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Title: A look into the future : how NAFTA and U.S. health care reform affect health care in Mexico and the Caribbean
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Permanent Link: http://ufdc.ufl.edu/CA00400159/00001
 Material Information
Title: A look into the future : how NAFTA and U.S. health care reform affect health care in Mexico and the Caribbean
Physical Description: Book
Language: English
Creator: Monograph
English ( Contributor )
Christian, Cora Le Ethel, 1947- ( Contributor )
Publisher: Caribbean Studies Association
Publication Date: 1994
Subject: Caribbean   ( lcsh )
Spatial Coverage: North America -- Mexico -- Caribbean
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Bibliographic ID: CA00400159
Volume ID: VID00001
Source Institution: Caribbean Studies Association
Holding Location: Caribbean Studies Association
Rights Management: All rights reserved by the source institution and holding location.


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Table of Contents
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Full Text







Giving every American health care that can never be taken away was President
Clinton's rallying cry that fired off the long-awaited battle for universal health care.
The USA, Canada and Mexico are, ostensibly, seeking to achieve greater levels of
economic efficiency and effectiveness in the production and delivery of goods and
services. Higher standards of living, the opening of markets and the reduction of
migration of Mexicans entering the USA are principal stated objectives of the North
American Free Trade Agreement (NAFTA) (Jones-Hendrickson, 1993). Improved
health care has always been clearly linked to a higher standard of living. On the
other hand, illegal immigrants have clearly placed a burden on health care services
especially in emergency rooms where the services are the most costly and least
efficient in promoting continuity of care and improved health status. Therefore it would
seem obvious that NAFTA would shift the flow of migration back to Mexico and away
from the USA as new economies are created in Mexico. We will argue in this paper
that the newly proposed health care reform poses a series of new problems that may
in fact continue to create enormous logistical problems for companies considering
establishing businesses in Mexico. We will argue that health care reform may continue
to encourage employees, whether Mexican or American, to continue to opt for
migration into the U.S. A. We will argue that the availability of health care is a major
determinant of where people choose to live especially if their contribution to the cost of
the care is sizeable.



The man who ran for change has been bold and aggressive on issues that had their

origin many administrations ago. President Clinton achieved what other U.S.

Presidents couldn't even get on the agenda. The health care reform proposal that is

on the lips of every American and has all industries and entities that buy, sell or

provide health care scrambling to be heard by Hilary Clinton, the wife of the President

and the key player in health care reform, was started in the Truman Administration.

The North American Free Trade Agreement (NAFTA) which joins Mexico with the

United States and Canada in the world's largest trade zone had its origins in the

Carter Administration. It has been successively refined and reintroduced under

different names in each successive administration. U.S. President Bill Clinton has

made it a reality. Mexico's President, Carlos Salinas de Gortari, has made NAFTA the

centerpiece of his sweeping economic reforms. Canada's Prime Minister, Jean

Chretien, although in favor of NAFTA, wants better rules on what constitutes a subsidy

and what sort of sanction should be imposed for trade violations. But, all in all, the

three leaders are united in creating a huge economic market encompassing 363

million people and $6.7 trillion.

banking, energy, trucking, textiles, patent and copyright protection, environmental


regulations, tariffs and immigration. We would like to focus on immigration as it

relates to health.

NAFTA states that the general immigration laws would be unchanged. Only limitations

on the movement of business executives and professionals would be reduced. Ross

Perot, leading the opposition to NAFTA, warns that companies will accelerate moving

jobs to Mexico and U.S. wages will drop. In 1990, the per capital income in the U.S.

was $21,790 with a per capital health expenditure of $2,763 or 12.7% of the gross

national product (GNP). The per capital income in Mexico was $2490 with a per

capital health expenditure of $89 or 3.2% of the GNP. The USA's per capital health

expenditure was more than the total per capital income of each Mexican. (World

Development Report 1993 ).

