychologist, Nutritionist V 0.04 38.69 27.22 5.01 47.00 35.00 3.10 60.00 70.00 115.00 144.00 87.21 101.16 117.35 50.00 50.00 950.78

Social Assistant, Medical Technologist IV 0.04 37.66 26.91 5.01 47.00 35.00 3.10 60.00 70.00 112.00 141.00 86.04 99.80 115.77 50.00 50.00 939.33

Nutritionist, Clinical Laboratories, VII 0.05 34.34 21.54 5.01 32.40 42.60 3.10 60.00 70.00 105.00 130.00 80.65 93.55 108.52 50.00 50.00 886.76

Physiotherapist, Occupational Therapist

VI 0.05 34.04 21.45 5.01 32.40 42.60 3.10 60.00 70.00 103.00 129.00 80.10 92.92 107.79 50.00 50.00 881.46

V 0.05 33.75 21.36 5.01 32.40 42.60 3.10 60.00 70.00 101.00 127.00 79.40 92.11 107.32 50.00 50.00 875.10

IV 0.04 33.45 21.27 5.01 32.40 42.60 3.10 60.00 70.00 99.00 124.00 78.54 91.11 105.68 50.00 50.00 866.20

III 0.04 33.15 21.18 5.01 32.40 42.60 3.10 60.00 70.00 97.00 122.00 77.84 90.29 104.74 50.00 50.00 859.35

Technologist Specialized in X-Rays, V 0.04 33.75 21.36 5.01 32.40 36.60 3.10 60.00 70.00 101.00 127.00 78.44 90.99 105.55 50.00 50.00 865.24

Technologist Specialized in Laboratories and Physiotherapy

IV 0.04 33.45 21.27 5.01 32.40 36.60 3.10 60.00 70.00 99.00 124.00 77.58 89.99 104.39 50.00 50.00 856.83

III 0.04 33.15 21.18 5.01 32.40 36.60 3.10 60.00 70.00 97.00 122.00 76.88 89.18 103.45 50.00 50.00 849.99

II 0.03 32.86 21.09 5.01 32.40 36.60 3.10 60.00 70.00 95.00 120.00 76.17 88.36 102.50 50.00 50.00 843.12

I 0.03 32.39 20.95 5.01 32.40 36.60 3.10 60.00 70.00 90.00 118.00 74.96 86.95 100.56 50.00 50.00 830.95

Source: Remuneration System PHL 2006 – MINSA

40

During the 1990s, Legislative Decree No. 728 established that the private sector’s labor regime was to be applied to the public sector, in response to various needs. One of these was the need to avoid the costs of leveling the retirement age as directed by DL 20,530 and another was the complexities of the SUR. Furthermore, in the health sector in particular, the application of this regimen was motivated by the desire to be able to use flexible contracts and rapidly add personnel to primary care facilities as a way of significantly broadening coverage for this service. In the health sector, this regimen is made up of public institutions, but whose employees have a work regimen similar to that of private employees. This regimen includes workers within the Superintendence of Health Service Providers, the Integrated Health System, and, even before the 2006-2007 appointments, the Associations of Local Communities for Health Administration (CLAS). El CLAS es un régimen mixto, en el que los recursos son públicos y los operadores son Personas Jurídicas privadas.

The institutions included in the regimen described above typically contract personnel via open competition, even though the norms governing the regimen do not require the institutions to do so. Similarly, although there is no standardized career structure, most public entities under this regimen have developed their own promotion structures. In addition to open-ended contracts, this regimen allows fixed-term contracts with a maximum duration of 5 years.

The management of personnel in terms of dismissals in these entities is more flexible than in the public sector, and job stability is limited by disciplinary actions, capacity, and institutional organization. However, this regimen is the most favorable for the worker in terms of benefits (see Table 30). The personnel that fall under this regimen enjoy a series of benefits in addition to their salaries: 30 days paid vacation per year; two merit bonuses per year; and one bonus per year for time served. These workers have legal protection against arbitrary firings (prior to dismissal the employer must follow a process in which the worker has the right to present a statement, and dismissals without cause are subject to fine). They are also covered by social security. These benefits also apply to fixed-term contract workers.

Table 30 Normative comparison Area Legislative Decree 276 and special laws Legislative Decree 728”

Legal workday

Professionals: 6 hours per day Others: 7:45 hours per day

8 hours per day

Overtime hours

Professionals: receive “Guard Work” bonuses Others: no overtime pay

Bonus of 50% over of regular rate of pay

Work on holidays

Professionals: receive larger “Guard Work” bonuses Others: no

Double pay for holiday work

Vacations 30 days per year May accrue vacation days over 2 periods Unused vacation days are payable No penalty for failing to use vacation days No compensation for incomplete vacations

Also 30 days per year May accrue vacation days only with permission Unused vacation days are payable Penalty for failing to use vacation days Compensation for incomplete vacations

Christmas and Independence day bonuses

amount determined by MEF A full salary

Bonuses for seniority

One bonus per year, over and above regular salary One bonus per year. Deposited piecemeal Una remuneración por año. Se deposita por partes en entidad financiera.

Life insurance No Yes, after 4 years of service Causes for dismissal disciplinary actions, inefficiency, or ineptitude (the last

2 causes are not used in practice) Dismissal with just cause (disciplinary action or for incapacity); and Dismissal without cause, with severance pay

Procedure for dismissals

administrative process undetaken by a disciplinary committee, with a worker’s representative

Procedure: communication with worker to present charges, except in case of a flagrant offense Dismissals for poor performance: term of 30 days for worker to improve

Reinstatement Possibility of reinstatement, if worker wins case against the complaint

No possibility of reinstatement, except in case of unfair dismissal (union members, pregnancy, etc.)

41

Table 30 Normative comparison Area Legislative Decree 276 and special laws Legislative Decree 728”

Pay for dismissals Severance pay for dismissals Severance pay for arbitrary dismissal: 1½ salary, with a maximum of 12

Source: Authors

This regimen was implemented under the framework of the CLAS model. In this model, management of primary care facilities was turned over to local entities. MINSA cedes use of primary care facilities either directly to the CLAS or through the regional governments and their respective Regional Health Departments (DIRESAs), according to a management contract that includes the active participation of the local governments. MINSA agrees to transfer funds as a “social subsidy” to support the facilities. With these funds, CLAS contracts personnel under the private regimen, with its inherent advantages of flexibility, stability, and social protection. The co-management arrangements developed under the CLAS model have stimulated active community participation and have produced valuable lessons learned for non-for-profit civil associations.

Under this arrangement, a contract worker may be better-paid than the permanent employees within the career structure, to compensate the worker for difficult working conditions and lack of job stability. The personnel contracted by the CLAS work alongside personnel contracted under other regimes in the local facilities. In recent years, however, the salaries of permanent employees have risen, via bonuses and payments “for productivity,” to the point that they are practically equal to or even higher than those of the “DL 728” personnel.

Types of contracts. There are more types of contracts in the health sector than in the rest of the Peruvian public sector combined. Health professionals (physicians and others), technicians, aides, and administrative workers were incorporated into the system without being incorporated into the career structure, at different salary levels and with difference funding sources. The types of contracts are as follows:

• Contracts under DL 276 • Contracts for “Non-Personal Services” (NPS): • Financed by the Public Treasury • Financed directly with funds collected by each entity • Financed with SIS funds • Financed with funds provided by the municipality

The majority of contract workers fall under the “Non-Personal Services” regimen. This was a creation improvised to get around the rigid budgetary restrictions limiting new hires, as a quick solution to a lack of human resources. It was decided that fixed-term contracts would be allowed. In some cases, it has been decided that the legal basis for these contracts is the Civil Code, while in others, it is the law of Contracts and Acquisitions of the State. In either case, there is no formal labor relationship, and therefore labor rights do not apply, such as a maximum number of hours per shift, job stability, vacations, etc. However, the workers subject to these contracts must follow a set schedule and many even fulfill managerial responsibilities. These contracts are renewed periodically, in some cases every 3 months, in others annually, and only if there is a vacant position budgeted.

During the 1990s, the personnel requirements in the sector increased, thanks to various programs to target spending, such as the Basic Health for All Program (PSBPT) (starting in 1994), the CLAS (starting in 1994), the program for itinerant teams in remote zones (ELITES, today called AISPED)(starting in 2000). These programs used the Non-Personal Service worker contracting mechanism to get around budgetary restrictions. In some ways, this regimen had the advantage of being an expeditious, temporary measure to cover personnel shortages at a time in which these services were urgently needed in extremely impoverished regions.

42

furthermore, these personnel were initially better paid than their permanent counterparts. The reason for the higher level of pay was to compensate these workers for lack of job stability, although the difference in pay has decreased over time. Contract workers, like permanent employees, tend to prefer to leave isolated regions after a few years and gravitate towards urban zones. If the transfer is not approved, they tend to leave their post.

Over the ten-year period, a number of workers began aspiring to less precarious working conditions. The decreased difference between their pay and that of permanent employees exacerbated their discontent. Incorporating these workers into the permanent employee career structure became inevitable, as no other solutions were proposed.

According to recent laws, this modality will be disappearing. The General Law of the National Budgetary System, Law 28,411, established a guiding principle that “contract workers or non-personal service providers who have been performing permanent functions shall be gradually incorporated into the public system as permanent employees, in such a way as to avoid expending additional Public Treasury resources.” The Budgetary Law for 2005 established that non-personal service contracts may only be authorized for temporary functions, which means that facilities cannot use the NPS mechanism for activities or functions equivalent to those performed by permanent employees. It does permit, however, the successive renewal of contracts in place prior to December 31, 2003, as well as the replacement of personnel who provided services before that date. Therefore, the NPS personnel and positions already in existence will be maintained, but new contract personnel may not be hired to perform permanent functions.

On the other hand, nearly all medical personnel who were hired as contract workers have been incorporated into the career structure. However, there are still significant numbers of care providers who are contract workers, striving to become permanent employees. According to data from the Ministry of Health, there are currently 26,780 persons working as contract employees (Regimen 276 or NPS), nearly 11,000 of whom work in the regions and 15,789 in Lima.

Evolution and comparison of salaries of health workers. Until the 1970s, the health sector had relatively high salaries and good working conditions, and health professionals enjoyed social prestige, making the health careers popular among university applicants. In the 1980s, however, the number of training programs proliferated, salary disputes erupted, and health professionals went on long strikes each year, all signs that the professions were losing their prior status. In the 1980s, the health sector became ungovernable due to labor conflicts. The strikes ended in 1990, when the health workers’ law homologized MINSA salaries with those of Social Security employees.

Currently, in general physicians earn more than other professionals and technical personnel in the health sector. Generally, their salaries are triple those of the other professionals, and quadruple those of technicians and aides. As has been true for decades, salaries are highest for all professionals within ESSALUD, followed by those within MINSA (See Table 31).

