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Extra resources for Actuarial Mathematic, Second Edition

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11 Health care reformers claim that the constitutional principle of universal coverage is not enforced in practice and that it is better to target scarce resources on the poor through a basic package of benefits. But World Bank officials now sustain that public support for the reforms of the 1990s might have been undermined because they focused almost purely on instruments for improving efficiency (payment mechanisms, shift from supply to demand subsidies, decentralization, autonomy of units, and separation of functions) rather than on specific benefits for the target population.

There is a difference between the pension program, with a linkage between contributions and benefits, and the health care program where benefits are not related to contributions. This implies that the young, healthy, single men should pay relatively more, in relation to the benefits received, than the old, sick, married with family, and women. The intergeneration contract means that the young pay higher contributions, despite relatively low health risk in the short and middle term, so that when reaching old-age their contributions and those from the new generation can finance higher health costs (ILO-ISSA 2001b).

With the objective of sustainability, pension systems should be financially viable in the long run. Therefore it is necessary that they conduct periodic actuarial projections and introduce the needed adjustments . . It is essential to make a full actuarial evaluation of any proposed reform before adopting new legislation (OIT 2001a: 4–5). 2. Enforcement in Latin America Before the reforms, the financial sustainability of social security varied among Latin American countries. Social security expenditures as a percentage of Gross Domestic Product (GDP) was the highest in the pioneer-high group and the lowest in the latecomer-low group; there were also important differences in the distribution of social security expenditures: in the pioneer-high group the majority of expenses went to pensions, while in Social Security Principles the latecomer-low group the majority went to sickness-maternity.

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Actuarial Mathematic, Second Edition by Browers Gerber Hickman

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