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The Health-Care System and its Fiscal Impact in Colombia

This document analyzes the structure of the health care system in Colombia with the aim of establishing the magnitude of the public fiscal deficit generated by such a system. We first explain its complex funding structure (full of “cross-subsidies”) and then we run simulations to establish the public sector financial gap. Based on these results we compute the Net Present Value (NPV) of the health care service’s (actuarial) liability, as the system increases coverage from the current 86% to the recently announced target of universal coverage by year 2012. Our base-case scenario shows an estimate of a NPV of public liabilities of about 97% of GDP (of year 2007) over the period 2007-2050, which is of similar magnitude to the pension system liability established after recent “parametric reforms” to the Pay-as-you-go System.