Public policy for pensions, health and sickness insurance

This document is prepared by Edward Palmer, Consultant of the Project ¨Inclusion of the European Nordic Model in the debate concerning reform of social protection schemes in Latin American and the Caribbean¨ (SWE/05/001). This project that the Economic Commission for Latin America and the Caribbean (ECLAC) is carrying out in the Social Development Division, with the financial support of Swedish International Development Agency (SIDA). Prepared as a support to the document Shaping the Future of Social Protection: Access, Financing and Solidarity" presented in the XXXI ECLAC Session Period carried out in Montevideo, Uruguay during March, 20 to 24, 2006. The views expressed in this document, which has been reproduced without formal editing, are those of the authors and do not necessarily reflect the views of the Organization. Abstract This paper discusses the rationale of social insurance and social insurance institutions as they have emerged and developed in economically mature nations. The aim of the paper is to present discuss experience in a perspective that can be useful for discussions in Latin America. Key issues in system and institution design are identified and discussed, and examined with reference to experience from Sweden. The paper contains three major sections and concludes with some final remarks. The first of these discusses the case for publicly mandated insurance. The second discusses models and issues for health care and sickness insurance and the third section models and issues for pension insurance. The paper presents the arguments favoring mandated insurance for health care and pensions. The paper concludes that public provision of health care insurance combined with some private-public mix of health care services has strong advantages in the Latin American setting. The paper discusses various institutional issues in designing health care and sickness insurance, referring specifically to experience from Sweden. Likewise, the paper argues in favour of mandated old age pension insurance, presenting the arguments for why the present trend in pension reform is in the direction of notional (NDC) and financial (FDC) defined contribution earnings-related schemes. A large portion of the population in Latin America will not be sufficiently covered by earnings-related schemes, stressing the need for the public sector to tread in with income support for the poor, only partially covered or wholly uncovered population as the market economy develops. The safety net will need to be a publicly provided defined benefit or means-tested income support, with the defined benefit taking the form of a minimum pension guarantee or demogrant."