Painel Abramed - O DNA do Diagnóstico - inglês

50 Basic sanitation in Brazil – Impacts on health A ccording to the World Health Organization (WHO), basic sanitation is a key factor to promote health, the environment and maintenance of social well-being. The lack of basic sanitation contributes to a number of issues related to public health, which reflects especially on the child mortality rates in the poorest areas, directly impacting the popula- tion’s life expectancy. Poor sanitation conditions also contribute to the develop- ment of tropical diseases, such as Dengue, Zika and Chikungunya, because they are transmissible via proliferation of the Aedes aegypti mosquito. In Brazil, over a third of the population lives in homes without the sewage sys- tems. According to the Summary of Social Indicators (SIS) released by IBGE, over 74.2 million Brazilians live in homes in this condition, which corresponds to 35.7% of the total population. From this total, 32.3 million (79.3%) live in the North and Graph 14 Ratio of people living in homes without a sewage system via collection network, pluvial drainage or septic tank connected to the network (2018) Source: IBGE, National Household Sample Survey 2018. Designed by Abramed. 90.6 85.7 85.7 93.0 79.3 48.5 76.8 68.6 70.0 66.3 64.5 57.1 58.2 58.2 60.1 Abramed Panel | 2020 Ratio (%) 50.8 43.5 52.3 46.0 45.2 46.8 44.5 33.8 45.3 35.7 30.8 30.7 21.8 18.6 11.8 12.1 7.7 Brazil ATRoRomcoAanrazNdamnoPioôAtairnacntpmrrianesaááash Rio GranPdereNMnodaarASProlteaamaCrrhBNnPbgeaegiaoíihuoaraahãpcbritasuíosaeeatoá REisMopiíSdnrSioeatãsuJootaGSPhneaaereinaualrtisooost RioSGarnatnadCeaPtSdaarooraiuStnnuláha MatFoeGdrMeorastasloMoiDGiddrsGootworsieSisáscutlots

14.2 million (57.1%) in the Northeast. In the state o Piauí, for example, around 93.0% of 51 the population lives in homes without sewage systems. On the other hand, in São Paulo this ratio is of only 7.7% of the population. On a preliminary basis, a negative association can be observed between the population’s life expectancy by state and the ratio of people that live in homes without sewage system. The better the condition of sewage system, the bigger will be the life expectancy. This cor- relation is naturally associated with other factors, such as income, education, among other human development indicators. The lack of proper basic sanitation results in the occurrence of thousands of hospitalizations due to Diseases Related to Poor Sanitation (DSRAI) that can be transmitted via fecal-oral route, insect vector, water, via hygiene, geohelmints and teniasis. Therefore, the universal access to water and sewage system could consid- erably reduce the number of hospitalizations, deaths from infections, number of work leave, among other positive impacts13, such as the social welfare. Graph 15 Relation between life expectancy at birth and ratio of population living in homes without sewage system (Brazil – 2018) Source: IBGE, National Household Sample Survey 2018. Designed by Abramed. 79 78 77 76 75 74 73 72 71 70 R2=0.6867 69 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 Proportion of the population living without sewerage Life expectancy (in years) Population and demography 13. Basic Sanitation in Brazil: pricing structure and regulations. Mortality by Sex and Age Groups – Large and Federation Units – 1980, 1991 and 2000. Texts for discussion, Research Board, IBGE, Rio de Janeiro, 2005.161p. ISSN 1518-675X; n. 20 2000 – IBGE / Research Board. Coordination of Population and Social Indicators. Studies and Analysis of Demographic Dynamics Management. Projection of the population of Brazil by sex and age for the period 2000-2060. 2010 onwards – IBGE / Research Board. Population and Social Indicators Coordination. Studies and Analysis of Demographic Dynamics Management. Projection of the Brazilian population by sex and age for the period 2010-2060. Adaptation by Abramed.

52 Mortality and morbidity From the 19th century to the 1940s, the a decrease in the infectious, respiratory and process of demographic change in Brazil has parasitic diseases in comparison with the dis- been characterized by high birth and mor- eases related to population ageing. It is noted tality rates, especially in the first years of life. that child mortality (under 1 year old) has pre- From this period on, many medicine advances sented a decrease of 91.5%, while the mortal- have provided an epidemiological change with ity on the ages 1 to 4 has decreases 97.3%. Abramed Panel | 2020