Table 31 Salary Schedule in Health Sector by Public Institution, 2006 (in current S/.) Occupation Career Level MINSA ESSALUD Air Force Army

N5 3,749.84 2,874.24 3,436.53 N4 3,578.86 2,743.47 3,265.18 N3 3,409.04 2,629.87 3,095.05 N2 3,237.63 2,509.36 2,926.05

Doctor

N1 3,068.03 3,375.00 2,333.55 2,752.58 14 991.21 1,052.52 1,067.05 13 973.36 995.26 1,031.51 12 963.65 988.82 10,009.72

Nurse, Obstetrics

11 950.78 959.85 983.72

43

Table 31 Salary Schedule in Health Sector by Public Institution, 2006 (in current S/.) Occupation Career Level MINSA ESSALUD Air Force Army

10 939.33 2,154.00 925.96 955.37 Dentist, Pharmaceutical Chemist VIII 991.21 1,052.52 1,067.05 Health Engineer Doctor, VII 973.36 995.26 1,031.51 Vet, Biologist VI 963.65 988.82 10,009.72 Psychologist, Nutritionist, V 950.78 959.85 983.72 Social Assistant, Medical Technologist IV 939.33 2,154.00 925.96 955.37

A 659.95 2,108.00 942.73 864.99 B 651,75 1.520,00 876,55 849,96 C 653,69 842,67 829,52 D 635,56 819,05 811,23 E 631,21 807,03 791,90

Technologist Assistant

F 630,86 800,24 782,23 A 615,26 1.200,00 737,62 B 615,07 1.032,00 728,74 C 614,91 719,89 D 614,73 657,02 E 614,56 644,51

Assistant

F 613,96 Source: MINSA Human Resources Management Office

The difference in pay by rank on the salary schedule is most notable for physicians (more than 20% on average), slight for other professionals, and practically inexistent among technicians.

ESSALUD salaries are higher than those provided by MINSA. For physicians (professional P1), they are nearly 1.5 times higher, and for other professionals (P2), 2.2 times higher.

Table 32 Average ESSALUD worker’s salary by occupational group, 2005

Occupational Group Levels Amount S/. (1)

Executive

E2 E3 E4 E5 E6

11,000 8,500 6,500 4,580 3,325

Professional

P1 P2 P3 P4

3,375 2,154 1,726 1,252

Technical T1 T2

2,108 1,520

Auxiliary A1 A2

1,200 1,032

Source: Salary Schedules ESSALUD 2005 1/ Salaries DS 018 + Bonus DS 019

The public budget for salaries (including bonuses and estimated obligations) has doubled from 2000 to 2007. The budget for NSP contracts has also increased considerably although it has not doubled.

44

A comparative analysis of the public budget for salaries in various sectors shows that the budget has increased 2.5 times in the health sector, 1.7 times in education, 1.24 in defense and security, and 2.0 times in justice. Despite these increases, the total public budget has increased by only 50% for education, 23% for defense and security, and 15% for health.

Table 33 Spending on Salary Schedule by Principal Sector, by Expense Category, 2000–2007 (in millions of current S/.)

Function Expense Category 2000 2001 2002 2003 2004 2005 2006 2007

Personal and Obligations 813.1 1,051.4 1,342.2 1,557.1 1,764.0 1,864.1 2,022.9 2,071.6 Health and Drainage

Non Personal Services 215.7 224.5 253.7 279.0 273.5 255.2 284,0 315.6 Personal and Obligations 3,875.1 4,047.8 4,618.7 5,015.8 5,534.2 6,024.1 6,505.3 6,864.8

Education and Culture Non Personal Services 143.3 155.6 167.7 174.7 176.3 177.5 186.9 219.4 Personal and Obligations 2,554.3 2,476.4 2,472.6 2,541.2 2,562.5 2,890.6 3,123.5 3,186.5

Defense and Security Non Personal Services 2.2 19.8 28.0 25.8 30.1 36.5 42.5 47.2 Personal and Obligations 297.6 309.9 348.2 393.9 428.4 477.5 555.7 607.1

Justice Non Personal Services 30.6 36.6 42.8 43.9 41.2 48.1 48.7 66.7 Personal and Obligations 6,283.0 9,270.6 9,875.7 10,610.0 11,416.4 12,443.8 13,449.1 13,997.4

Total Non Personal Services 698.0 754.6 816.4 813.5 830.0 898.8 1,084.4 1,095.9

Source: Ministry of Economics and Finance’s Consulta Amigable (http://ofi.mef.gob.pe/transparencia/default.aspx)

No uniform statistics regarding salaries and income are available for Peru. The National Institute of Statistics and Information – INEI – carries out a trimestral salary survey on a national level in urban areas, covering the 26 largest cities in Peru. The survey includes a sample of workers in the private sector in companies with at least 10 employees. Using this information, MEF created the following table:

Table 34 Public Workers: Average Monthly Income in current USD Profession 2001 2002 2003 2004 % variation

2004/2001

Teachers 181.29 195.02 225.91 263.93 45.6%

University Instructors 399.65 398.56 446.08 486.84 21.8%

Judges 1,327.78 2,560.80 2,589.10 2,638.69 98.7%

Police 290.47 303.90 336.57 372.31 28.2%

Military 290.47 303.90 336.57 372.31 28.2%

Physicians 817.82 1,017.44 1,116.35 1,164.09 42.3%

Source: MEF. Conversion to US$ according to official exchange rate of the Central Reserve Bank.

National survey analysis. We sought to analyze data from the Encuesta Nacional de Hogares ENAHO (National Household Survey) and the Encuesta Permanente de Empleo (Continuous Labor Survey). However, the health worker sample sizes in these surveys were too small to draw any useful conclusions. For example, the number of medical doctors interviewed in the Encuesta Permanente de Empleo each year was between 4 and 10, and the number of nurses was between 1 and 6 (Table 35). In the ENAHO, there were only 2 medical doctors and 4 nurses interviewed (Table 36). The estimation of income statistics, or the analysis distributions by income decile, would turn out very imprecise if we used such small samples. For example, the distribution of health workers and education workers across income deciles is not smooth, like in Chile. Although health and education workers seem to belong in the richer segments of the population, the oscillations seen in the distribution could be very well caused by the large variance inherent to small samples (Figure 19). Also, consider that this Figure grouped all different health workers together, in addition to summing the samples from 2003 to 2007, in an attempt to make the sample bigger.

45

Table 35 Number of individuals interviewed in the Encuesta Permanente de Empleo, 2003-2007 Type of worker 2003 2004 2005 2006 2007

Health professionals (except nursing) 4 7 10 6 4

Nursing and midwifery professionals 1 1 6 2 3

College, university and higher education teaching profession 1 2 3 4 2

Secondary education teaching professionals 1 1

Primary education teaching professionals 3 2 1 1

Special education teaching professionals 4 4 6 3 2

Other teaching professionals 34 40 41 42 36

Modern health associate professionals (except nursing) 13 23 7 8 3

Nursing and midwifery associate professionals 3 2 2 1

Primary education teaching associate professionals 1

Pre-primary education teaching associate professionals 2 2 1

Special education teaching associate professionals 1

Other teaching associate professionals 1

Source: Authors based on the Encuesta Permanente de Empleo, 2003-2007

Table 36 Number of individuals interviewed in the ENAHO 2005 Type of worker N

Health professionals (except nursing) 2

Nursing and midwifery professionals 4

College, university and higher education teaching profession 7

Secondary education teaching professionals 0

Primary education teaching professionals 1

Special education teaching professionals 30

Other teaching professionals 74

Modern health associate professionals (except nursing) 11

Nursing and midwifery associate professionals 4

Primary education teaching associate professionals 0

Pre-primary education teaching associate professionals 0

Special education teaching associate professionals 0

Other teaching associate professionals 0

Source: Authors based on the ENAHO 2005

46

Figure 19 Distribution of health and education workers by decile of income per capita (average between 2003 and 2007)

0

5

10

15

20

1 2 3 4 5 6 7 8 9 10

Decile of income per capita

Num

ber

of w

orke

rs (

thou

sand

s)

Health workers Education workers

Fuente: Encuesta Permanente de Empleo.

Governance of salary policy. In the past 15 years, the human resources for health field in Peru has become disordered, resulting in disparities between needs, demand, and supply. Today the education supply in health produces graduates at a higher rate than the demand for practitioners, yet the supply at universities and other institutes remains lower than the demand for education in health. As a result, the institutes continually increase the number of slots per class.

There is a mismatch between the labor market and the education system. If there are no positions available in the labor market, the health education system is not responding to the real demand for services but rather the enormous demand for education of high-school graduates. The result is that a large number of graduates emigrate and a number of practitioners remain unemployed. Higher education is mainly financed privately.

Periodically Peruvian society broadens the coverage of its health system. The effective demand for service, then, has expanded as the health system has been democratized. A new development during the most recent expansion, from 1993 to 2005, is that there has been a greater demand for human resources. From 1993 to 1007, there was an extensive and intensive exploitation of resources, symbolized by the launching of the Basic Health Program for All (PSBT) in 1994 the increase in financing, human resources, and facilities. In 1998, programs to cover students, mothers, and children were introduced (predecessors to the current Integral Health Insurance, SIS). These new programs increased productivity and output by taking advantage of available installed capacity and the intensively exploiting human resources. In this way, MINSA and ESSALUD have been able to address changing cultural patterns of accessing health services, as the population now seeks care at a higher rate than previously. It should be noted, however, that in recent years there has been an increase in income, although the increases have all been in bonuses rather than base salary, because of fiscal restrictions against increasing pensionable salary.

Human resources for health have increased over the past 15 years as well. In 1992, the labor force working within MINSA and ESSALUD was approximately 66,000 workers; by 1996, this figure had increased to 101,000, and today it has risen to 128,000. The Peruvian health system encompasses a total of about 139,000 workers. This labor force is financed with an annual amount equivalent to 4.7 of Peru’s Gross Internal Product, which is below Latin

47

America and the Caribbean’s average of 7.3%. Per capita spending on health has remained stable over the past 10 years. Currently spending is at 97 dollars per person, or around 2610 million dollars per year. Of that total, households spend 37.3%, companies spend 25.05%, and the government spends 24.0%.

Until the 1970s, workers in the health sector enjoyed relatively high salaries, a reasonable workload, and high social status, making health careers attractive to students applying to universities. In the 1980s, however, with the proliferation of training institutes, along with the massification of graduating health professionals and containment of salaries of the health workers, health professionals experienced a decline in their situation. They resisted by staging large-scale annual strikes. In the 1980s, the health sector became ungovernable due to labor conflicts. This age of strikes ended in 1990 with the Law of Medical Work, which made MINSA salaries comparable to those of workers in the Social Security system.

However, in the 1990s, the balance continued to be disturbed, in both the labor market and the health education field. In the labor market, labor unions agitated in defense of appointments to positions and standardized salaries. In the health education arena, schools began operating like businesses, responding to the demand for education rather than the need for professionals.