For the Caribbean, the measures needed in NAFTA to give Caribbean nations equal

treatment with Mexico were left out when the US. House of Representatives approved

the agreement on November 17, 1993. With Mexican imports entering duty-free

status under NAFTA, the Caribbean share of the dollar could diminish and in turn

increase the number of unemployed or underemployed. The per capital income in the

Caribbean varies from as low as $370 in Haiti to a middle-income economy like

Jamaica of $1500 to a high-income economy of the U.S. Virgin Islands of $11,000.

A drop in wages in the U.S.A. has the same effect in the Caribbean. Wage reduction


has far-reaching effects on health care. Putting aside income reduction, which in and

of itself has an effect on health, coupling the present Mexican expenditure vs. the USA

expenditure on health and the income disparity between per capital income in Mexico

versus the USA. NAFTA has a special relationship to the proposed American Health
Security Act.


The American Health Security Act (ASHA) promises security, responsibility, savings,

quality choice and simplicity. We will limit our discussion of the ASHA only to those

areas that impact on perceived changes as a result of NAFTA.

Before discussing ASHA and NAFTA, it is important that we discuss some of the

specifics of frequently used terms. Health alliances, health plan, and comprehensive

or defined benefit package will be discussed throughout the paper.

Health Alliances

Health alliances are meant to act as conduits between health plans and individual

purchasers of health insurance coverage. The alliances contract with health plans to

provide the required benefit package. They provide a simplified uniform means for
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There are several 'musts' and some 'mays' for all alliances. Alliances must contract

with a plan unless the plan's premium exceeds the weighted-average premium by

more than 20%, its quality is poor, or it discriminates. The alliance must use a risk-

adjustment mechanism to account for enrollment variations across plans. The alliance

must establish provider advisory boards. The alliance must enroll all eligible

individuals and have annual open enrollment periods. The alliance must publish

consumer information on cost, providers, access restrictions and quality of plans. The

alliance must offer at least one fee-for-services plan, but may limit its number to three

through competitive bidding.

The alliance may be a nonprofit corporation or state agency, but nonprofit's board

must equally consist of consumer and employers whose selection is determined by the

state. After collective provider negotiations, the Alliance may set a provider fee

schedule for each fee-for-service plan and providers may not balance bill. Balance bill

means that the provider would attempt to collect the difference between his/her regular

charge from the portion not paid by the fee schedule. This balance billing would not

be allowed. States may impose prospective budgeting on fee-for-service plans. The

alliance may not bear insurance risk.

Alliances are permitted to adopt varying arrangements with health plans for providing

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Health Plans

Health plans provide coverage for the nationally guaranteed comprehensive benefit

package through contracts with regional or corporate alliances. Again, here there are

several 'musts' and 'mays'. Health plans must be state certified. Health plans must

accept all eligible individuals, have an open enrollment period, and may not

cancel/reduce benefits even for enrollee nonpayment. Pre-existing condition limits and

disease-specific exclusions are prohibited. The plans must provide the alliance with

extensive information on cost, quality, provider availability, utilization review, consumer

rights, and plan responsibilities. ASHA also states that all US citizens and legal

residents must enroll in a health insurance plan. Plans may be purchase through a

state/regional health alliance. Large employers (more than 5000 employees) may

proved coverage through its own alliance. Out-of-service-area emergency/urgent care

when required is paid on the alliance's fee-for-service payment schedule.

As we focus on occupational health care, health plans will provide treatment for

individuals with work-related injuries covered under workers' compensation insurance.

To obtain state certification, a health plan must demonstrate its ability to provide or

arrange for comprehensive medical benefits for work related-injuries and illnesses,

including rehabilitation and long-term care services. Health plans must employ or

enter into contract with specialist in industrial medicine and occupational therapy.

or centers of excellence in industrial medicine and occupational therapy. An alliance


may designate as subcontractors health care professionals and institutions that

provide specialized services for the treatment of work-related injuries and illnesses on

behalf of all health plans serving the alliance region. Individuals enrolled in health

plans within the alliance will receive treatment for work-related injuries or illnesses

from their health plans, although emergency treatment may be obtained from any

provider. State laws regarding choice of provider for workers' compensation cases are

overridden in the ASHA with respect to individuals covered through health alliances.