Table 6 Child mortality rate, mortality rate in the age group of 1 to 4 years old and mortality rate during childhood (by thousands) – Brazil (1940-2018) Sources: IBGE – Complete Table of mortality in Brazil – 2018. Brief analysis of the Evolution of mortality in Brazil 1940, 1950, 1960, 1970 – Tables built 53 under the Management of Studies and Analysis of the Demographic Dynamics. 1980 and 1991 – ALBUQUERQUE, Fernando Roberto P de C. and SENNA, Janaína R. Xavier “Tábuas de Mortalidade por Sexo e Grupos de Idade – Grandes e Unidades da Federação – 1980, 1991 and 2000”. Texts for discussion, Research Directory, IBGE, Rio de Janeiro, 2005.161p. ISSN 1518-675X; n. 20 2000 – IBGE/Research Directory. Coordination of Population and Social Indicators. Management of Studies and Analysis of the Demographic Dynamics. Brazil’s Population Projection by Gender and Age for the Period 2010-2060. 2010 onwards – IBGE/Research Directory. Coordination of Population and Social Indicators. Management of Studies and Analysis of the Demographic Dynamics. Brazil’s Population Projection by Gender and Age for the Period 2010-2060. Adapted by Abramed. Year Infant Mortality rate Infant Of children who died before mortality rate in the 1 to 4 mortality rate the age of 5 the chance of dying (%) (per thousand) years old group (per thousand) (per thousand) Before the Between 1 and 4 1st year years old 1940 146.6 76.7 212.1 69.1 30.9 1950 136.2 65.4 192.7 70.7 29.3 1960 117.7 47.6 159.6 73.7 26.3 1970 97.6 31.7 126.2 77.3 22.7 1980 69.1 16.0 84.0 82.3 17.7 1991 45.1 13.1 57.6 78.3 21.7 2000 29.0 6.7 35.5 81.7 18.3 2010 17.2 2.6 19.8 86.9 13.1 2018 12.4 2.1 14.4 85.5 14.5 ∆ abs (1940/2018) 134.2 74.6 197.7 ∆ % (1940/2018) -91.5 -97.3 -93.2 It is important to highlight that the mor- and premature disability in most countries in Population and demography tality rates have presented a direct associa- our continent, including Brazil. tion with the socioeconomic condition and the indicators related to education, per capita In 201814, the set o DCNTs was responsible income, health expenditures and basic sanita- for nearly 62.4% of deaths, followed by external tion, among others. The demographic change causes of morbidity and mortality, which repre- process, urbanization and the socioeconomic sented 11.5% of the total of deaths. According to changes have strongly impacted the life hab- the data from the Ministry of Health, there was its of the Brazilian population, especially in the an increase of 25.5% in the number of deaths last decades. As a result of that, there was a caused by DCNTs in Brazil in the last ten years. systematic increase of the prevalence of risk The following table shows the number of deaths factors such as obesity, smoking and seden- between 2008 and 2018, according to Chap- tariness directly related to the development of ter ICD-10, in which we highlight the number of non-communicable chronic diseases (DCNT). deaths arising from circulatory system diseases The DCNTs are the main cause of mortality and neoplasms: 585 thousand in 2018. 14. Most recent data.

Table 7 Deaths by Chapter ICD-1015 (Brazil – 2008/2018) 54 Source: MS/SVS/CGIAE – System of Information about Mortality – SIM. Obtained in Oct. 1/2020. Designed by Abramed. Note: Deaths by place of residence according to ICD-10. Chapter ICD-10 2008 2018 Rnk ∆ (%) ∆ (quantity) 2018 2008/2018 2007/2017 IX. Circulatory system diseases 317,797 357,770 1º 12.6% 39,973 II. Neoplasms (tumors) 167,677 227,920 2º 35.9% 60,243 X. Respiratory tract diseases 104,989 155,191 3º 47.8% 50,202 XX. External causes of morbidity and mortality 135,936 150,814 4º 10.9% 14,878 IV. Endocrine nutritional and metabolic diseases 64,631 81,365 5º 25.9% 16,734 XVIII. Symptoms, signs and abnormal findings in clinical and laboratory tests 79,161 70,505 6º -10.9% -8,656 XI. Diseases of the digestive system 55,272 67,316 7º 21.8% 12,044 I. Some infectious and parasitic diseases 47,295 54,679 8º 15.6% 7,384 XIV. Genitourinary system diseases 19,790 43,428 9º 119.4% 23,638 VI. Nervous System Diseases 21,609 41,035 10º 89.9% 19,426 XVI. Some affections originated in the perinatal period 26,080 20,764 11º -20.4% -5,316 V. Mental and behavioral disorders 11,852 13,697 12º 15.6% 1,845 XVII. Congenital malformations and chromosomal abnormalities 10,502 11,156 13º 6.2% 654 III. Blood and hematologic diseases and immune disorders 5,825 6,601 14º 13.3% 776 XII. Skin and subcutaneous tissue diseases 2,642 6,273 15º 137.4% 3,631 XIII. Osteomuscular System and Connective Tissue Diseases 4,094 6,153 16º 50.3% 2,059 XV. Pregnancy, childbirth and puerperium 1,691 1,862 17º 10.1% 171 VIII. Mastoid ear and apophysis diseases 125 169 18º 35.2% 44 VII. Eye and eye attachments deseases 39 21 19º -46.2% 18 Total 1,077,007 1,316,719 22.3% 239,712 Abramed Panel | 2020 The number of deaths related to the age a decrease in the infectious diseases and exter- groups indicates a significant decrease in the oc- nal causes in the same period. Conversely, in the currences associated with the NCDs, especially age group of over 60 years old, we can notice in the age group from 0 to 14 years old between an expressive increase in the deaths by NCDs, in- 2008 and 2018. It was also possible to observe fectious diseases and external causes. 15. CID-10 – The International Classification of Diseases and Related Health Problems (also known as the International Classification of Disease – CID 10) is published by the World Health Organization (WHO) and its goal is to standardize the codification of diseases and other health related issues. ICD 10 provides codes related to the classification of diseases and a variety of signs, symptoms, abnormal findings, complaints, social circumstances, and external causes of injury or diseases. A unique category is given to every health condition, which corresponds to an ICD 10 code.

