In a recent trip to Jaco Beach, Costa Rica I was awestruck by the beauty of the country as well as the Costa Rican way of life. The term “Pura Vida” (pronounces poo-rah vee-dah) translates to pure life; an expression natives use to describe their way of living. What I soon discovered is this term encompasses everything amazing about Costa Rica, from the way people greet you, to the country’s progressive and efficient healthcare system.
With 5 million people and a gross domestic product worth $50 billion, Costa Rica is ranked 104th out of 195 countries in terms of GDP. However, despite a moderate-to-low economic ranking, they have a high performing healthcare system ranked 36th out of 191 countries based on a World Health Organization (WHO) report done in 2000.
Efficient use of funds has enabled Costa Rica to develop a healthcare system that provides access to care for practically everyone with high quality outcomes for relatively low costs (6.1 billion or 10% of GDP); thus proving money does not always correlate to quality.
In contrast, with a GDP worth $17.4 trillion, the United States was only ranked 37th out of 191 counties by WHO landing below Costa Rica but spending far more on healthcare ($3 billion or 17% of GDP). If the United States could match Costa Rica’s healthcare expenditure percentage of 10%, they would spend $1.5 trillion less on healthcare services every year! However, to truly match the efficiency of the Costa Rican healthcare system, the level of care and access would actually have to increase despite the trillion dollars of cuts in funding.
How Is This Possible?
Early on, Costa Rica made a conscious decision to be proactive when it comes to healthcare and not being reactive. In doing so, they invested public funds towards eliminating homelessness, poverty, starvation and other lifestyle factors that eventually lead to illness and hospitalization. Many of these social reforms started in 1942 with the creation of the CCSS (Caja Costarricense del Seguro Social). This government agency became accountable for financing healthcare services for the entire country. By 1970, CCSS controlled all hospitals and through healthcare budgeting created incentives for the healthcare system to efficiently eliminating fraud, waste, and abuse. For example, pay-for-performance programs are embedded in the contracts CCSS has with its hospitals where 10% of revenues received by each hospital are contingent on meeting required performance metrics.
Many government controlled healthcare systems are critiqued for long wait times and a lack of choice. Costa Rica was no different. Prior to the 1990’s, private medicine was practically invisible due to the monopoly of the CCSS and the Ministry of Health. In fact, in 1995 close to 75% of physicians were hired by the CCSS. However, to ease the demands on the government to deliver care, the CCSS introduce more efficient ways to receive care through a variety of programs that opened the door to private doctors:
- Mixed Medicine: Patients can pay for medical consultation out-of-pocket and the CCSS would cover drug expenses and other support services.
- Enterprise Medicine: The CCSS would hire private doctors and nurses to proivide health care to Costa Ricans.
- Part-time Flexibility: The CCSS allowed its employed doctors to work part-time in the hopes they would create their own medical clinics giving more options to receive healthcare.
With more avenues for accessing doctors, new models of healthcare were created that provided greater connections to urban and rural communities alike. This even included home assistance program and home doctor visits.
The Mechanics of ¡Pura Vida! Healthcare
Unlike the United States, most of Costa Rica’s health expenditures are financed by the government. For example, 75% of the country’s healthcare costs are financed by the government compared to roughly 50% for the United States. However, income and sales taxes only account for about 10% of healthcare financing; a 2% sales tax is dedicated to social programs for the poor with a 5% income tax levied on top.
Most of the health system is financed through payroll taxes:
- Costa Rica – 0.25% of the total wages of workers
- Employers – 9.25% of workers’ wages
- Employees – 5.5% of personal wagers
- Self-employed – 12.75% of total earnings
Health services in Costa Rica can be divided into three major categories:
- Primary care – Representing 20% of all healthcare costs, 100+ small clinics providing basic preventive care and wellness to roughly 70% of the country. Costa Ricans must see their designated clinic and get referred to appropriate specialists and hospitals. This allows the CCSS to focus on cost controls and efficient use of dollars. Many physicians are employed by the government and paid a base salary that is not contingent on patient condition or volume. This eliminates adverse incentives of increasing patient volume for financial gain unlike the U.S.
- Secondary care – Representing 30% of the total healthcare costs, this level of care is made up of 12+ peripheral hospitals and 35+ clinics that offer specialist care and handle more complex medical conditions.
- Tertiary care – Representing the remaining 50% of the total healthcare costs, tertiary care represents the most acute types of healthcare and is provided by three main national hospitals.
Lessons from Costa Rica
Costa Rica has learned very simply that helping the poor will consequently improve the entire nation. By spending more than a third of government funds on reducing poverty, they have been able to keep their healthcare costs under 10%. High healthcare spending is largely attributed to populations of low income and low education. By working to improve the quality of life, Costa Rica has created one of the best performing healthcare systems in the world that even the most developed nations can learn from.
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Sources: (1) Universal Coverage in a Middle Income Country: Costa Rica by María del Rocío Saenz, Juan Luis Bermudez, Mónica Acosta, World Health Report (2010). (2) World Health Statistics 2015, World Health Organization. (3) Measuring Overall Health System Performance for 191 Countries by Ajay Tandon, Christopher JL Murray, Jeremy A Lauer, David B Evans. GPE Discussion Paper Series: No. 30.