During the administration of President Alberto Fujimori (1990-2000), labor strikes began to lose their effectiveness. At the same time, health professionals and workers began to be contracted rather than appointed, and salaries were broken down into various parts. There was a base salary, plus additional income from funds collected directly from the consumer, as well as bonuses and salaries from second or third jobs. This development created a dispersion of the labor force, with workers seeking additional sources of income rather than concentrating their efforts.15

The result of all of these occurrences for the labor market has been an increase in union conflict and a climate of relative dissatisfaction. Today 59.4% of health personnel feel that their salary or pay is too low for the job that they do. It is no coincidence that the frequency of labor strikes in health has risen. Over 81.25% of the demands that result in a labor strike are related to sector economic policies, especially salary raises, other benefits, and calls to increase the health sector budget.

6.4 Incentives and policies to stimulate human resources

Incentives. A 2003 MINSA study of employee satisfaction investigated satisfaction regarding: current work, work in general, interaction with immediate supervisor, opportunities for advancement, salary and incentives, interaction with colleagues, and work environment.

15 The authors have not been able to obtain evidence to support this view, but it is consistent with

information obtained in the interviews conducted.

48

Figure 20 Internal User Satisfaction, MINSA 2003

35 3623 19 9

24 30

37 34

3326

16

3133

13 1318

19

19

2016

11 1117

21

26

17 135 6 10 16

309 8

0%

20%

40%

60%

80%

100%

Current job Work ingeneral

Interactionwith direct

chief

Progressoportunities

Salaries andincentives

Relationshipwith work

colleagues

Workingenvironment

Strongly agree Somewhat agree Indiferent Somewhat disagree Strongly disagree

Source: Ministry of Health. External and Internal User Satisfaction Survey and Health Workers Satisfaction Survey 25 DISAs. Lima, January 2003.

The area with the lowest satisfaction ratings was salaries and incentives, with only 25% either totally or mostly satisfied, followed by opportunities for advancement, with 45%. When employees were asked about their perceptions in these two areas, they noted that they felt the institution failed to meet their expectations regarding monetary and non-monetary compensation.

Figure 21 Perception of Progress Opportunities, Salaries and Incentives, MINSA 2003

19,5 17,7 7,9 9,6

25,4 27,5

12,6 20,2

18 19,4

16,820,3

20,3 20,7

24,328

16,8 14,738,4

21,9

0%10%20%30%40%50%60%70%80%90%

100%

Trainingoportunities on

integral care

Trainingoportunities on

humandevelopment

Salary is adequatefor my job

Concerns aboutstaff needs

Strongly agree Somewhat agree Indiferent Somewhat disagree Strongly disagree

Source: Ministry of Health. External and Internal User Satisfaction Survey and Health Workers Satisfaction Survey 25 DISAs. Lima, January 2003.

The main incentive for a worker is salary. Salary raises are traditionally made either to maintain recruitment ability in times of inflation or in response to labor union pressures.

One way to obtain a raise is to be promoted. According to law, promotions are not automatic. In addition to serving in a post for a given time, Law 23,536 indicates that a worker must undergo an evaluation to obtain a promotion, with satisfactory mark scores in the following areas: professional qualification, personal evaluation, work experience, and minimum time at previous level of career structure. The law also indicates that every year there should be an open contest for promotions “if there are vacancies and available funds.” It should be noted

49

that the career structure is organized by levels and not by position; therefore, promotions do not necessarily involve a change in function.

However, these regulations have never been applied. The budgetary laws did not explicitly prohibit promotions, but it did impede them. The norms require that every raise or salary adjustment be authorized by supreme decree of the MEF.

The medical workers’ law passed in July of 2001 resolved the problem of “career freezing” by instituting automatic promotions. The first disposition specified that physicians should be incorporated into the career structure according to years of service accumulated by July 2001:

• Level 1: up to 5 years of service • Level 2: 5 years, 1 day to 10 years of service • Level 3: 10 years, 1 day to 15 years of service • Level 4: 15 years, 1 day to 20 years of service • Level 5: over 20 years of service

Nurses, midwives, and dentists were also given a “one time only” automatic promotion according to a similar process. The norms for medical technicians did not provide any dispositions regarding promotions.

After the special process of readjustment of levels, the regulations regarding promotion of professionals were then to be applied, unless a budgetary norm suspended promotions. The regulations provided in the medical workers’ law included criteria to be used for the promotion evaluation process: length of service (30%), professional qualification (35%), and evaluation (30%). Physicians must obtain a minimum of 70 points to be promoted. According to the regulations in the administrative career law, professional qualification represents work potential, and includes education, training, and experience. Therefore, the system rewards doctors who obtain titles and certificates, participate in courses, undertake teaching roles, produce scientific work, publish, and receive awards.

The Legislative Decree 276 and the health professionals’ career law indicate that personnel are subject to periodic evaluations, which are referred to as part of the promotion process. The law goes further, assigning an additional significance to the evaluation: “The servant who fails to achieve the appropriate points for two consecutive two semesters will be removed from the career structure for professional insufficiency” (article 51), but this disposition has never been applied. On the other hand, the special laws regulating the health professions, when they refer to evaluations, only do so in relation to the promotion process.

In practice, according to information obtained from MINSA’s Office of Human Resources Management, no all health facilities carry out semestral evaluations of work performance as indicated by RM 386-91-SA. When they are carried out, the immediate supervisors are responsible for conducting them, and then they are ratified or amended by the facility superiors. These evaluations, therefore, fail to apply the objective criteria. The superiors can easily change the evaluations turned in by the immediate supervisors, either because of cronyism or to avoid problems and disputes. As a result, the evaluations as currently carried out are of little utility.

Because promotions and therefore pay raises are limited, another way to motivate human resources is using bonuses. The aides, salaried workers, and contract workers under regimen DL 276 are eligible for this type of benefit, defined in the following way: “compensation apart from the base salary, retirement benefits, or raises.” These payments are diverse:

• Food allowance: for example, some facilities may provide a package of goods valued at approximately S/.300, while others offer snack service during the work day at an average value of S/. 150.

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• Education allowance: for training • Family allowance: health services, medications, and social assistance provided

by the establishment • Various cash payments: for managerial responsibilities, specialization, and

coordination of work teams, and payments for “productivity,” known as AETAS (Extraordinary Stipends for Work in Health)

Of these, the most important are the AETAS. This is an additional payment of S/. 30 per day up to a maximum of 22 days per month (S/. 660 total). Doctors, nurses, midwives, technicians, etc. all receive an equal AETA payment; what varies is the number of AETAS that each receives. The personnel in the public hospital centers that have “better clients” receive more AETAS. Therefore, in Lima, doctors receive up to 22 AETAS each month; in the interior of the country, only 9 (S/. 270). Nurses in the interior used to receive fewer than four AETAS per month. After the September 2004 strikes the national government guaranteed the transfer of sufficient funds from the Treasury to finance at least four AETAS per month for the nurses.

None of these benefits is related to the worker’s performance. They are only asked to complete one additional hour of work beyond the normal work shift and arrive on time. Whether or not a worker receives this bonus, and its value, depends only on whether the funds are available, not on the worker’s efforts or results. The Public Treasury finances only a part of these bonuses, and the rest depends on the facility’s own funds. The more a facility is able to charge for its services (generally in urban zones, which tend to be better-off economically), the more resources they can devote to these benefits. The fact that a significant part of a worker’s compensation depends on the facility’s own funds creates incentives for the personnel to generate and increase profits. This may create barriers to the poorest members of society receiving care.

Finally, another way to increase income is through pluri-employment. Studies from all previous years have indicated that some medical workers have more than one job, but the State and Social Security positions are increasing at a slower rate than that at which new professionals are graduating. The most recent data regarding physicians who work for EPS who do not also work for MINSA or ESSALUD indicates that their average salary is S/. 3,240 (USD 1,080). Given the crisis state of private clinics and the private subsector in general, except for a small subgroup of the elite, one could assume that these doctors have casual employment elsewhere as well. The private subsector only provided care for 7.8% of the population with symptoms or illnesses in the year 2000, and the EPS covered scarcely 0.4%. Nurses and midwives, on the other hand, without position in the two principal subsectors are in an even worse situation, as they typically do not have access to positions in private facilities. This has led to international emigration.

Reports from the Office of Migration have noted that the number of emigrant physicians has risen from 4416 in 1992 to 14,130 in 2004; that is, an increase of 220%. During the same period, the number of emigrant nurses rose from 2,726 to 7,560 (an increase of 117.3%); the number of emigrant midwives from 48 to 1240 (2683%) the number of emigrant dentists from 184 to 2,212 (1147%). In the case of the nurses, the country that receives the greatest number of these emigrants is Italy, followed by the United States and Spain. This jump in the numbers of emigrant professionals reflects the disequilibrium between an oversupply of educated professionals and the demand for services in the country. Part of the education system is preparing health professionals who will work abroad.

Another expression of discontent is the number of labor conflicts. About 81.25% of the demands that lead to strikes are related to the political-economic state of the sector, in particular salary increases and other benefits and the demand for a larger budget for the health sector. Opposition to sectoral reforms was the main reason for 10.94% of the strikes. The conflicts protagonized by professional organizations and health workers in Peru has become a notable component of the social movement, in particular among labor unions of the State. Since 2003 to 2004, the number of nationwide health sector labor conflicts rose from 6 to 11.

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Policies. Peru’s policy regarding the hiring of health personnel in the public sector was based on non-personal service contracts. This was due to the fact that the norms that regulated, among other things, the mechanism by which health workers entered a health facility’s staff and staff’s salaries, became inapplicable due to the severe inflation faced by Peru in the late 1980s and early 1990s.

According to the analysts we interviewed, Peru had no policies regarding retention of health workers. The obstacles to giving out raises and promotions made the public sector less attractive than the private sector. On the other hand, as there is actually a surplus of health workers within the public system, the real problem is the lack of mechanisms to dismiss employees. It is nearly impossible to dismiss a functionary due to the policy of immobility of functionaries. However, the increased number of personnel contracted under the non-personal services modality has allowed a bit of flexibility in this area. In addition, the issue of migration and flight of trained health personnel is a severe problem on a national level, but it is decreasing as the Peruvian economy enjoys a period of robust expansion that is projected to continue.

There is also a lack of clear policies regarding the training of health functionaries. This lack of regulation makes the supply of health workers precarious. Universities, for professionals, and technical institutes, for technicians and aides, generally fail to prepare the human resources for the needs of the Peruvian labor market. Some centers have even specialized in training workers for the foreign market. For this reason, each health institution in Peru should invest in preparing training courses on health care and basic administration topics (paperwork, etc.). Until the late 1990s, there was a School of Public Medicine within the Ministry of Health that was directly responsible, on a national level, for training human resources as a function of individual or institutional demand. This institution was replaced by the Institute of Human Resources – IDREH – which focused more on regulation than on training until it ceased to exist in 2006. There is now an office within the Ministry of Health that carries out these functions.

6.5 Conclusions and recommendations

a) Number of health workers

In the last 15 years, there has been a disorganization within the field of human resources for health in Peru, resulting in gaps between need, demand, and supply. Today the supply of health education produces graduates and licensees far in excess of the demand for health services. Strangely, this already inflated supply offered by universities and institutions of higher learning is still insufficient to meet the demand for health education, and so these institutions continue to open more and more slots. This has created a mismatch between the working world and the health education world.