Graph 16 Number of deaths by Chapter ICD-10 (Brazil – 2018) Source: MS/SVS/CGIAE – System of Information about Mortality – SIM. Designed by Abramed. Respiratory 55 tract diseases Circulatory system diseases 155,191 357,770 External causes of morbidity and mortality 150,814 Neoplasms (tumors) Endocrine nutritional and metabolic diseases 227,920 81,365 Table 8 Number of deaths by Chapter ICD-10 according to age group (Brazil – 2008 and 2018 – selected diseases) Source: MS/SVS/CGIAE – System of Information about Mortality – SIM. Designed by Abramed. 0 to 14 years old 15 to 59 years old 60 years or older Chapter ICD-10 2008 2018 ∆ (%) 2008 2018 ∆ (%) 2008 2018 ∆ (%) 2008/2018 2008/2018 2008/2018 I. Some infectious and parasitic diseases 4,151 2,267 -45.4% 23,145 21,039 -9.1% 19,874 31,308 57.5% Population and demography II. Neoplasms (tumors) 2,106 1,833 -13.0% 55,716 65,750 18.0% 109,805 160,308 46.0% IV. Endocrine nutritional and 1,175 760 -35.3% 13,939 15,934 14.3% 49,426 64,648 30.8% metabolic diseases IX. Circulatory system diseases 1,216 910 -25.2% 72,018 69,557 -3.4% 244,209 287,094 17.6% X. Respiratory tract diseases 4,271 3,125 -26.8% 18,210 21,060 15.7% 82,293 130,875 59.0% 6,660 4,757 -28.6% 106,417 110,950 4.3% 20,598 33,445 62.4% XX. External causes of morbidity and mortality

56 It is noteworthy that with age progression, there is also an increase in the number of people that declare having one, two, three or more chronic diseases. Between people that are 65 years old or older, 79.1% had a chronic disease and 51.4% had two or more. Graph 17 Percentage of people that have declared at least one of the twelve types of the selected chronic diseases by age group – Brazil (2008) Sources: IBGE, Research Directory, Coordination of Labor and Income, National Household Sample Survey 2008. Designed by Abramed. Note: 12 types of diseases considered chronic: spine or back diseases, arthritis or rheumatism, cancer, diabetes, bronchitis asthma, high blood pressure, heart disease, chronic kidney disease, depression, tuberculosis, tendonitis or tenosynovitis, cirrhosis. 80.0 79.1 70.0 60.0 50.0 40.0 30.0 27.7 28.3 23.2 20.0 10.0 One or more illnesses 1 2 3 or more 0 to 4 years old 5 to 13 years old 14 to 19 years old 20 to 39 years old 40 to 49 years old 50 to 64 years old 65 years or older Abramed Panel | 2020

In developed countries, especially pressive number in the deaths of the 57 in the United Kingdom and the United population with up to 3 years of educa- States, the level of education has been tion. This number decreases as the years used as a key indicator for monitoring of education increase. In conclusion, we socioeconomic diseases, and is usually can observe that the number of deaths more relevant in determining the health from the population with up to seven situation of each individual and of the years of education is, in average, 74.6% mortality rates16. In Brazil, there is an ex- of the total. Graph 18 Number of deaths by Chapter ICD-10 according to years of education (Brazil – 2018 – selected diseases) Source: MS/SVS/CGIAE – System of Information about Mortality – SIM. Obtained in Oct. 1/2020. Designed by Abramed. 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 None 1 to 3 years old 4 to 7 years old 8 to 11 years old 12 years or older I – Some infectious and parasitic diseases II – Neoplasms (tumors) IV – Endocrine nutritional and metabolic diseases IX – Circulatory system diseases X – Respiratory tract diseases XX – External causes of morbidity and mortality Most chronic diseases are triggered entariness, among others. In general, the Population and demography by risky behavior. By making healthy diseases associated with these factors are choices, the individual can reduce the silent and do not show any symptoms in probability of developing a chronic dis- its early stages. Therefore, the early de- ease and improve its quality of life. Stud- tection through diagnostic exams is a way ies have shown the positive association of preventing them and it aims to identify between the main NCDs and the risk fac- the factors that develop the conditions for tors such as: smoking, high consumption the occurrence of a symptom or a disease, of alcohol, obesity, high cholesterol, sed- avoiding more complexes diseases. 16. Cutler & Lleras-Muney, 2007.

