As the Brazil healthcare budget is finalized, we expect the Ministry of Health to have another year of volatile budget assignments. Specialized components of the pharmaceutical budget will see growth initially, but other emergency allocations for COVID-19 vaccines and SUS waiting list reduction will follow later in the year.

Growth of the private insurance market will continue, driven by a rising affinity for lower-cost plans among the aging population. Expect to see continued rapid consolidation of the private provider space, with subsequent innovation in care delivery models. For those companies with a strong strategy in place, 2022 could prove to be a strong year in Brazil’s healthcare market, with demand rising based on the recovery of non-COVID procedures, but this will be accompanied by significant volatility caused by budget uncertainty from payers, and potentially wild swings in the currency generated by the presidential election.

While we anticipate another austere SUS budget for 2022, we also anticipate that the MOH will once again receive significant new injections of cash to support the recovery of the SUS wait list and potential booster shots

Overview for 2021–2022

The preliminary 2022 budget (PLOA) shows a 7.8% increase in federal healthcare spending from 2021, though most of this increase is aimed at COVID-related expenditures. We still anticipate increases in key areas, such as tertiary care and the specialized component of the pharmaceutical budget. Meanwhile, the number of individuals with private insurance was up by nearly 4% in August when compared to one year prior. We expect continued expansion into 2022 but with a slowdown in overall growth, averaging approximately 2% expansion across 2022.

Risks to Forecast

The largest risk to our current forecast revolves around the presidential election in late 2022. Uncertainty around the election could throw the labor market, and potentially the private insurance base, into another tailspin, while FX volatility could impact hospital investment more than expected. Likewise, should we not see additional allocations from the treasury to SUS across 2022 to finance booster shots and the clearing of the procedure backlog, we could see disruptions to other parts of the public budget, in addition to further shifts to out-of-pocket spending focused on low-cost products and services.

Business Implications

The anticipated dramatic recovery in non-COVID-related procedures will likely present significant challenges for pricing and supply chain management. Furthermore, we expect payers to quickly come under cost pressures as per capita demand for health services rise, which will have the inverse impact of increasing provider profitability. Subsequently, we may see a boom in provider capital expenditures. Firms will also need to keep an eye on the execution of ANS’s new process for updating the Rol de Procedimentos, while preparing for potential turnover in the Ministry of Health with the entrance of a new government in early 2023.

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