As a consequence, the number of human resources for health has increased over the past 15 years. In 1992, the work force of MINSA and ESSALUD comprised approximately 66,000 workers. By 1996, the number had increased to about 101,000 and now comprises 128,000 workers. The Peruvian health system as a whole employs about 139,000 people.

Because there are insufficient jobs, the health education market is responding not to the real demand for services but to the enormous demand for education by high school graduates. Therefore, a large number of graduates emigrate while many others remain unemployed.

It would be advisable to simultaneously regulate the formation of human resources and the health sector, to synchronize the need, demand, and supply of human resources according to the epidemiological profile of each region (provincial and district) of the country. Regulation should start with simplifying and organizing the current norms.

b) Salary composition

Salaries of personnel named under the public regimen (Legislative Decree No. 276) include:

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• A basic salary, which, due to the hyperinflation faced in Peru, has dwindled to an average monthly salary of little more than US$ 10.

• Bonuses, both personal (linked to seniority) and familiar (linked to number of dependents) and differentials to compensate workers for special job circumstances (managerial responsibilities, or exceptional working conditions). More recently new bonuses have been created to increase workers’ incomes; the main types include “guard work” bonuses and bonuses meant to bring MINSA and Social Security salaries in line with one another.

• Benefits, allocated based on years of service, paid holidays for Independence Day and Christmas, and compensation for years of service (2 salaries when a worker completes 25 years and 3 when he or she completes 30 years).

Salaries in the private regimen (Legislative Decree No. 728) are simpler: salary according to salary scale with benefits according to dispositions of the relevant law (social security for health, unemployment insurance, and a pension fund).

Finally, salaried workers were incorporated into service without losing their position in the salary structure, under various figures and with funding from diverse sources. The types of contracts are the following:

• Contracted under legislative decree 276 • Contracted under the non-personal service regimen (SNP):

Financed with funds from the public treasury Financed with funds directly collected by each entity Financed with SIS funds Financed with funds contributed by the municipality

In these cases, the salary consists of a net honorarium and the relevant taxes, basically the income tax.

It would be advisable to develop a unified policy for the various labor regimens (under legislative decree 276, legislative decree 728, and the multiple non-personal-service regimens) that would lead to the development of a new public salary structure for health workers. The policy should include the development of an express salary policy, according to the unified labor regimen, with transparent salaries and bonuses. This salary policy should also include the mechanisms for periodic raises for the entire health system, or better, yet, a general policy for the public sector as a whole to prevent distortions among the different sectors.

c) Evolution of salaries

There are no reliable statistics regarding the evolution of health sector salaries. An indirect measurement of their progression would be the evolution of the public budget allocated for health workers’ salaries and bonuses. The health sector grew rapidly from 2000-2007, with its budget increasing by a factor of 2.5. (Given that in this period the average increase in personnel was less than 10%, it may be inferred that salaries increased by nearly 100% over the period.) In this period the health sector’s budget (and the salaries of its personnel) grew more rapidly than did those of other public sectors such as education (which grew by a factor of 1.7), defense and security (1.24), and justice (2.0).

d) Incentives

The main incentive for a worker in Peru is salary. Salary raises are traditionally approved to maintain purchasing power in times of inflation or as a response to union pressure. One method of obtaining a raise is through promotions; therefore, individual and collective union struggles have been focused on promotions, attempting, for example, to make them independent of performance reviews. Therefore, this “incentive” become a fiscal pressure, the Laws of Public Budgets in recent years established that promotions – as well as salary raises – were prohibited.

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As promotions and therefore salary raises are restricted, the remaining form of incentive for human resources is bonuses. Employees named and contracted under the regimen of Legislative Decree 276 are eligible for bonuses defined in the following way: “of a non-remunerative nature, non-pensionable, and not the basis for calculating raises.” These payments vary widely:

• Food allowance: for example, some facilities may provide a package of goods valued at approximately S/.300, while others offer snack service during the work day at an average value of S/. 150.

• Education allowance: for training • Family allowance: health services, medications, and social assistance provided

by the establishment • Various cash payments: for managerial responsibilities, specialization, and

coordination of work teams, and payments for “productivity,” known as AETAS (Extraordinary Stipends for Work in Health)

None of these bonuses are linked to the worker’s performance. They only require the worker to complete an extra shift and to be punctual. Whether or not the bonuses are granted depends not on the efforts or results of the worker, but rather on the availability o funds. The Public Treasury finances only part of these bonuses, and the rest depends on the establishment’s own resources (RDR).

In light of this situation, developing a new salary policy would be advisable. Such a policy should include performance incentives and should align with national priorities (allocating human resources to rural zones, for example) or sectoral priorities (specialization in given areas of health).

7. Chile The development of human resources for health care is an indispensable requisite for

ensuring the sustainability of the Chilean health care system. However, as in many other countries, there is a scarcity of certain health workers, such as specialist physicians, primary care physicians (PHC), medical technologists for radiology, specialized nurses, and emergency medicine physicians. In addition, despite some advances, the current institutional framework remains lacking in terms of incentives that would attract and support human resources more in accordance with the health needs of the population.

Salaries in the health sector depend on the type of worker and on various technical parameters, but also on the pressure and protest power that workers are capable of exerting on the public sector. It is clear that a victory by some types of workers (physicians, for example) provides a stepping-stone for the victories of others. The overall status of the country’s macroeconomic situation and wage policies in the public sector also play a role in determining salary increases within the public sector. Public sector salaries, in turn, influence the private sector, as public sector salaries are used as a reference for labor contracts in the private sector. However, there is practically no labor movement within the private sector, which instead follows the laws of the market.

Salaries of health workers have risen in recent years. However, this increase has been less than that of the salaries of workers in other sectors, such as education (professors) and justice. In fact, according to household surveys in Chile (CASEN), salaries of health workers actually decreased slightly in 2003, recovering by 2006 for physicians only. On the other hand, there is a lack of information regarding health workers and their salaries, which is a barrier to developing plans to develop human resources in this area.

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7.1 Health System

The Chilean health system is a mixed system, both in the provision of health services and in health insurance. The providers and insurers, both public and private, are regulated by the Superintendence of Health.

The public provision of health services is carried out by the so-called Health Services. These entities develop and administer health care networks over a given region. The networks (SNSS, National Health Services System) are responsible for preventive and curative care, as well as rehabilitation and health promotion. The Health Services are functionally decentralized, state entities with legal status and an independent capital structure. They are subject to the oversight of the Ministry of Health and must comply with the Ministry’s policies, norms, plans, and programs. Each Health Service owns and operates several hospitals with different levels of complexity as well as multiple open care centers (public hospitals and municipal health facilities). They may establish contracts with private providers to serve certain zones or types of care. Primary health care is provided by Primary Care Centers.

Private health care professionals provide care at hospitals, clinics, and independent offices, and serve both the insured as well as beneficiaries of the public system. Physicians may work in both a public hospital and private office or clinic simultaneously.

Within the social security system, a unique public administrator, the National Health Fund (FONASA), coexists with various private administrators. FONASA covers nearly 80% of the insured population, and the private insurers compete for the remaining 20%. Active and passive workers pay an obligatory fee equal to 7% of their eligible income into the health system, with a ceiling of approximately $US 150 per month.16 Workers may opt to affiliate with the public insurer or the private insurer of their choice, and the chosen insurer receives their fee.

FONASA operates on the basis of a distribution scheme (financed with the 7% of income fee from its beneficiaries and with resources from general national taxes). Beneficiaries of FONASA may choose between two modalities of care: institutional (closed) or free-choice. In the former, beneficiaries receive care at public sector hospitals or primary care centers. In the latter, beneficiaries receive care from private providers within this modality. The institutional modality requires a copayment that varies according to level of income. Those whose income is lower than a set minimum are exempt from copayments.

The private insurance system is made up of Private Health Plan Providers (ISAPRES), which operate on the basis of individual contracts with their affiliates. The benefits provided are directly linked to the fees paid. Affiliation with an ISAPRE requires a fee determined by each ISAPRE. Fees vary according to type of insurance and characteristics of the affiliate. Furthermore, the worker may opt to pay higher fees, above 7% of income, to obtain greater benefits.

Health financing. In Chile, the entire population is guaranteed access to the public health system, whether or not they have the resources to pay premiums. By law, dependent workers must enroll in FONASA or an ISAPRE by making a contribution equal to 7% of their income to the health system. These monthly contributions account for about a third of FONASA’s funding. About half of FONASA’s funding come from Sate funds. The ISAPRES, in contrast, are funded mainly by their beneficiaries’ monthly contributions. Funding for social security health benefits in Chile, not including co-payments, comes from contributions to ISAPRES (35%), contributions to FONASA (24%), and government subsidies (41%).

Funding for health care in public facilities comes from four main sources: government subsidies, monthly contributions, operational income, and co-payments. The percentage of

16 Active workers are those who are working at the moment. Passive workers are those who have

retired, that is, they have stopped working and receive retirement benefits.

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funding for health care in public facilities from government subsidies increased by 10% from 1990 to 1993. In the following years, this figure remained constant at about 55%, before dropping down to about 50% by 2002 and 2003. Operative income and co-payments represented a low proportion of funding throughout the period studied, and the proportion represented by co-payment decreased slightly (see Figure 22). For example, in 2003, the public sector spent US$ 2300 million on health care, of which 51% came from government subsidies, 35% from monthly contributions, 6.4% from operative income, and 7.3% from co-payments.

Figure 22 Structure of financing for public health spending

0%10%20%30%40%50%

60%70%80%90%

100%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Public Expenditure Contribution Operative Income Copayment

Source: Superintendent of ISAPREs

Health spending. Health care spending in Chile amounts to 6% of the GDP and is financed by both public and private sector entities. Private health spending consists of out-of-pockets payments on health care and payments for health insurance premiums. In 1998, spending on the former was 59% higher than on the latter. By 2000, the trend had reversed, and spending on health insurance premiums had eclipsed out-of-pocket spending on health care. The decrease in private health spending as relative to public spending, therefore, can be explained as a decrease in out-of-pocket spending on health care. Figure 23 demonstrates how public spending and private spending on health insurance premiums have increased relative to out-of-pocket spending on care.

Figure 23 Structure of heal spending 1998 – 2004 (percentage)

0%

20%

40%

60%

80%

100%

1998 1999 2000 2001 2002 2003 2004

Public Expenditure Out of Pocket Payment Private Prepayment

Source: Own elaboration based on data from the World Bank

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7.2 Economic context

Economic growth. Between 1999 and 2006, the Chilean economy expanded, year after year, with the exception of 1999 in which it contracted by 0.7%. This mild recession was the result of various factors, mainly the Chilean economy’s internalization of the so-called “Asian crisis.” Overall, the economy grew at an average annual rate of 4.2%, with a maximum of 6% in 2004. Over this period, the gross internal product grew a cumulative 32.6%. (See Figure 24).