Economic environment



Economic environment

61 The pandemic has found economic activity in a period of stagnation in Brazil T he global economic environment has been through a drastic change of per- spective since the emergence of the new coronavirus in China. In March 11th, 2020, as the disease was gaining territory in many countries in all of the continents, WHO declared a pandemic situation because of Covid-19. The Covid-19 pandemic is a worldwide phenom- enon unprecedented in the history of the last cen- tury. The government actions were fairly slow in order to delay the dissemination process and allow a proper adjustment of the health care systems to face the disease, resulting in extreme isolation and social distancing measures. The economic impact have occurred mainly in China and have rapidly reached the financial mar- kets worldwide. There was a generalized decrease in the stock exchange, appreciation of the Ameri- can currency and depreciation of many commodi- ties, especially with the oil, given the probability of retraction in the world’s economic activity and a high level of uncertainty about the epidemiological impacts related to Covid-19.

62 Therefore, the isolation and social distanc- ual upturn of the economic activities through a ing measures have strongly impacted the relaxation of the restrictive measures. supply and demand of goods and services, causing direct effects on the industry, trade Is this scenario, the projection of variations and credit supply. In order to avoid a further of the Gross Domestic Product (GDP) will es- deterioration in the economy, many economic sentially depend on the duration of the social measures where implemented, among which isolation and on the result of the adopted eco- we highlight the following: loosening of the fis- nomic measures. However, it is possible to es- cal target, relaxation of labor laws, extension of timate that the economy, both in Brazil and payment deadline for taxes and the expansion in the world, will hardly grow in 2020, show- of liquidity in the markets with the increase of ing a high probability of a sharp downturn in credit supply. However, the recovery pace of comparison with 2019’s GDP and a moderate the economic activity in Brazil and worldwide increase only in 2021. Even in face of the pan- will depend on a strict control over the prog- demic, the only exception for this year in Brazil ress of the pandemic, which will allow a grad- is the growth projection of agricultural activity. Table 1 GDP variation in percentage: years before and estimates of the International Monetary Fund (IMF) Source: International Monetary Fund World Economic Outlook database and IMF datampper. Designed by Abramed, inspired by the Letter of Conjuncture IPEA. GDP Variation (%) Average Average Estimate 1998-2008 2009-2019 2017 2018 2019 2020 2021 World 4.1 3.4 3.9 3.6 2.9 –6.4 2.2 Developed Countries 2.6 1.5 2.5 2.2 1.7 –7.8 2.9 Euro Zone 2.2 0.8 2.5 1.9 1.2 –8.9 3.3 United Kingdom 2.7 1.3 1.9 1.3 1.4 –7.9 2.5 United States 2.8 1.8 2.4 2.9 2.3 –8.0 3.0 Japan 0.8 0.7 2.2 0.3 0.7 –5.7 2.5 Developing Countries 5.8 4.9 4.8 4.5 3.7 –5.6 1.8 Asian Developing Countries 7.8 4.2 4.1 4.1 4.5 –5.0 2.3 China 10.0 7.8 6.9 6.7 6.1 –4.6 3.3 India 6.9 7.1 7.0 6.1 4.2 –5.1 0.0 Abramed Panel | 2020 Latin America and Caribbean 3.2 1.6 1.3 1.1 0.1 –7.0 1.0 Mexico 2.5 2.0 2.1 2.1 -0.1 –7.9 1.1 Brazil 3.2 1.2 1.3 1.3 1.1 –7.3 0.5 Europe – Developing Countries 5.1 2.2 4.0 3.2 2.1 –7.7 1.7 Russia 5.8 1.1 1.8 2.5 1.3 –7.4 1.5 Middle East and Central Asia 5.4 3.1 2.3 1.8 1.2 –5.7 0.8 Sub-Saharan Africa 5.1 4.1 3.0 3.3 3.1 –5.2 0.4 South Africa 3.7 1.4 1.4 0.8 0.2 –6.9 2.6