Exception may be necessary in cases of disputes.

Defined Benefit Package

The new health security card will entitle each holder to a nationally defined

comprehensive benefit package. The national defined benefit package includes:

comprehensive medical care inclusive of hospital services;

emergency services and services of physicians and other health professionals;

clinical preventive services based on a periodicity schedule;

30 days/episode and 60 days/yr inpatient mental health/substance abuse with

30 visits/yr psychotherapy;

family planning; pregnancy-related care;

hospice; home health care;

outpatient laboratory and diagnostic services; outpatient prescription drugs and


biologicals; outpatient rehab services;

durable medical equipment and prosthetic/orthotic devices;

vision/hearing care;

preventive dental care for children;

and health education classes.

For the first time, all Americans would be guaranteed no-cost physical exams and all

childhood immunizations. Most preventive services would be provided at no cost to

the consumer. In addition to the regularly covered items like hospital care, also

covered would be classes that encourage the reduction of behavioral risk factors and

promote health activities including smoking cessation, nutritional counseling, stress

management and physical training classes. An annual exam would be a lot more than

the laying on of hands. It would be a chance to make sure that the patient is getting

all the counseling about risk prevention that causes over 80% of our present

preventable illnesses.

ASHA will change the payment of health care significantly. Employees will pay 20% of

weighted average-cost alliance health plans, depending on its cost. Self-employed

and unemployed will pay 100%, but anyone below 150% of poverty will receive federal

premium assistance from the alliance. Undocumented -aliens- will not be eligible for

States will address migrant worker issues. These provisions will, de facto, limit


choice of providers for occupational illnesses to whomever are the providers in the

plan, yet it will define the dollar contribution of the employee to the plan without

defining the dollar contribution to workmen's compensation by the employer. It is

understood that workers' compensation will reimburse the plan, yet the administrator of

the plan is permitted to negotiate fees that vary from the fee-for-service rate

schedule with workers' compensation insurers and employers. If all care is covered by

the plan, why is there a need for workmen's compensation separate and beyond the

employer's contribution of the 80% to the plan? If the plan is reimbursed, why isn't the

reimbursement equal to the expenditure by the plan? Since emergency care can be

obtained from any provider and since emergency care gives freedom of choice, will

more care be labelled -emergency-?


Exhibit 1 details the trail of coverage, the redistribution of funds, who pays what, what

is covered, and what's not covered as per the White House documents in September,

1993 when ASHA was released. However, ASHA is silent on the issue of whether or

not the nationally defined comprehensive benefit package of U.S. based companies,

which have a mixture of U.S. citizens and employees who are not U.S. citizens, is

applicable to all. But the ASHA is clear on the employer requirement. ASHA states

that all employers must pay 80% of weighted-average plan premium for all

.!'Caps exist on the empler' rcontribution not to ex d 7.9% of payrollr an hrfre r \all

Caps exist on the employer's contribution not to exceed 7.9% of payroll and for small


employers (less than 50 employees between 3.5% and 6.5% depending on the

employee's average annual wage." Coupling these requirements of ASHA suggests

that U.S. based companies will have a responsibility to insure all its employees are

covered. No distinction is made between employees that are U.S. citizens and

employees that are non-U.S. citizens in the Act although the ASHA states only citizens

and legal residents will hold a card. Unions often require health care benefits for all

their members. Will Mexicans work under a Mexican labor law and U.S. citizens under

the collective bargaining agreement for U.S. companies? If the same Union collective

bargaining agreement is not applicable, then we have a double standard within the

same company. If so, will this double standard press the U.S. labor union machinery

to interact or interfere, as some may see it, in the laws of Mexico to insure all

employees receive equal benefits? Jack Sheehan, Assistant to the President, United

Steelworkers of America in a recent interview with me indicated that the Unions did

just that in Canada recently. Apparently the National Labor Relations Act of 1935,

better known as the Wagner Act, requires equity. How is equity determined? Is it

based on U.S. companies standards for its U.S. citizens or is it based on the

community standard of the specific country? If a double standard exists, what does

that say in reference to disease transmission for communicable diseases that can be

prevented by proper immunization and health care?