Figure 24 Growth of the GDP in Chile, 1999-2006 (percentage)

-10123

45678

1989

-199

8

1999

2000

2001

2002

2003

2004

2005

2006

2007

Source: Central Bank of Chile

Generation of employment. The level economic growth maintained since 2000 has meant that unemployment has reached its lowest levels in recent years. It decreased from a rate of over 10% in 1999 to less than 8% in 2006 (7.8%), as shown in Figure 23. According to the ILO, the greatest increase in jobs from 1997 to 2006 was for salaried positions. The number of self-employed individuals and workers in other occupational categories (domestic workers, employers, and unpaid family workers) remained stable. The service sector generated the most employment, with the goods sector contributing few new jobs. The four main sectors generating new jobs are all within the service sector, especially general and commercial services. The service sector represents 64% of jobs, up from 58.6% at the start of the period, while industry jobs represent only 13.3% of the market in 2006, down from 16.2% in 1997.17

17 Reinecke , Gerhard and Velasco Jacobo 2007. “Employment report for 2006”. International

Labor Organization (ILO).

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Figure 23: Evolution of the unemployment rate

5

6

7

8

9

10

11

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

(%)

Source: OIT

Salaries evolution. Between 1995 y 2006, the average and minimum real salary in the Chilean economy increased. This explains because of the nominal increase of these salaries above the CPI evolution (inflation). The inflation remains during the whole period below 2 digits and mostly under 4%. Table 37 shows the nominal, real salaries and the inflation evolution.

Table 37 Evolution of nominal, real, and inflation-adjusted salaries, (1995-2006).

Year

Real average monthly salary

Real average hourly salary

Real minimum monthly salary

Nominal monthly average salary

Nominal hourly average salary

Nominal minimum monthly salary CPI

1995 5,0 4,8 4,5 13,6 13,5 13,1 8,2 1996 3,4 4,1 4,2 11,0 11,8 11,9 7,4 1997 2,6 2,4 3,6 8,8 8,7 9,9 6,1 1998 1,5 2,7 5,1 6,4 7,9 11,3 5,1 1999 1,2 2,4 8,9 4,5 5,8 12,5 3,3 2000 1,2 1,4 7,2 5,0 5,3 11,2 3,8 2001 0,4 1,6 3,3 3,9 5,2 6,9 3,6 2002 0,5 2,0 3,1 3,0 4,6 5,6 2,5 2003 0,6 0,9 1,8 3,5 3,8 4,6 2,8 2004 1,9 1,8 2,9 2,8 2,9 3,9 1,0 2005 -1,9 1,9 1,8 1,2 5,0 5,0 3,2 2006 4,7 2,0 2,6 8,2 5,4 6,1 3,4 Fuente: OIT

Public spending. The central government spending remained relatively stable between 1999 and 2005, at 22 to 25% of GDP, as shown in Figure 25.

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Figure 25 Evolution of central government spending (as a percentage of GDP)

0

5

10

15

20

25

30

35

40

45

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

(% o

f GIP

)

Fuente: Larrain y Selowsky (1970-1985), BID (1986) and DIPRES (1987-2004)

Tax and non-tax state income grew each year from 1999-2006, with the exception of 1999, when the drop was greater than the drop in GDP, in percentage terms, after which the percent growth in income was greater than the percent growth in GDP. Cumulatively, state income grew by 106.5% over the period. On the other hand, tax income grew cumulatively by 74.6%. The cumulative increase in aggregate spending on personnel was 46.8%. This is due to improved efficiency in tax collection, overall economic growth, and a trend towards reduced spending on personnel by the state (see Table 38).

Table 38 Evolution of tax income and spending on personnel, 1999–2006 (in 2006 Chilean pesos)

Years Total

Revenues Var (%) Annual

Fiscal Revenues

Var (%) Annual

Personal Spending

Var (%) Annual

% of Public Spending in Total

Revenue

% of Public Spending in Fiscal

Revenues 1999 $ 9,237,728 -4.90% $ 7,119,701 -6.00% $ 2,008,070 6.80% 21.70% 28.20% 2000 $ 10,314,379 11.70% $ 7,868,827 10.50% $ 2,089,678 4.10% 20.30% 26.60% 2001 $ 10,739,581 4.10% $ 8,196,438 4.20% $ 2,146,488 2.70% 20.00% 26.20% 2002 $ 10,819,243 0.70% $ 8,554,204 4.40% $ 2,226,365 3.70% 20.60% 26.00% 2003 $ 11,397,977 5.30% $ 8,744,465 2.20% $ 2,293,957 3.00% 20.10% 26.20% 2004 $ 13,672,923 20.00% $ 9,709,269 11.00% $ 2,452,350 6.90% 17.90% 25.30% 2005 $ 16,280,721 19.10% $ 11,564,031 19.10% $ 2,602,802 6.10% 16.00% 22.50% 2006 $ 20,060,506 23.20% $ 13,221,062 14.30% $ 2,760,449 6.10% 13.80% 20.90% Accumulate 106.50% 74.60% 46.80%

Source: Candia et- al-, 2007

Therefore, in terms of spending on personnel by the state, there is a drop in participation, both in relation to total income as well as in relation to tax income; from 21.7% to 13.8% and from 28.2% to 20.9%, respectively. This reflects an overall cost-containment policy on the part of the government, in terms of spending on personnel.

Spending on health. In recent years, there has been an increase in public spending on health as a percentage of GDP, but a decrease in public health spending as a percentage of the total public budget. In 1999, public spending on health represented 2.6% of the GDP and 15.4% of total public spending, while in 2007 these figures were 3.2% and 14.6%, respectively. During the same period, total public social spending increased from 15.4% to 17.1% of GDP.

Most of the new health spending was allocated for increased number of health services provided, such as PHC and specialist clinics, biochemical and hematological tests, and imaging

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exams, along with an increase in public sector beneficiaries (MINSAL, 2007, FONASA, 2007). This increased spending has been correlated with a tendency towards improved health impact indicators (such as life expectancy, infant mortality) and quality of life indicators, as measured by the Index of Human Development (based on these two indicators) (MINSAL, 2007).18

Health spending in Chile is about 7% of GDP. The insurance system, consisting of FONASA and the ISAPRE (private health plan providers), spends about 5.5% of the GDP. The private sector spends 2.6% of the GDP, and the public system spends another 2.9%, to finance the population ensured under FONASA. A little less than 1% of the GDP is spent by complementary systems, such as workers compensation (Mutuales, Law 16.744) and the Armed Forces. About 10% of the population is not covered by any health insurance system. These individuals spend about 1% of the GDP on direct payments to providers and on medications.

Table 39 shows total Spending and Sources of Financing within the Chilean Health System.

Table 39 Total Spending and Sources of Financing within the Chilean Health System, for the year 2000 (in millions of year 2000 pesos)

Contributions Public spending

Out of pocket Total %GDP

FONASA 398,906 463,377 237,863 1,100,146 2.91% (%) 36.3% 42.1% 21.6% 100.0% ISAPRE 642,279 12,071 322,721 977,071 2.59% (%) 65.7% 1.2% 33.0% 100.0% ISAPRE + FONASA 1,041,185 475,448 560,584 2,077,217 5.50% (%) 50.1% 22.9% 27.0% 100.0% OTROS 229,727 178,734 378,029 786,490 2.08% (%) 29.2% 22.7% 48.1% 100.0%

TOTAL CHILE 1,270,912 654,182 938,613 2,863,707 7.58% (%) 44.4% 22.8% 32.8% 100.0%

% PIB 3.36% 1.73% 2.48% 7.58% Source: Cid, 2006. Developed using data from the National Accounts of FONASA-PAHO, 2001.

Financing of health services. The major source of financing for health services in Chile is the obligatory contribution of 7% of salary to health plans, and the additional contributions (for private plans), which represents 50% of the financing overall of FONASA and the ISAPRES. Second are out-of-pocket payments, representing 33% of the total, and third is fiscal support, representing 23% of total financing.

Twenty-two per cent of FONASA services are financed with out-of-pocket payments, compared with 33% of ISAPRE services. These payments include co-payments for medical visits and spending on medications and other items. Spending on medication represents 44.4% of the total out-of-pocket cost; within FONASA, it represents 53.5% and within the ISAPREs, 37.7%, although the total actual cost is about the same in both subsectors. Spending on medications per beneficiary in the public subsector is approximately 1/3 of that in the private sector (Superintendence of Health).

7.3 Salaries of health workers

Health market. In Chile there are two main markets for health workers; the public and the private sectors. However, many health professionals work in both subsystems, especially physicians.

18 MINSAL, Ministry of Health. FONASA, National Health Fund.

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Contractual relationships for public workers are framed within the norms of public administration in general and health in particular. In the private sector, on the other hand, contracts are drafted in the context of the work code that governs labor relationships for private sector workers in Chile (see Table 40).

Table 40 Main Norms and Laws Governing Human Resources for Health in Chile

Public Sector Private Sector Working relationships are governed by public and health administration statute

National Health Services System Medical doctor personnel: law 15,076 Other personnel SNSS: administrative statute, law 18,834 Law 19,296 (public workers associations) Annual budgeting law Staff law (by health services) Law 19,490 Bonus and allowances by Individual and Institutional Performance Primary health care Primary health care statute (Law 19,378)

General workers code governs all contracts in the private sector. Working relationships governed by the code are relatively flexible and non-regulated.

Source: MINSAL, 2000

Health workers. Within the public sector, there is a distinction between workers within the SNSS and within the municipal primary care centers. The two groups of workers are governed by different legislation and depend institutionally on different entities – SNSS and the local (municipal) government, respectively. Physicians are also distinct from other health professionals and workers, as they are also governed under a different institutional framework. The health sector is large and diverse, including physicians, dentists, pharmacists, nurses, midwives, nutritionists, medical technicians, kinesthesiologists, occupational therapists, audiologists, paramedics, and personnel in social work and health administration. For example, in 1999, there were 12,501 physicians, dentists, and pharmacists governed by law 15,076, while there were 56,508 SNSS health workers governed by the administrative statute.

Table 41 SNSS workers in Chile, 1999 Law Health Professional July 1999

Governed by Law 15.076 Doctors 8,861 Dentists 1,081

Biochemist/Pharmaceutical Chemist 321

Destination Cycle (recently graduated general practitioner assigned to health services in Chile) 2,238

Sub total 12,501 Governed by Law 18.834 Administrators 1,630 (Administrative Statute) Professionals 11,042 (Nurses) (3,537) (Midwives) (2,159) Technical aides and paramedics 23,051 Administrative assistants 20,785

Sub total 56,508 Total 69,009

Source: MINSAL, 2000 ( ) Total Professionals

According to the University of Chile and the Division of Personnel Administration and Development in the Ministry of Health, in Chile there are 8.4 doctors per 10,000 inhabitants in the public health system in. Specifically, there are 2 general practitioners per 10,000 inhabitants

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and 4.9 specialists per 10,000 inhabitants, according to the scale used by the World Health Organization (WHO). These figures are from a 2004 study.