Covid-19 has caused a global recession with 63 deep effects in many countries. Although the outspread of the pandemic are still uncertain, it is possible to estimate a sharp downturn in most part of the emerging markets, the devel- oping markets and in the low-income coun- tries. Even in face of the adoption of monetary and fiscal policies, we hope that the reduction of per capita income in this set of countries lead millions of people to extreme poverty. It is estimated that approximately 71 million17 peo- ple end up in this condition all over the world. In the worst-case scenario, this number can reach around 142 million people with an aver- age daily income of US$ 1.9. Graph 1 COVID-19 impact on the global poverty Source: Lakner et all (2020), PovcalNet, Global Economic Perspectiver. World Bank Data Blog – Daniel Gerszon Mahler, Christoph Lakner, R. Andrés Castaneda Andrés Castaneda Aguilar and Haoyu Wu. Available on: https://blogs.worldbank.org/opendata/ updated-estimates-impact-covid-19-global-poverty . Note: Extreme poverty is measured with the number of people that live with less than US $ 1.90 per day. 750 730 719 710 690 679 670 650 648 630 610 590 570 577 550 2015 2016 2017 2018 2019 2020 2021 People in extreme poverty (in millions) Pre Covid-19 April Projection June Projection Pessimistic projection June Economic environment In Brazil, the economic indicators presented record numbers in face of the collapse in the oil below, show the results and expectations con- prices and the fears related to the economic ac- sidering the Covid-19 effects from many as- tivity’s retraction. Naturally, these prices tend to pects. Is this scenario, a significant reduction return to the previous level in the medium term. can be expected as a result from the decrease In addition, trying to reduce the cost of credit goods and services demand. Regarding the and incentivize the economy, the Central Bank currency exchange, the US dollar have reached has systematically reduced the Selic rate. 17. Perspectivas Econômicas Globais. World Bank Data Blog – Daniel Gerszon Mahler, Christoph Lakner, R. Andrés Castaneda Aguilar e Haoyu Wu. Avail- able in: https://blogs.worldbank.org/opendata/updated-estimates-impact-covid-19-global-poverty.

Abramed Panel | 2020 64 Nominal Exchange Rate (R$) IPCA (%) Source: Brazil’s Central Bank. Obtained in Sept. 1/2020. Designed by Abramed. Source: Brazil’s Central Bank. Obtained in Sept. 1/2020. Designed by Abramed. Jun.100246 8 10 6.00 Oct.10 12 5.50 Sep.10 Graph 3 Inflation target Feb.11 Graph 2 5.00 Jan.11 Jun.11 4.50 May.11 Maximum limit Oct.11 IPCA and inflation targeting – var. % in 12 months, performed, 4.00 Sep.11 Feb.12 market expectations (Focus), inflation target (2010-2021) 3.50 Jan.12 Nominal Exchange rate R$/US$ (2010-2020) Observed IPCA Jun.12 3.00 May.12 Oct.12 2.50 Sep.12 More recent focus Feb.13 2.00 Jan.13 Jun.13 1.50 May.13 Oct.13 1.00 Sep.13 Feb.14 Jan.14 Jun.14 Nominal Exchange Rate (R$) May.14 Oct.14 Sep.14 Feb.15 Jan.15 Minimum limit Jun.15 May.15 Oct.15 Sep.15 Feb.16 Jan.16 Jun.16 May.16 Oct.16 Sep.16 Feb.17 Jan.17 Jun.17 May.17 Oct.17 Sep.17 Feb.18 Jan.18 Jun.18 May.18 Oct.18 Sep.18 Feb.19 Jan.19 Jun.19 May.19 Oct.19 Sep.19 Feb.20 Jan.20 Jun.20 May.20 Oct.20 Sep.20 Feb.21 Jun.21 Oct.21

Brazilian Central Bank Economic Activity Index (%) Basic interest tax (%) Source: Brazil’s Central Bank. Obtained in Sept. 1/2020. Designed by Abramed. Source: Brazil’s Central Bank. Obtained in Sept. 1/2020. Designed by Abramed. Jul.10 Graph 5 Sep.10 Graph 4 Oct.10 8.00 Jan.11 14.00 Jan.11 6.00 IBC-Br – economic activity – var. percentage in 12 months May.11 12.00 Selic rate percentage per year target (2010-2020) Apr.11 4.00 Sep.11 10.00 Jul.11 2.00 Jan.12 8.00 Oct.11 May.12 6.00 Jan.12 00 Sep.12 4.00 Apr.12 -2.00 Jan.13 2.00 Jul.12 -4.00 May.13 Oct.12 -6.00 Sep.13Basic interest tax target Jan.13 Jan.14 Apr.13 Brazilian Central Bank Economic Activity Index May.14 Jul.13 Sep.14 Oct.13 Jan.15 Jan.14 May.15 Apr.14 Sep.15 Jul.14 Jan.16 Oct.14 May.16 Jan.15 Sep.16 Apr.15 Jan.17 Jul.15 May.17 Oct.15 Sep.17 Jan.16 Jan.18 Apr.16 May.18 Jul.16 Sep.18 Oct.16 Jan.19 Jan.17 May.19 Apr.17 Sep.19 Jul.17 Jan.20 Oct.17 May.20 Jan.18 Sep.20 Apr.18 Jul.18 65 Oct.18 Jan.19 Apr.19 Jul.19 Oct.19 Jan.20 Economic environment