Will certain benefits that would clearly improve the health status of the Mexican worker


be deleted from the package or will all elements of the above stated defined benefit

package be applicable? Will services not available in Mexico be guaranteed for the

Mexican worker? Will services not available in Mexico be guaranteed for U.S. citizens

while resident in Mexico? Will U.S. companies have to expend additional dollars to

set up preferred provider systems utilizing the best of Mexican health care providers

for company purposes or flying in their own health care providers at an additional cost

to the company to meet the requirements of ASHA for employees accustomed to a

higher standard of health care? Will U.S. citizens with acute problems, where care is

unavailable in Mexico, have to be transported by expensive air ambulance to a U.S.

based hospital for a service that is part of the defined benefit plan? The cost of air

ambulance ranges from approximately $3000.00 for a 50 mile flight to $16,000.00 for

a three and a half hour flight. The ASHA requires that the plan pay for the cost of

emergency/urgent care when required. Who will determine the necessity of the

expenditure? Will it be a medical decision of the treating physician, a plan's officer

decision or an alliance decision? If alliances exceed their targeted budget in two out

of three years, which cannot be adjusted other than by Congress, they will be

terminated. Alliances of the border states of California, Arizona, and Texas, and the

Caribbean entities of the Commonwealth of Puerto Rico and the territory of the U.S.

Virgin Islands will be in jeopardy from the beginning because of their peculiar situation

and the built-in increased need for services. We fear that the border states and the

board and therefore will have to be terminated. Who then will be available for insuring


care? Will we be faced with yet another insurance crisis as exists due to the

devastation effects of Hurricane Hugo and Hurricane Andrew? After these natural

disasters, basic insurance was unaffordable, even for the well-to-do middle class.

What will be the overall health of these states? The Northwestern National Life State

Health Rankings considers 17 areas that measure disease, lifestyle, access to health

care, occupational safety, disability, and mortality. Presently the southern states are

ranked the least healthy states [FP Update, Dec 22, 1993 p.7]. Will the southern

states suffer disproportionally more to their detriment because of NAFTA and ASHA?

How will border states pay for undocumented workers and migrant workers when the

federal government reduces its participation and leadership in providing care for these

individuals? States will have to address migrant workers health care benefits. Are the

border states prepared financially for this event and if not, what will happen to the

quality of the care these workers receive when quality is a stated goal of the ASHA?.

Medicaid defines an eligible person as one whose income is $5,500.00 per person

with an additional $1,000.00 allowed for each additional person in the household

[Source: USVI Medical Assistance Program, March 8, 1994]. Although not under

Medicaid, any illegal immigrant has access to the U.S. health care system in many

ways but most importantly in emergency rooms which are the most expensive avenue

citizens of the U.S. who live in the Caribbean?
citizens of the U.S. who live in the Caribbean?


ASHA significantly changes the workers' compensation/auto injury practices. Under

the ASHA, health plans and auto insurance policies will be reimbursed at a negotiated

fee-for-service alliance schedule with no copayments. The state will continue to

determine workers' compensation benefits. The state freedom-of-choice provider laws

will be pre-empted. These provisions seem to allow workers to be treated by

whomever is designated by the plan. This approach will save dollars but appears to

be in direct contradiction to the freedom-of-choice concept, one of the basic tenets of

the ASHA.

Many industries presently require workers with job-related injuries to see a designated