A comparative analysis using data from the World Health Organization (WHO) shows that Chile is at a disadvantage in terms of number of physicians compared with other South American countries. Eight of ten countries in South America have a greater number of physicians per 10.000 inhabitants than Chile, with only Brazil having fewer. The Table 42 below shows this data.

Table 42 Physicians per 10,000 inhabitants in selected South American countries

Country Indicator Argentina 30.1 Bolivia 12.2 Brazil 9.3 Colombia 13.5 Chile 10.9 Ecuador 14.8 Paraguay 11.1 Peru 11.7 Uruguay 36.5 Venezuela BR 19.4 Source: Candia et. al. 2007 from WHO

This shortage of doctors means that the average workload of each physician is higher, and that the country falls short of international standards for adequate patient care and quality.

Bastías et. al., 2000, estimated the number of doctors in Chile using the figures for incoming first-year medical students, adjusted according to average attrition. They calculated that the percentage of foreign doctors in relation to the total number of practicing physicians is on the rise, from 24% in 1992, 34% in 1997, and an estimated 45% in 2007 if the trend continued.

It should be noted that the immigration of health professionals has had a strong positive impact on primary health care, despite legal difficulties associated with their incorporation into practice, especially within specialist fields. Within the primary care field, over half of physicians are foreign, mainly from Ecuador.

The 2000 study by Bastías et.al. demonstrates the scarcity of Chilean doctors and compares a series of countries according to the hypothesis that the number of doctors is correlated with degree of development of a country. In this comparison Chile fares poorly, with fewer doctors per inhabitant than its closest neighbors, such as Argentina. This relationship is also demonstrated by correlating the number of physicians with per capita income within a country.

These estimates were made in 2000. Current figures available for Chile regarding the overall number of doctors and other health professionals are in Table 43.

Table 43. Chile: Number of health workers 1999-2007

Year Doctors University Nurses Others

Total medical registered in

medical college

Total Medical not working in

the SNSS 1999 10,899 3,537 55,742 N,A, N,A, 2000 10,505 3,677 54,745 18,236 7,731 2001 12,348 4,055 59,019 18,556 6,208 2002 15,706 6,761 84,872 19,151 3,445 2003 15,006 6,900 85,689 20,320 5,314 2004 16,359 6,325 84,458 20,726 4,367

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Table 43. Chile: Number of health workers 1999-2007

Year Doctors University Nurses Others

Total medical registered in

medical college

Total Medical not working in

the SNSS 2005 N,A, N,A, N,A, N,A, N,A, 2006 N,A, N,A, N,A, N,A, N,A, 2007 20,035 7,746 N,A, N,A, N,A,

Source: developed using data from the Health Statistics from the INE, Statistical Compendium, 2006 N.A. Not Available

The shortage of doctors persists despite a major increase of 83% between 1999 and 2007 and despite larger increases in the numbers; other health professionals are growing in number more quickly. For example, the number of nurses grew by 119%.

Evolution of the Number of Health Workers. According to records from the Chilean Medical Association, the distribution of physicians by specialty in recent years is shown in Table 44:

Table 44 Chilean physicians by specialty, 2000-2004 2000 2001 2002 2003 2004

Medical Specialization Quantity % Quantity % Quantity % Quantity % Quantity % Anesthesiology and reanimation 502 2.75 506 2.73 516 2.69 632 3.11 547 2.64 General surgery 1,233 6.76 1,233 6.64 1,291 6.74 1,490 7.33 1,348 6.50 Internal medicine 2,256 12.37 2,256 12.16 2,258 11.79 2,421 11.91 2,111 10.19 Gynecology and obstetricians 1,146 6.28 1,062 5.72 1,068 5.58 1,253 6.17 1,134 5.47 Pediatric 1,808 9.91 1,813 9.77 1,825 9.53 2,228 10.96 1,983 9.57 Psychiatric 487 2.67 487 2.62 492 2.57 661 3.25 661 3.19 Traumatology and orthopedic 443 2.43 453 2.44 456 2.38 570 2.81 503 2.43 General zone medicine 805 4.41 779 4.20 786 4.10 822 4.05 659 3.18 General integral medicine 543 2.98 543 2.93 543 2.84 620 3.05 516 2.49 Other specialization 2,952 16.19 3,072 16.56 3,091 16.14 5,686 27.98 4,361 21.04 Specialization non declared 6,061 33.24 6,352 34.23 6,825 35.64 3,937 19.38 6,903 33.31 Total 18,236 100.00 18,556 100.00 19,151 100.00 20,320 100.00 20,726 100.00 Source: Developed using INE data. INE, Health Statistics, 2005

The large percentage of the main specialties has remained stable over time, while some specialties are under-represented, such as psychiatry, anesthesiology, and traumatology. The overall figures for health professionals and workers in 1998 were as Table 45 shows.

Table 45 Public Health System Figures, Chile, 1998

Health professionals and workers Primary health

care SNSS Total % Doctors, dentists, chemist pharmaceuticals 2,707 12,649 15,356 16.9% Professionals clinic non doctors 3,708 8,102 11,810 13.0% Administrative professionals 171 4,446 4,617 5.1% Clinical area: auxiliaries and technical 7,320 22,721 30,041 33.1% Administrative and secretaries 2,859 9,879 12,738 14.0% Cleaning auxiliaries, drivers, guard 3,372 12,729 16,101 17.8% Total 20,137 70,526 90,663 100.0% % 22.2% 77.8% 100.0% Source: MINSAL, 2000

Physician-hours contracted by SNSS 1999-2007. The above sections noted the growth in the number of doctors in Chile from 1999 to 2007. The number of public sector physicians increased in particular, so one would suppose that the number of private sector

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physicians dropped. However, according to a study by Candia et. al., 2007, these trends are not so clear if one analyses according to amount of physician-hours rather than by person.

According to the above study, between 1999 and 2007, the public health system increased the number of contracted positions in absolute terms by 1995 contracts, representing an increase of 16%.

Table 46 Change in number of contracted physicians in SNSS

Contracting Categories 1999 2007 Absolute Variation

Percentage Variation

11 hours per week 286 2,330 2,044 715% 22 hours per week 4,149 5,301 1,152 28% 33 hours per week 1,327 1,164 -163 -12% 44 hours per week 3,287 1,977 -1,310 -40% Total daytime 9,049 10,772 1,723 19% PHC 28 hours per week 3,084 3,326 242 8%

Total 12,133 14,098 1,965 16% Source: MINSAL, developed by C. Candia, 2007

However, there was a drop of 2.3% in number of physician-hours contracted over the same period. The position type with the largest increase in contracts was for 11-hour/week contracts, which resulted in an absolute increase of 22,484 contracted hours per month, representing an increase of 715%. On the other hand, there was a 40% drop in the number of 44-hour/week contracts, resulting in a drop of 57,640 contracted hours per month.

Table 47 Change in number of contracted physician-hours in SNSS (per week) Contracting Categories 1999 2007 Absolute

Variation Percentage

Variation 11 hours per week 3,146 25,630 22,484 715% 22 hours per week 91,278 116,622 25,344 28% 33 hours per week 43,791 38,412 -5,379 -12% 44 hours per week 144,628 86,988 -57,640 -40% Total daytime 282,843 267,652 -15,191 -5% PHC 28 hours per week 86,352 93,128 6,776 8%

Total 369,195 360,780 -8,415 -2% Source: MINSAL, information for June 2007, developed by C. Candia, 2007.

Distribution of Health Workers. The excessive concentration of human resources, in particular physicians and specialist physicians, in the metropolitan region of Santiago, is reflected in the distribution of medical collectives by region (see Table 48). The association’s regional councils are in the main cities in Chile.

Table 48 Distribution of medical personnel by Regional Counsel, 2006 Consejo Regional Hombres Mujeres Total Porcentaje Physicians by

10,000 population Arica 132 39 171 0,8% 7,4 Iquique 164 54 218 1,1% 7,6 Antofagasta 374 127 501 2,4% 8,0 Copiapó 174 52 226 1,1% 6,7 La Serena 338 114 452 2,2% 6,1 Valparaíso 1.336 486 1.822 8,8% 10,6 Santiago 8.181 3.961 12.142 58,6% 17,3 Rancagua 409 140 549 2,6% 5,7 Talca 359 137 496 2,4% 6,1 Chillán 229 90 319 1,5% 4,6

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Table 48 Distribution of medical personnel by Regional Counsel, 2006 Consejo Regional Hombres Mujeres Total Porcentaje Physicians by

10,000 population Bío-Bío 194 73 267 1,3% 7,1 Concepción 902 432 1.334 6,4% 6,3 Temuco 480 209 689 3,3% 5,9 Valdivia 235 109 344 1,7% 6,3 Osorno 139 65 204 1,0% 7,5 Puerto Montt 291 114 405 2,0% 8,2 Coihaique 81 50 131 0,6% 9,7 Punta Arenas 163 52 215 1,0% 9,8 No Information 186 55 241 1,2% Total 14.367 6.359 20.726 100,0% Source: INE, 2006

Nearly 59% of doctors belong to the Santiago regional counsel; even in other major cities, the percentage is very low, including Conception (6.3%) and Valparaiso (8.8%). With the exception of Temuco (3.3%) all the other regional counsels (14) have percentages under 3% and most are around 1%.

Shortage of medical professionals and specialists. Access to medical specialists is concentrated in MINSAL, which finances specialization grants. However, traditional centers of medical education (University of Chile, Catholic University, and other traditional universities) and other private education centers carry out the training in association with a clinical practice site (nearly always within the private sector in this case), but in any case specialization is concentrated mainly among the health services and in the traditional universities. These are the institutions that certify the specialists, as specialization is not covered by any legislation. Recognition of a specialty is ultimately given by CONACEM (National Commission of Medical Specialties), whose members include representatives from the medical association, the faculties of medicine, scientific societies, and a MINSAL representative who does not vote. Reform legislation currently under development in Chile states that this role is to be turned over to the Ministry of Health.

MINSAL has promoted a policy of decentralization of management to encourage efficiency and equity within the health system, with the idea that a more direct relationship will create a better response to the population’s health needs. However, specialist physicians remain concentrated in the metropolitan region and major cities in Chile.

During long periods there have been shortages of human resources for health. Ophthalmologists and radiologists, for example, have been scarce. In these cases, supply has driven the market, which has been problematic for the public sector. However, MINSAL has developed methods for addressing this problem, using administrative mechanisms (specific payment mechanism) and contracts (incentives). The various forms efforts to address the shortage have included different contract modalities, such as 22-28 hour weeks for physicians, increasing nurses’ salary grades, rotating remote assignments, assistance with job placement for a spouse when a specialist is transferred, etc. The immigration of foreign doctors into Chile has also been a key factor in sustaining and developing PHC. This immigration is increasing in significance (Lastra, 2007).

It should also be noted that the health education market is deregulated, and in recent years there has been a significant increase in supply, due to the incorporation of health majors into private universities. Furthermore, there is legal freedom to create new institutions, associated with a clinical campus. However, there remains a shortage of specialists within the public health sector.

