With this week’s issue of the prepaid health plans like no other, the libertarian Javier Milei administration has simultaneously made contact and lost touch with reality. For almost the first time it has voluntarily subordinated its economic dogmas to political calculations – just the day after the Supreme Court had upheld its deregulatory emergency decree 70/2023 against two lawsuits, the government moved forcefully to regulate the market forces which it had previously liberated.
End of story? This abrupt U-turn will not make such factors as the exodus of the doctors or the soaring cost of medicine previously justifying the astronomic increases in fees magically go away – which is not to say that the prepaid health plans were not on a collision course with reality either. Subordinating medical fees to the dictates of a usually populist government, as had been the case for the previous dozen years, did not work since it placed pricing hopelessly out of sync with the costs but the naïve faith that the market could correct the damage of years in three months was a non-starter. Which is not to say that this week’s hasty U-turn is going to be third time lucky.
The government’s “one size fits” solution to this problem – rolling back charges to the end of last year and then updating them on the basis of the general monthly inflation figure – denies both the inherited disarray of relative prices and the imbalances which have since arisen from the attempts to straighten them. Firstly, the INDEC monthly inflation figure now converted into the benchmark for the prepaid health plans is an average of items with huge variations in the price increases – taking the latest figure from last month (whose bottom line was 11 percent), the rises ranged from five percent for domestic appliances to 52.7 percent for education. If each sector has its special needs and factors, why not healthcare? In the past decade the price of medicine has increased almost 20 times and prepaid fees eightfold – since the start of the coronavirus pandemic the respective percentages have been 1,750 and 667 percent. One size never fits all.
But without going as far as to say that the cure is worse than the disease, the government’s austerity drive to end inflation has only created new problems for both itself and the prepaid health plans. While magically wiping out the fiscal deficit in the first quarter of this year (with huge doubts about the sustainability), the government has invited the prepaid health plans to wipe out their own deficits in a record short space of time via deregulation. But while Milei’s election campaign assured the voter that “the caste” would be picking up the bill for austerity, its cost has fallen disproportionately on the middle class and on pensioners – the core clientele of the prepaid health plans. The latter were thus being squeezed in precisely the same months in which prepaid fees were shooting up some 150 percent on average, way above inflation but still well behind the accumulated deficits – an impossible situation. There is a strong argument for saying that these increases were self-destructive, banishing most of the six million users to the already overcrowded public hospitals or the union-run obras sociales healthcare schemes – perhaps the market would have done its job after all with a bit more patience – but renewing the curb does not solve the other problems.
The government might feel that these problems can be muscled down with a display of authority, as it has done for the past dozen years, but quite apart from all its contradictions with the libertarian creed, this aggressive move will have to clear the hurdle of the courts – going all the way up to a Supreme Court which had just smiled on deregulation the previous day. The government backed up the resolution by the Economy Ministry’s trade department with a court injunction but two can play at that game and legal pushback from the prepaid may now be expected. Apart from the new increase caps, there is also the issue of the repayment of the sums collected in excess of inflation (which in any case is not due until the second half of the year).
Presidential spokesman Manuel Adorni (anointed a secretary of state the same day) celebrated this move last Wednesday by saying that the “Argentina of wise guys” is over but if this demagogic and populist intervention is the shape of things to come, it may only be beginning.
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