Current Spending Falls Short of WHO Recommendations
Mexico must, at the very least, double its current healthcare budget to achieve universal coverage and meet the needs of its population, according to various experts in the field. Alejandra Macías, director general of the Center for Economic Research and Budgeting (CIEP), stated that “at least we should be allocating double, another 900 million pesos, and we don’t even reach 6% of GDP. But with double, we could cover a universal healthcare system.”
Government’s Current Healthcare Spending
This year, Claudia Sheinbaum’s government plans to allocate 881.460 billion pesos to functional healthcare spending, representing a 10.90% annual decline. This reduction in spending aligns with efforts to lower the fiscal deficit.
As a result, healthcare spending will account for approximately 2.4% of the Gross Domestic Product (GDP), which is half of the World Health Organization’s (WHO) recommendation of 6%.
Proposals to Allocate Resources for IMSS-Bienestar
To address the population lacking social security and protection against health issues, civil organizations Fundar and El Poder del Consumidor have proposed a series of recommendations to boost resources and direct them towards IMSS-Bienestar.
During the event to present these proposals, Iván Benumea, coordinator of Fundar’s Justice Fiscal Program, suggested increasing the Impuesto Especial sobre Producción y Servicios (IEPS) tax rate on tobacco, alcohol, sugary drinks, and ultra-processed foods, which negatively impact consumers’ health. These resources would then be earmarked for the IMSS-Bienestar budget.
Specific Tax Increases
- Increase the IEPS on tobacco by one peso, leading to a 30.1% rise in revenue while causing a 13.9% decrease in sales.
- Set a specific tax per liter for alcohol, potentially generating 105.3 billion pesos, a 42.9% increase compared to 2023 revenues.
- Raise the volumetric tax per liter for flavored beverages from 1.6451 to 7 pesos, increasing the final price by 20% and generating approximately 104.993 billion pesos, a 210% rise from expected revenues this year.
- Boost the tax rate for processed goods from 8% to 20% to discourage consumption.
These actions could reportedly yield around 250 billion pesos in additional revenue, which could be directed towards IMSS-Bienestar.
Reforming the Ley General de Salud
To ensure that healthy IEPS revenue is allocated to the uninsured population through IMSS-Bienestar, Fundar’s Iván Benuema proposes revising the Ley General de Salud. This revision would guarantee that at least 3.1% of the federal budget’s programmable expenditure goes to IMSS-Bienestar, close to the total IEPS revenue from alcohol, tobacco, flavored beverages, and ultra-processed goods in 2024.
Increasing ISR for Alcohol, Tobacco, and Processed Goods Industries
In addition to updating IEPS tax rates and allocating the revenue, the study also recommends increasing the payment of the Impuesto sobre la Renta (ISR) by large corporations in the alcohol, tobacco, beverage, and ultra-processed goods industries.
Although Mexico’s corporate ISR rate is 30%, these industries’ effective tax rate is only 3.82% after accounting for benefits and deductions.
To address this, Fundar proposes creating an exclusive tax regime for these industries, eliminating deductions for water concession rights and other contributions, as well as publicity and marketing expenses. This regime would also limit access to various tax benefits offered by law, frontier zone incentives, deductions for private and public organization donations, and create an over-ISR rate for profits that harm the population’s health. Lastly, it would ensure transparency in financial and tax information.
“Fiscal policy is a crucial tool for preventing and reducing health damages caused by tobacco, alcohol, flavored beverage, and ultra-processed goods consumption. Healthy IEPS, corporate ISR, and a budgetary guarantee can play a more significant role in ensuring everyone’s right to health,” Benuema added.
Key Questions and Answers
- What is the current situation with Mexico’s healthcare spending? Mexico’s healthcare spending currently represents around 2.4% of the GDP, which is less than half of the WHO’s recommended 6%.
- What do experts propose to achieve universal healthcare coverage? Experts recommend doubling Mexico’s current healthcare budget to at least 12% of the GDP, which would allow for universal coverage.
- How can resources be allocated to IMSS-Bienestar? Civil organizations propose increasing taxes on harmful products like tobacco, alcohol, and sugary drinks and earmarking the additional revenue for IMSS-Bienestar.
- What changes are suggested for the alcohol, tobacco, and processed goods industries’ taxation? Proposals include increasing tax rates, eliminating certain deductions, and creating an exclusive tax regime for these industries to generate more revenue for healthcare.