Clearly the public health sector is the major source of demand for human resources. However, in recent years competition for human resources has increased within the private sector. The existence of private insurance, vertical integration, and the movement of private

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physicians to partnerships or associations have all decreased the prevalence of independent practices, especially group private practices, and created tension in the labor relations between salaried physicians and the private health industry.

Composition of health salaries. Public sector health workers are governed by a normative framework emanating from guidelines and policy negotiation, combined with health planning criteria for the public supply of health care. Therefore, it is logical to expect that these criteria would outweigh market criteria in the contracts, as occurs in other sectors, in particular, private labor markets.

The composition of public health functionaries' salaries includes dispositions from ad-hoc legislation that regulates the labor market, which differentiates this sector from other professions (with the exception of certain sectors such as the armed forces). The mobility of human resources is restricted by law, in order to support job stability and health planning. Dismissals are practically impossible; even where the evaluation system permits removal from office after several years of poor performance reviews; in practice workers are seldom dismissed.

Table 49 Composition of health workers’ salaries Personnel governed by Law N° 18.834 Personnel governed by Law N° 15.076 Personnel governed by Law N° 19.664

• Higher government authorities • Administrators with a professional salaries • Administrators without a professional salaries • Technicians, administrators, and aides

Professional functionaries working: • 11 hours per week • 22 hours per week • 33 hours per week • 44 hours per week • 28 hours per week

Professional functionaries working: • 11 hours per week • 22 hours per week • 33 hours per week • 44 hours per week • 28 hours per week

• Grade (each group has different grade scales) • Base salary • Salaries by profession • Salaries according to seniority • Raises for increased responsibility • Overtime hours • Dismissals Other special dispositions

• Grade • Base salary • Merit-based raises • Salaries by profession • Salaries according to seniority • Three-year periods • Dismissals Other special dispositions

• Base salary • Qualified experience • Continuing education • Three-year periods • Other special dispositions

Source: Authors

Salary levels. In spite of the multiple components, salaries do not tend to vary greatly by type of worker, as shown in the table below, created from a sample of 35 hospitals in Chile. The workers whose salaries varied more than 20% were physicians (endowed, general zone, and general practice).

Table 50 Descriptive statistics on monthly salaries of hospital workers 2007 (current Chilean pesos)

Professional Average Maximum Minimum Coefficient of Variation

Midwife 962,871 1,143,020 818,002 8%

Anesthetist 1,400,851 1,767,482 1,277,338 10%

Social assistant 943,980 1,075,862 859,359 6%

Technical paramedics 408,672 483,353 348,718 8%

Cleaning auxiliaries 342,241 469,562 274,635 13%

Grant holder doctor 1,346,660 2,175,591 1,001,309 22%

Biochemist 1,237,008 1,650,056 983,159 16%

Administrative 367,396 568,560 302,830 16%

General zone medicine 1,380,080 2,175,591 1,001,309 21%

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Table 50 Descriptive statistics on monthly salaries of hospital workers 2007 (current Chilean pesos)

Professional Average Maximum Minimum Coefficient of Variation

Nutritionist 943,980 1,075,862 859,359 6%

Pediatric/Neonatology 1,370,070 1,741,778 1,115,069 13%

Surgical Gynecologist/obstetrics 1,447,105 1,941,119 1,183,880 14%

Psychologist 943,980 1,075,862 859,359 6%

Medical technology 929,094 1,220,447 728,473 11%

General Practitioner 1,363,796 2,175,591 1,001,309 21%

Nurse 940,521 1,313,077 704,446 14% Source: MINSAL, sample of 35 hospitals in Chile. Note: the unit of analysis is each hospital

Salaries in the public sector are used as a frame of reference for the private sector. However, private sector salaries are higher, and contracts and labor relations are more rigid, in terms of negotiating salary raises.

Evolution of salaries of health workers. Average salaries for communal, social, and personal services, including health care, is close the average salary for the Chilean economy in general (represented in the figure below by the activity called “General.”) Figure 25 shows this data for 3 different years, each separated by a period of 6 years.

Figure 26 Evolution of nominal salaries by economic activity

0100000200000

300000400000500000600000

700000800000900000

Gen

eral

Min

ing

Man

ufac

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Ele

ctric

ity, g

asan

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and

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alse

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199420002006

Source: Authors, based on INE data

To illustrate the differences in the evolution of salary levels according to economic activity, the authors developed an index (1994=100) to express the relative variation experienced by each economic activity. As shown below, the largest salary increases by far were in the mining sector, due to the positive evolution of prices within the sector, especially for copper, Chile’s main export product. The evolution of salaries in the health sector has followed a pattern similar to the average, as shown in Figure 27.

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Figure 27 Evolution of nominal indexed salary by economic activity (base 1994=100)

0100200300400500600700

Gen

eral

Min

ing

Man

ufac

ture

Ele

ctric

ity, g

asan

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ater

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199420002006

Source: Authors, based on INE data

Workers in the education sector fall into the same category as health workers: communal, social, and personal services. This category, which includes workers from both sectors as well as other sectors, was used by the INE to track the evolution of salaries through 2005. In 2006, average monthly salaries for teachers diverged from those in social services and health. Salaries for teachers were higher than for health workers, at $380,855 (approximately US$ 780) for the former and $348,159 (approximately US$ 696) for the latter. In other words, the average salary in the education sector was 12% higher than in the health sector. However, due to the limitation noted, it is not possible to track how this difference has evolved over time using this source of information.

Below we elaborate on the evolution of salaries within the communal, social, and personal services category. Figure 28 shows the evolution of salary by occupational group. As shown, salaries vary within the sector by occupational group. For example, physicians, who would be classified as professionals, would receive approximately double the salary of the average health worker.

Figure 28 Evolution of nominal salary in the communal, social, and personal services category, by occupational group

0100000200000300000400000500000600000700000800000900000

1000000

Gen

eral

Man

gers

Pro

fess

iona

ls

Tech

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ans

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inis

trativ

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nal

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ices

and

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ectio

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dw

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rsP

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an

mac

hine

oper

ator

s an

dU

nski

lled

wor

kers

199319972001

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Source: Authors, based on INE data

Figure 29 shows the difference in the evolution of salary by occupational category within the sector. Physicians and plant managers have enjoyed the greatest salary increases over time.

Figure 29 Evolution of nominal indexed salary in the communal, social, and personal services category, by occupational group

0

50

100

150

200

250

300

Gen

eral

Man

gers

Pro

fess

iona

ls

Tech

nici

ans

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nd

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kers

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nt a

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achi

ne

Uns

kille

dw

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rs

199319972001

Source: Authors, based on INE data

National survey analysis. The CASEN surveys (National Socioeconomic Characterization Survey) provides basic data about the income of health workers over time. According to the survey, the salaries of physicians and dentists rose significantly in 1996, reaching about 2,500 dollars per month per capita. However, this income has fallen, as reflected in the 2000 and 2003 surveys, to a little over 1,800 dollars per capita per month, recovering in 2006 to about 2,000 dollars per capita per month.

Figure 30 Monthly per capita income of health workers, 1996-2006

0

500

1.000

1.500

2.000

2.500

3.000

1994 1996 1998 2000 2002 2004 2006 2008

Year

Mon

thly

inco

me

per

capi

ta (

Inte

rnat

iona

l dol

lars

20

00)

Medical doctors/Dentists Nursing and midwifery professionals

Medical assistants/Nursing associate professionals Traditional medicine practitioners/Faith healers Source: CASEN surveys 1996, 1998, 2000, 2003 y 2006

Salaries of physicians are much higher than those of other health workers, nearly 3 times higher on average than those of their closest colleagues (university-educated nurses).

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Although this gap decreased in 2000, when the salaries of nurses reached their highest point among the years surveys, the gap widened again in 2006 with the increase in the salaries of doctors and dentists. The salaries of aides and non-professional nurses remained practically unchanged during the period surveyed.

Salaries of physicians are much higher than those of other health workers, nearly 3 times higher on average than those of their closest colleagues (university-educated nurses). Although this gap decreased in 2000, when the salaries of nurses reached their highest point among the years surveys, the gap widened again in 2006 with the increase in the salaries of doctors and dentists. The salaries of aides and non-professional nurses remained practically unchanged during the period surveyed.

Figure 31 Income per capita per month for public and private sector physicians

0

500

1.000

1.500

2.000

2.500

3.000

1994 1996 1998 2000 2002 2004 2006 2008

Year

Mon

thly

inco

me

per

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ta (

Inte

rnat

iona

l dol

lars

20

00)

Medical doctors/Dentists in the public sector Medical doctors/Dentists in the private sector

Average worker in the public sector Source: CASEN surveys 1996, 1998, 2000, 2003 and 2006

Physicians and dentists clearly make up the deciles with the highest income levels of the Chilean population, followed by university-educated nurses and midwives. Non-university-educated nurses and aides are distributed most evenly, and can be found in practically all income deciles, although they are concentrated in deciles 6, 7, and 8.

Figure 32 Distribution of health workers by income decile per capita (average from CASEN surveys 1996 and 2006)

0

5

10

15

20

1 2 3 4 5 6 7 8 9 10

Decile of income per capita

Num

ber

of w

orke

rs (

thou

sand

s)

Medical doctors/Dentists Nursing and midwifery professionals

Medical assistants/Nursing associate professionals

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Source: CASEN surveys 1996, 1998, 2000, 2003 and 2006

Evolution and comparison of salaries of health workers. An analysis of the CASEN survey data regarding physicians and other health professionals versus teachers (primary and secondary) reveals that between 1996 and 2006, the income of physicians fell, while that of teachers, in general, rose. During the same period, the salaries of professional midwives and nurses remained stable, although there were significant variations within the period.

Figure 33 Monthly income per capita for health workers, by education level, 1996-2006

0

500

1.000

1.500

2.000

2.500

3.000

1994 1996 1998 2000 2002 2004 2006 2008

Year

Mon

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inco

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per

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ta

(Int

erna

tion

al d

olla

rs 2

000)

Medical doctors/Dentists Nursing and midwifery professionals

Higher education teaching profession Primary/Secondary education teaching professionals Source: CASEN surveys

On the other hand, according to Candia et. al., 2007 and data from the National Institute of Statistics, the overall cumulative increase in public sector workers’ salaries was 9.2%, reflecting an average annual growth of 1.2%. An annual breakdown, along with the behavior of nominal readjustments, the CPI, and real adjustments in salaries within the public sector follows in the tables below. The Table 51shows real and nominal readjustments for public sector salaries along with CPI variation.

Table 51 Evolution of public sector readjustments and CPI (measured for the periods form January – November of each year)

Year (Dec) Readjustments PH CPI Nov-Nov Real Readjustments PH 1999 4,90% 4,30% 0,60% 2000 4,30% 4,70% -0,40% 2001 4,50% 3,10% 1,40% 2002 3,00% 3,00% 0,00% 2003 2,70% 1,00% 1,70% 2004 3,50% 2,50% 1,00% 2005 5,00% 3,60% 1,40% 2006 5,20% 2,10% 3,10% Accumulated 38,30% 26,80% 9,20% Average 4,10% 3,00% 1,20%

Accumulated 2000-1999 31,80% 21,60% 8,60%

Source: INE and Candia et. al, 2007

We can compare the readjustments experienced by health sector workers with those experienced by other workers in order to determine how health workers fared, relatively. The

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following figure presents the nominal salary increases of workers within the Internal Taxation Service (SII), other fiscal entities, the teachers union, the judicial branch, and the doctors governed under laws 15,076 and 19,664.