"company physician" to assess the problem and to dialogue with Workmen's

Compensation. Some workers object to the usurpation of their rights to see their own

physician and in turn see their physician of choice with the understanding that,

although workmen's compensation will not reimburse the company for the expenditure,

the private insurance held by the individual will cover the cost. Although this general

situation applies whether there was a NAFTA or not, with American workers and

especially the more skilled workers being assigned outside the U.S.A., when injuries

occur these workers will no longer have the option of choosing to see their own

physician. Will this discourage professionals and highly skilled workers from

assignments in Mexico? Will the companies have to provided some additional

to assist in the construction of a new textile plant. Worker A sustains a second


degree burn of approximately 9.9% of his body. He is taken to the nearest emergency

facility and the physician, assigned by workmen's compensation, determines that his

burn is under 10% and does not meet the criterion to allow him to be transported to a

burn center in the U.S.A. Worker A is in severe pain and demands that he be flown

immediately to a burn facility for care. If he is transported to the burn facility, who

pays? Does Worker A pay out of pocket since the workers' compensation rules now

specify a protocol that limits Worker A from accessing the burn center? Does Worker

A's company pay since it is job-related? If Worker A is not flown out and succumbs to

his injury, is it a wrongful death because the patient failed to get optimum care?

We all know the draft of ASHA is excellent. But the devil may be in the details as it

relates to NAFTA. President Clinton sprinkled his 53-minute address on September

22, 1993 with anecdotes of nightmares from the current health system, laying out his

rationale for the biggest social initiative for the USA since the New Deal. The

President said the current health system is "too uncertain, too expensive, too

bureaucratic and too wasteful." ASHA is the product of eight months of active work.

ASHA is based on the premise that it can extend health coverage to all and at the

same time shrink the nation's $900 billion medical bill. But NAFTA, places all the

adjectives used by President Clinton for the present health care system right back

onto ASHA- too many present uncertainties, potential increased expense, increased

good to ASHA. It is too early to judge. There are too many unanswered questions.


Complex and likely to change-yes. Nothing is set in concrete yet, but we know

enough that we raise significant questions. Is the passage of NAFTA a thunder-storm

cloud hanging over ASHA? We will have to watch and wait. Behind every cloud, it is

said, there is a silver lining. We will wait and see if NAFTA is the silver lining of ASHA

or if NAFTA will be the thunderstorm of ASHA deluging it with rains of mammoth fiscal

and logistical problems.


1. "Americans Healthier". FP Update, 1993, December 22, p.7

2. James, M. USVI Medical Assistance Program, (telephone conversation March,


3. Jones-Hendrickson, S.B. "NAFTA and the Caribbean". Seminar at the Institute of

International Relations, University of the West Indies, Trinidad, November 16, 1993.

4. Pompa, F. "To You and Your Health". The Daily News 1993, September 23.

5. The American Health Security Act of 1993, September 7, 1993.

6. Investing in Health-World Development Indicators. World Development Report

1993, p.210-211.


Only U.S. citizens or legal
U.S. residents will be
covered under the new
health care plan. Citizens
covered by Medicare, the
Indian Health Service, the
Department of Veterans
Affairs, and the Department of Defense
will continue the plans they have. Here is
a look at how the new system will
How premiums are divided:

* Employers spend
up to 7.9 percent of
annual payroll on
workers' premiums.
* Companies with
fewer than 50
workers pay
between 3.5-7.9
percent of payroll,

depending on
average wage.
* Self-employed
workers pay total
premium but are
allowed a 100
* Families and
individuals whose
incomes are 150
percent of the
poverty level are
eligible for subsides
to help pay their

The standard national benefits
package includes:

* Hospital
* Emergency
I Doctors' visits
* Preventive care*
I Prescription
I Mental health
nd substance

* Pregnancy-
related services
* Hospice and
home health care
* Outpatient care
* Physical
rehabilitation and
durable medical
* Vision and
hearing care

includes mammograms, Pap smears,
cholesterol test and immunizations.

IAdult dental care' N Private hospital
SAult eyeglasses rooms
id contact lenses U Cosmetic surgery
In vitro fertilization U Orthodontia
o be added after the year 2000.

Redistributing the funds
A breakdown of the $441 billion allotment, in billions of dollars, through the year 2000:

Where the money comes from
Medicare Taxes on
savings expected higher
$51 wages, lower
$124 /$47 medical
( -- deductions

Where the money goes
Medicare -- 100% tax deduction
prescription for self-employed
drug $72 $80 $9
$91 Long-
$160 care

ce: White House documents

Frank Pompa, Gannett News Servic



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