66 Economic In Brazil, the pandemic arrived at a activity stagnation period of the economic ac- tivity, with optimistic growth perspec- tives after the approval of the welfare reform and the advance on discussions surrounding the tax reform. However, the results of the GDP in 2019 have revealed that the economy’s growth pace is still slow. The growth of 1.1% in comparison to last year was below the numbers registered in the two previ- ous years and indicated that the level of activity was still at a slow pace even before the effects of Covid-19 on the economic activity. In the most recent period, the re- traction was of 2.2% in the last 12 months that were over on the second quarter on 2020. However, when com- pared to the trimester immediately before that, there was a retraction of 9.7%. This is the biggest decrease in Graph 6 The evolution of the GDP – Cumulative rate in 4 quarters (%) 2nd quarter 2010 to 2nd quarter 2020 Source: IBGE, Research Directory, Coordination of National Accounts. Designed by Abramed. 8 6 4 Abramed Panel | 2020 2 GDP (%) 0 -2 -2.2 -4 -6 2010.II 2010.III 2010.IV 2011.I 2011.II 2011.III 2011.IV 2012.I 2012.II 2012.III 2012.IV 2013.I 2013.II 2013.III 2013.IV 2014.I 2014.II 2014.III 2014.IV 2015.I 2015.II 2015.III 2015.IV 2016.I 2016.II 2016.III 2016.IV 2017.I 2017.II 2017.III 2017.IV 2018.I 2018.II 2018.III 2018.IV 2019.I 2019.II 2019.III 2019.IV 2020.I 2020.II

the variation rate since the beginning number of beneficiaries was smaller 67 of the series and it stops a record of than the reduction of the GDP. How- stability that began in the first quarter ever, in the period that followed, the of 2019. This result reflected partially recovery of the number of beneficia- on the developments of the pandemic ries was slower than the recovery of over the economic activity. the economic activity. What occurs is that after reaching its peak in the first The estimates for the perfor- quarter of 2015, the number of ben- mance of the economy in Brazil and eficiaries went from approximately in the world for 2020 and 2021 were 50.2 million to 47.0 million and have reviewed and indicate a sharp down- remained at this level in the last three turn regarding the difficulties of the years, since 2017. supply response, demand and inter- national liquidity. In addition to that, Such fact results from, among other the reduction of number of employ- factors, a faster growth of the informal ees with signed work cards and the labor market, which shows smaller sala- increase in the vacancy rate should af- ries and benefits, and a difficult internal fect negatively the number of benefi- environment: in political, economic and ciaries of healthcare insurance plan in social terms. These ingredients, put to- a short term. gether, slow the potential development of the sector and the population and Between 2014 and 2016, in spite company’s access to the private health- of being negative, the variation of the care plans. Graph 7 GDP and number of beneficiaries of health care insurance plan variation (Cumulative rate in twelve months – Brazil – Jun.10/Jun.20) Fontes: Sistema de informações de beneficiários – SIB/ANS/MS-Tabnet – Obtained in Sept. 1/20. Contas nacionais trimestrais: Indicadores de Volume e Valores Correntes – IBGE – março/junho 2020. Designed by Abramed. 8.0% 6.0% 4.0% 2.0% 0.0% Jun.10 -2.0% Sep.10 -4.0% Dec.10 -6.0% Mar.11 Jun.11 Sep.11 Dec.11 Mar.12 Jun.12 Sep.12 Dec.12 Mar.13 Jun.13 Sep.13 Dec.13 Mar.14 Jun.14 Sep.14 Dec.14 Mar.15 Jun.15 Sep.15 Dec.15 Mar.16 Jun.16 Sep.16 Dec.16 Mar.17 Jun.17 Sep.17 Dec.17 Mar.18 Jun.18 Sep.18 Dec.18 Mar.19 Jun.19 Sep.19 Dec.19 Mar.20 Jun.20 Economic environment GDP Health care plan beneficiaries

68 Labor market Abramed Panel | 2020 One of the consequences of the Covid-19 people employed to 83 million in the quar- pandemic on the economy was the increase ter ended in June 2020 compared to the in the number of people without any occupa- same period of the year before. The em- tion. A bit more than 4 months after the first ployed population showed a decrease of case of the disease in the country, the unem- 10.7%, the biggest negative variation since ployment rate reached 12.6% in the quarter the historical series in 2012, and it repre- that was over in June, which represents 12.8 sented the loss of almost 10 million work- million people 14 years old or over that unem- ers in the period. ployed. According to the National Household Sample Survey (PNAD Contínua – IBGE), The decrease was widespread and there was an increase of 0.2% in comparison reached nine out of the ten main job sec- with the same period of the year before. tors. The trade has showed the greatest re- duction, losing 2.3 million workers. On the Another number that shows the nega- other hand, the activities related to health tive effects of the Covid-19 pandemic in the have showed an increase of 338 thousand labor market is the decrease of 93 million people employed in the period.

