Many Latin American finance ministries are approving austere healthcare budgets for 2021 as compared to their adjusted 2020 budgets. However, the budgets are still unlikely to be sufficient given that the pandemic is expected to persist through most—if not all—of 2021. Additional costs are associated with vaccinating entire populations, and governments will need to finance diagnostic exams and treatments for patients who delayed going to clinics for illnesses unrelated to COVID-19 in 2021. This likely means that in 2021, we will see governments injecting additional funds into their public healthcare systems during the fiscal year, leveraging either reserves or new debt allocations. With slow-recovering economies, healthcare spending as a percentage of GDP will likely go up and—in many cases—never return to previous levels. With fiscal deficits rising, this will undoubtedly drive further government efforts to reduce costs, despite rising social pressures across several Latin America countries for improvements to the quality of public health services.

Health financing policy and key decisions around access will fluctuate dramatically across 2021. Uncertainty regarding COVID-19 vaccine effectiveness and deployment means that payers and providers face tremendous uncertainty around funding flows as well as the timing and magnitude of the recovery in demand for non-COVID-19 healthcare services. In this case, firms should anticipate an environment that is as dynamic as what we saw in 2020. Healthcare policy will remain at the center of the political debate, while key decision makers will be in demand of quick and timely support to address newly arising challenges. This combination of factors will present an environment in which firms prepared to offer innovative solutions can take large steps to ensuring continued improvements in patient access, both in the short- and medium-terms.

Public budgets are effectively in disarray. Overall, 2021 budgets are trending below 2020 budgets, but we do not anticipate either additional waves of infections or the need to address backlogs of diagnostic exams and procedures (neither elective nor non-elective). We expect the need for sporadic new budget allocations across 2021, turning overall growth positive in most cases. At the same time, this will create funding uncertainty for key public institutions, disruptions to care in some instances, and pressures from finance ministries for health ministries to seek cost reductions.

Private spending is likely to show the fastest growth in most cases. Private insurance spending contracted significantly in most Latin American countries in 2020 due to delayed diagnostic exams and procedures. However, we expect a strong recovery in 2021, as the beneficiaries that have retained their private plans return to the clinical setting, especially across the second half of the year. For out-of-pocket spending, we expect moderate growth to continue, despite falling disposable incomes, due to delayed access to public services.

Actions for Business Professionals

  • Engage heavily on policy. The combined obligations of having to vaccinate an entire population amid continued budget pressures will result in a high level of healthcare policy revisions in the next two years. Firms should be more engaged than ever in this moment.
  • Constantly review assumptions across therapies and payers. Various stages of vaccination and recovery will impact different payer groups and therapy areas differently. Firms will need to make different assumptions across segments for each quarter.
  • Continue to push digital. While there have been barriers to adopting digital solutions (including telehealth) during the pandemic, firms should stay the course and continue to invest in these solutions. We have seen many 2021 public plans prioritize this action area specifically.

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