care for some, while invariably excluding many of the poor from the services or diminishing
their use of them (Creese, 1991; Nyonator and Kutzin,1999). More wholesale moves towards
market allocation of resources within the health sector have been introduced in some
countries - e.g. Chile and the UK.
In Chile there was an integrated public health service in the 1970s with universal coverage,
and some private health care for the wealthy. Public health services were financed mainly by
the central government budget (65%) and by compulsory health insurance contributions from
workers and their employers. The system was redistributive and offered near-equality of
health treatment. Chile was one of the first developing countries to adopt market reforms in
the economy as a whole under the harsh dictatorship of Pinochet. Market reforms were soon
introduced into the health services also. These occurred in two stages, the mid-1970s and the
early 1980s. In the mid-1970s, there was a reduction in central government finance which
was compensated for by direct user payments and by an increase in the compulsory insurance
contribution. Reforms of the mid-1980s abolished the National Health Service as such,
favouring private intermediary institutions to which workers could assign their compulsory
health contributions in exchange for health insurance plans. The reforms also involved greater
decentralisation of the public health system. In both the mid-1970s and the 1980s there was a
severe reduction in public funding for health services. The 1981 reforms led to a major opt
out from the public health system among the middle classes, leading to a further squeeze on
public funding and a loss of medical personnel to the private sector where rewards were
higher. The result was rising inequality in health care, and diminished public service. Both
infant and maternal mortality rates worsened during the acute public expenditure cuts. There
was a sharp reduction in staff per person in the public sector (Montoya-Aguilar and
Marchant-Cavieres, 1994). Health care expenditure per capita in the mid-1990s was 2.5
times higher for the privately insured than for those receiving public health care. “The 1981
reforms may be therefore be regarded as a major setback to the establishment of a more equal
society” (World Bank, 1997b, annexe 5, p 174).
The medical reforms were associated with a change in the dominant mode of behaviour. The
public system of the early 1970s combined P/C and COOP behaviour. There were both P/C
34