Graph 8 Unemployment rate and number of people aged 14 years old or more that are unemployed (Brazil – 2012-2020) Source: IBGE, National Household Sample Survey – Quarterly – April to June 2020. Designed by Abramed. 69 14.0 13.3 16,000 13.0 13.0 12.4 12.0 14,000 12.0 12,000 Unoccupancy rate (%) Unoccupied people (in thousands) 11.0 10,000 10.0 8,000 9.0 6,000 8.0 4,000 7.0 2,000 6.0 0 Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun 2012 2013 2014 2015 2016 2017 2018 2019 2020 Tabela 2 Number of employed people with 14 years old or over by main work activity – estimate in thousands (Brazil – Apr. May. Jun. 2019-2020) Source: IBGE, National Household Sample Survey – Monthly – April to June 2020. Designed by Abramed. Variation over the Variation over the Apr-May-Jun Apr-May-Jun same mobile quarter same mobile quarter Main work activity groupings 2019 2020 of the previous year of the previous year (absolute) (%) Working people 14 years old and over 93,342 83,347 -9,995 -10.7 Agriculture, livestock, forestry, fisheries and aquaculture 8,655 7,976 -679 -7.8 General Industry 11,986 10,727 -1,259 -10.5 Construction 6,605 5,323 -1,282 -19.4 Automotive and motorcycle trade & repair 17,531 15,244 -2,287 -13.0 Economic environment Transportation, storage and mail 4,862 4,341 -521 -10.7 5,417 4,341 -1,076 -19.9 Lodging and food 10,509 10,064 -445 -4.2 Information, communication and financial, real estate, 16,451 16,789 338 2.1 professional and administrative activities 4,988 4,117 -871 -17.5 Public administration, defense, social security, education, 6,301 4,746 -1,555 -24.7 human health and social services Other services Household services

70 In the private sector, we highlight a Sharp decrease reduction of 3.1 million employees with in the number of work cards, which represents a de- employed people crease of 9.2% in comparison to the in the formal same period of the year before. The labor market number went from 33.2 million to 30.2 since 2014. million, resulting in the lowest level of the historical series. In the informal labor market, the decrease was even bigger, with a reduction of 2.9 million (24.9%) on the same comparison basis, going from 11.5 million to 8.6 million. Before the negative effects of the pandemic, during the first quarter of 2019, the labor market showed a mod- erate recovery pace, especially on the employments with signed work cards. This slight improvement of the formal labor market resulted in the inclusion of approximately 150 thousand new beneficiaries on the supplementary health market. Graph 9 People 14 years old and over, employed in the private sector WITH and WITHOUT a formal employment contract (excluding domestic workers – in thousands) Brazil 2012-2020 Source: IBGE, National Household Sample Survey – Monthly – April to June 2020. Designed by Abramed. 38,000 12,000 11,500 37,000 11,000 10,500 36,000 10,000 Registered workers (in thousands) 9,500 Unregistered workers (in thousands)35,0009,000 8,500 Abramed Panel | 2020 34,000 8,000 33,000 32,000 31,000 30,000 Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun Jul-Aug-Sep Oct-Nov-Dec Jan-Feb-Mar Apr-May-Jun 2012 2013 2014 2015 2016 2017 2018 2019 2020 Registered workers Unregistered workers

71 Data released by the General Regis- months of the year. Between January try of Employed and Unemployed peo- and July, Caged registered 7,821,801 ple (Caged) also show that the effects admission compared to 8,914,379 lay- of the Covid-19 pandemic have signifi- offs, resulting on a negative balance of cantly contributed to a negative bal- 1,092,578. It is the worst result for this ance in the formal jobs on the first seven period in the last 10 years. Graph 10 Formal employment balance – cumulative January to July (Brazil – 2011-2020) Source: Monthly Statistics of new formal jobs Caged and MTE/SPPE/DES/CGET – CAGED LAW 4.923/65. Available on: pdet.mte.gov.br Obtained in Sept. 1/2020. Designed by Abramed. 1,405,813 + 3,063,155 Positive 1,000,830 employment balance 699,036 504,914 Employment balance 391,376 70,954 Economic environment -307,311 - 1,581,826-547,438 -644,267 Negative employment balance -1,092,578 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Supplementary Health Market in Brazil



Supplementary Health Market in Brazil

75 The health is mainly driven by the private expenditures in Brazil T he health market in Brazil handles over R$ 650 billion per year, with significant participation of the private sector, which corresponds to nearly R$ 370 billion of the total expenditure with goods and health services. In this scenario, there is a significant participation of the supplementary health market through the offer of pri- vate health plans and insurance, espe- cially the ones hired by companies and families. This way, the dynamics of the market is essential in the development and complementation of the health ser- vices offer, besides those offered by the public health system in the country.

