The president of the IESS and Biess explains the financial situation of the IESS funds and the payment options that the Government is considering to honor its debt.
Francisco Cepeda came from the private health sector to the Ecuadorian Social Security Institute (IESS) a few months ago. However, it already draws a clear diagnosis of what is happening with the entity and its health and disability, old-age and death (IVM) insurance. He assures that under current conditions, the Biess will no longer be able to continue financing the State, and that it is urgent to reach agreements to pay the debt that the State has with the IESS, otherwise a collapse is imminent. Explain that there are already agreements in methodology and payment options are analyzed. He also talks about the mafias entrenched in public purchases
How did you find the IESS, in October, when you took office and what have been the actions to address the problems?
As you know, the IESS has some insurances and health and disability, old age and death (IVM), which is pensions, are the ones that have worried me the most since I arrived, since they are in deficit. Citizens must know that each insurance has its own fund that allows it to survive over time. But in the case of the health fund, the State has been accumulating a debt that reaches $ 4,300 million. A 20-year debt. Currently in the fund there are only $ 76 million, which is practically nothing.
To understand well, how much is spent on health each year?
The expenses are $ 1.9 billion, but right now we have a deficit of $ 500 million. While there was the fund there, it was disinvested and it continued to subsist. Now in 2022 we will have to agree to collect the debt from the State.
Health is a big problem, but how is the IVM fund, that is, the pension fund?
Right now we have a deficit of $ 2 billion per year; the expenses we have are above $ 3,500 million, while the income reaches $ 1,500 million. The difference must be financed by the State with 40% of pensions, but debt from this insurance has also been accumulating. We currently have a fund of $ 5.3 billion that will allow us to move forward until 2024. As of that year, the IVM fund would practically no longer exist and there would be a collapse.
But what does the government say about this?
This matter, which is very worrying, is well known by the President and has made us aware of his political will that we must find a solution. However, it is not easy to solve a problem that has been around for 20 years. On December 3, we already agreed, with the Ministry of Finance, a methodology to audit the health debt and have it paid. The results of these conversations should be seen already in the first quarter of 2022, since being in deficit and having no resources to divest, the issue could explode. It is a problem to be solved in the very short term.
What payment options are being considered and how much is the total debt of the State?
The total debt will close at $ 8,175 million: the $ 4,300 million for health, which is 54% of the debt, followed by $ 2,758 million for 40% of pensions (which is 34% of the debt); from the Rural Social Security they owe us $ 756 million; Risks of the Work, $ 58 million; and an additional $ 5 million from Unemployment Insurance. Among the options is to create a fund that is fed with income from different sources such as a contribution from the OCP rate or it can come from telecommunications.
Despite the fact that the State is this great debtor of the IESS, you shook hands with the Government with an investment in bonds this year a few weeks ago, how was this operation and what investment plans do you have for the future?
What occurred in the Biess was a novation for the maturity of bonds for $ 500 million. As you say, we shook hands with the Government, it was a last operation to leave this year with a yield of 7.98%. But this must stop, there is no way to continue supporting the Government. It would be madness for the Biess to fund the Government, when it should be the other way around: the Ministry must support us with the payment of the debt. The Government is aware that it must make a payment plan. Additionally, you have to think about structural solutions. We cannot be waiting for the Government to provide for IVM insurance that is poorly structured. I understand that the president is very concerned about this issue and has thought about the creation of a commission of notables to analyze this case and make a proposal for a solution.
Where should these reforms or solutions go?
It is important to understand why there is little time to make structural reforms to the IVM fund. The pension calculation based on the best five years must be analyzed. In actuarial matters, the replacement rate is high, that is, the retiree receives what he contributed or even more than what he contributed. Years of contribution should be reviewed. However, these types of changes must be made by law, the IESS is not empowered to do it alone.
‘There are mafias and we have already cut some tentacles’
The problem in the health fund generates the lack of care and medicines or are they other bureaucracy, for example?
We have to recognize that we have faced a problem of shortage of medicines, no one denies it. There has been administrative instability, between January and October three presidents and changes of hospital managers. There are bureaucratic problems, the public procurement law does not flow and there are financial problems. But also, in previous administrations hospitals were built, I do not make a value judgment if they were built well or if the price was correct, but the unprecedented thing is that they are not provided with supplies. The result has been that they are working at 50% of installed capacity and referrals are still being made to private companies. We live in a perverse mix: we do not have supplies but we pay payroll from hospitals and we refer private providers that are being prosperous with the income that should remain in the IESS. We have changed the director of health and we seek to improve the productivity of hospitals.
When will the changes come or do we continue in the diagnosis?
When I received the hospitals they were at 30% supply of medicines and to date we have 70% supply, and we expect to close at 75% or 78% this year. A purchase was made from the Pan American Health Organization for HIV patients with a horizon of fifteen months of medication. We have bought medication for muscular dystrophy. We still have specific problems in cancer medications in Andrade Marín, but they are expected to be resolved. The decline in referrals is expected to be 25% by the second quarter of the year. We are talking about savings of about $ 150 million that we should put in our hospitals that can continue producing. We must also think about having stability in the hospitals of the managers and that they are well selected, we must improve the issue of public purchases. The IESS must be restructured, there will be a reduction in the support sector especially.
The former president of the IESS, Jorge Madera, said that he had had to face mafias. Did you also find that there are mafias that run certain sectors of the IESS?
The answer is yes. There are mafias and we have already cut some tentacles from them. We are working so that the law of public purchases is done in a different way. Every day we find cases: there are complaints that they were sleeping in the IESS Attorney’s Office and we have urged them to the Prosecutor’s Office. I have seen that products are bought at different prices. Here some “mini-kingdoms” have been created. These mafias are in public purchases (…), of course. The shortage I received was done on purpose, because it is more profitable to buy through minute purchases or through auctions and not through decentralized purchases. We are going to make this transparent.
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