Table 52 Nominal cumulative adjustments 1999-2006 (various sectors)

Sectors

Nominal Readjustments

1999-2006 Readjustments public sector 38,3% CPI 26,8% SII 60,9% Regulator Entities 31,8% Teachers College A.G. 56,0% Judicial Power 52,8% Medical College (18.834, 15076, 28 AP) 31,8% Medical College (19.664) 32,9% Source: INE and Candia et al., 2007.

Real salary increases were greatest for SII employees, with a 34% cumulative real increase (including 3698 functionaries, of which 1434 were auditors), followed by the teachers union, at 29.1% (including 149,683 teachers), and the judicial branch, at 25.9%. In contrast, the real cumulative salary increase for doctors governed by law 19,664 was 6.0%, and for doctors under law 15,076, only 5%.

The data show a relative disadvantage in the salary increases of physicians within the public health system. In comparison with SII auditors, the difference was extreme – 31% for doctors under law 15,076 and 30% for doctors under law 19,664 over the period studied. In comparison with judicial branch employees, the difference was 20.9% for doctors under law 15,076 and 19.9% for doctors under law 19,664 over the period studied. Finally, in comparison with teachers’ union members, the difference was 24.1% for doctors under law 15,076 and 23.1% for doctors under law 19,664.

Table 53 Absolute differences between cumulative salary raises in three public health subsectors, 1999-2006

Law Difference SII (%) Difference Teacher College (%)

Difference Judicial Power (%)

15.076 31% 24,10% 20,90%

19.664 30% 23,10% 19,90% Source: Candia et.al.2007

Governance of salary policies. Salary levels are readjusted annually for all workers. Salary raises in the public sector are used as a frame of reference for salary negotiations in the private sector. However, the health sector stages independent negotiations to define its annual salary raises. In general, the starting-off point is a floor proposed by the government, usually based on inflation for the previous year. The health workers’ unions, mainly the National Confederation of Health Workers (Confenats) negotiate a higher increase that not only compensates for inflation but also “allows the workers to share in the benefits of a growing economy” and “reduces inequities” with respect to salaried workers in the private sector or workers in other economic areas, who on average earn higher salaries. after a period of negotiations, which may include pressure tactics such as strikes or demonstrations, the union succeeds in securing a salary raise that is higher than the rate of inflation (real salary always increases) but lower than the salary that the workers desired.19 One strategy that the

19 The last salary negotiation resulted in a 15-day strike staged by 30,000 health workers.

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government has used has been to divide the striking workers and sign agreements with minority sectors.20

The evolution of salaries is not correlated with economic growth, nor with productivity, as shown in Figure 34. Therefore, it seems that salaries are linked mainly to political conditions, the unions’ ability to negotiate and apply pressure, and the government’s political strength.21 However, inflation and economic growth are reference points for salary negotiations.

Figure 34 Growth rates for productivity, real salary, and economic growth, 1998-2006

-3-2-101234567

1998 1999 2000 2001 2002 2003 2004 2005 2006

(%)

Productivity Real wages Economy growth

Source: INE

This method of determining salaries is about to be replaced by another system involving medium-term agreements and linked to the achievement of determined goals. This salary policy is intended to do away with linking salaries to seniority and the capacity of physicians and health workers to apply pressure tactics.

7.4 Incentives and policies to recruit, retain, and train health workers

From the worker’s point of view, incentives include continuing education opportunities, the work environment, salaries, the prestige of the facility for which they work, health benefits, the workday (flexible hours) and shift schedules (allowing for increased income), the availability of cutting-edge technology, and captive markets of patients for physicians (for example, in specialized hospitals or national institutes).

The major legal changes in recent years have sought to allow flexibility in the management of productive levels, contracting modalities, and mobility within the career ladder. For example, the law that governs physicians, dentists, pharmacists, and other health workers was modified to include a provision for salary raises and a system to evaluate performance and provide merit-based incentives, after a prolonged negotiation with the medical association. The law strengthened the role of the health services offices (decentralized MINSAL organisms in

20 For example, during the last CONFENATS strike, the government signed an agreement with

the University Health Services Professionals (FENPRUSS), which has 13,000 members. This group accepted the government’s proposal and returned to work immediately.

21 It could even be suggested that whether or not it is an election year may influence the definition of salary raises. In 2006, presidential elections were held, and this year saw the highest increase in salaries. 2000 was also an election year, and the raises were not especially high, but at that time the economy was just beginning to recover from the Asian crisis.

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charge of the health network in a geographic-population zone) in hiring personnel and determining the salaries of physicians, dentists, and pharmacists, the establishment of a career ladder, and the organization of a salary system to simplify and link spending with performance (MINSAL, 2000). This law expressly allowed for:

• The development of a career ladder, with contests for open positions, guaranteed training, job stability, and incentives to be determined by the directors of services, according to local circumstances

• Decentralization of the role of director of services, for the management of allocations, determination of variable salaries, management of training courses and seminars, availability of positions, and local agreements regarding filling of positions

• Performance-based rewards in terms of individual salaries and collective bonuses

Despite the preceding modifications, implemented as medical law No. 15,076 in the late 1990s, salaries of public functionaries in health care, in general, standardized. This allows for better planning of resources but is a barrier to providing incentives.

On the other hand, before this modification and negotiation of the medical law, in 1995, Law No. 19,490 was implemented to provide performance-based incentives and to create a system to evaluate individual performance according to the needs of SNSS. Various other laws have been established as well, almost always surrounded by conflict, in order to provide salary bonuses and criteria for performance evaluations. (MINSAL, 2000). For example, between 1994 and 1998, real salaries increased between 11% and 19% and allowances by 9%.

Policies. The policy in Chile for recruiting human resources for health is based on a general norm regarding contracting of personnel, along with some legal instruments that allow for contracting key personnel at the margins of the limits of the general norm. A recent law increased the power of the Health Services Offices (decentralized organisms within MINSAL that are responsible for the health network for a given geographic-population zone) in hiring personnel and determining the salaries of physicians, dentists, and pharmacists, the establishment of a career ladder, and the organization of a salary system to simplify and link spending with performance.

Chile’s policy for retaining workers is also related to the legislation to make the norms that govern salaries more flexible, allowing payments beyond the general standard. In addition, the country has developed a series of performance-based incentives and implemented a performance evaluation system to evaluate individual performance according to the needs of SNSS. Another powerful incentive to help with retaining personnel is the possibility of a flexible schedule, so that workers can take on a second activity if they choose. Facilities may contract physicians with different weekly schedules, and they may also choose rotating shifts.

Chile’s policy for training personnel is, by law, that all functionaries must be trained. All public institutions must allow their workers at least 5 working days, equivalent to 40 chronological hours or 53.5 credit hours, to participate in continuing education. Training in health has been mainly focused on the following areas: care models, development of network administration modes, strengthening of the system of explicit guarantees in health, development of abilities, improving a hospital’s capacity to adapt to continual changes in the environment, improving quality of care, and improving patient relations.

7.5 Conclusions and recommendations

a) Quantity of health workers

Chile has 8.4 doctors per 10,000 inhabitants in the public health system (2004). Specifically, there are 2 general practitioners per 10,000 inhabitants and 4.9 specialists per 10,000 inhabitants. There is an excessive concentration of human resources, in particular

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physicians and specialist physicians, in the metropolitan region of Santiago. Nearly 59% of doctors belong to the Santiago regional counsel; even in other major cities, the percentage is very low (under 7%).

During long periods there have been shortages of human resources for health. Ophthalmologists and radiologists, for example, have been scarce. In these cases, supply has driven the market, which has been problematic for the public sector. However, MINSAL has developed methods for addressing this problem, using administrative mechanisms (specific payment mechanism) and contracts (incentives). The various forms efforts to address the shortage have included different contract modalities, such as 22-28 hour weeks for physicians, increasing nurses’ salary grades, rotating remote assignments, assistance with job placement for a spouse when a specialist is transferred, etc. The immigration of foreign doctors into Chile has also been a key factor in sustaining and developing PHC.

b) Salary composition

The composition of public health functionaries' salaries includes dispositions from ad-hoc legislation that regulates the labor market, which differentiates this sector from other professions (with the exception of certain sectors such as the armed forces). The composition of salaries includes: grade (each group has different grade scales), base salary, salaries by profession, salaries according to seniority, raises for increased responsibility, overtime hours, and other special dispositions.

In 1995, Law No. 19,490 was implemented to provide performance-based incentives and to create a system to evaluate individual performance according to the needs of SNSS. Various other laws have been established as well, in order to provide salary bonuses and criteria for performance evaluations; but in practice salaries don’t depend on the workers performance.

c) Salaries evolution

Between 1994 and 1998, real salaries of health workers increased between 11% and 19% and allowances by 9%. Between 1999 and 2006 their salaries increased by 5%. However, this increase has been less than that of the salaries of workers in other sectors. The data show a relative disadvantage in the salary increases of physicians within the public health system. In comparison with teachers’ union members, for example, the difference between 1999-2006 was about 23.5%.

d) Incentives oriented to recruit, train and retain health workers

The policy in Chile for recruiting human resources for health is based on a general norm regarding contracting of personnel, along with some legal instruments that allow for contracting key personnel at the margins of the limits of the general norm. Chile’s policy for retaining workers is also related to the legislation to make the norms that govern salaries more flexible, allowing payments beyond the general standard. Chile’s policy for training personnel is, by law, that all functionaries must be trained.

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8. Bibliography Candia C. Paiva C., 2007. Final Report: “Salary study of the public sector medical

body.” Chilean Medical Association A. G., 2007

González David, 2006, Formation of human resources for health. Chilean Journal of Public Health, 2006, Vol 10. University of Chile

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Institute of Human Resources – IDREH, 2006. National plan for the decade for the development of human resources for health.

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Superintendence of Health (2006). “Equity in financing and financial protection in health,” developed by C. Cid, A. Muñoz, www.superdesalud.cl

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Appendix A

Table 54 List of Interviewed people for the study Name Country Position Institution

Adhemar Esquivel Bolivia Researcher UDAPE Fernando Landa Bolivia Social Vice Chairman UDAPE Ciro Puma Bolivia Administrative Director Ministry of Health Eduardo Chávez Bolivia President Medical College Lizardo Huamán Peru Researcher on Human Resources Management Ministry of Health Giovanni Escalante Peru Representative PAHO Manuel Núñez Peru Person in charge of Human Resources Medical College Cristián Candia. Chile Economic Advisor Medical College Verónica Bustos Chile Human Resources Advisor Ministry of Health Gloria Uribe Chile Human Resources Advisor Ministry of Health Hernán Sepúlveda Chile Chief of Work Relations Ministry of Health