76 Operators The supplementary health market totaled 717 op- erators of health plans in activity and with beneficia- ries, and 269 exclusive dental operators according the data of National Agency of Supplementary Health (ANS) in July 2020. In this way. This way, it is possible to observe a significant participation of medical coop- eratives, with 279 active operators and 38.9% of the market, followed by the group medicines, with 241 op- erators and 33.6% of the total operators. Table 1 Distribution of operators by size of beneficiaries, by management type (Jul.2020) Source: Private Health Insurer Registry and Beneficiary Information System/ANS TABNET. Obtained in Sept. 1/2020. Designed by Abramed. Modality No Small size Medium size Large size Total with beneficiaries (up to 20,000) (20,000 to 100,000) (over 100,000) beneficiaries Self-management 6 112 31 10 153 Medical Cooperative 3 127 118 34 279 Philanthropy 1 21 12 2 35 Abramed Panel | 2020 Group medicine 17 138 78 25 241 Health insurance company – 3 2 4 9 Medical-hospital 27 401 241 75 717 Dental cooperative 1 72 25 5 102 Group Dentistry 14 136 18 13 167 Exclusively dental 15 208 43 18 269 Benefits Management Company 164 – – – – Total 206 609 284 93 986

The introduction of the regula- 77 tory mark has brought immediate results in the sector, among them there is the decrease in the num- ber of operators and the market consolidation, with operators that are able to address the set of reg- ulatory requirements and maintain the economic-financial balance of its activities in face of the challenge imposed by the demographic and epidemiological change. In spite of the decrease in the number of operators, it is important to high- light that this market tends to be regionally centered, since it de- mands the existence of economies of scale and scope. Graph 1 Private healthcare plan operators with beneficiaries in activity (Dec.1999/Jul.2020) Source: Consolidated data of the Supplementary Health – July 2020. Designed by Abramed. Up to Dec.99 – 1,380 Jul.20 – 717 Up to Dec.99 – 441 Jul.20 – 269 Supplementary Health Market in Brazil Medical-Hospital Exclusively dental

78 Is this set; we can highlight the propor- variation of the loss ratio is directly re- tion of operators of small and medium size lated to the level of capital necessity of on both welfare segments. In the medi- an operator. This means that the group of cal-hospital segment, 55.9% of the opera- operators are more likely to become in- tors have up to 20 thousand beneficiaries. solvent due to the occurrence of an un- In the dental segment, this number corre- foreseen accident and, consequently, end sponds to 77.3% of the operators. their activities, as they do not meet the regulatory capital requirements. Nesse mercado, a capacidade finan- ceira é essencial na medida em que al- The healthcare and insurance op- guns eventos assistenciais podem ser erators are organized according to its extremamente custosos para algumas legal status and differ from each other operadoras e, por isso, é necessária uma according to the form of access, pay- escala populacional, além de outros fa- ment system and benefits offered. The tores, para minimizar o risco de insolvên- collegiate board resolution (RDC) nr. cia. Tal fenômeno pode ser exemplificado 39, from October 2000, Art. 10, defines por meio da lei dos grandes números. the segmentation and classification of health operators according to the fol- The loss ratio for small and medium lowing categories: Administrator, Med- size operators present a bigger variation ical cooperative, Dental cooperative, than the ones from the big size operators. Self-management, Medical group, Den- The standard deviation – measured by tistry group and Philanthropy. Law nr. the loss ratio – is significantly bigger in the 10.185 from February 2001, refers to the small size operators, which are the ones specialization of the insurance compa- with up to 20 thousand beneficiaries. The nies in private healthcare plans. Graph 2 Normalized distribution of loss ratio by size – medical and hospital operators (2019) Source: DIOPS ANS. Designed by Abramed. Note: It takes into account the medical-hospital plans. Average casualty rate 82.1% Abramed Panel | 2020 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0% Small Medium Large

The pace of growth in assistance 79 income and expenditure was 8.1% last year. Economic and financial performance The supplementary health market handled healthcare expenditure amounted to R$ 172.8 bil- R$ 213.5 billion in revenue from services18 in 2019. lion and increased 8.1% in the same comparison The medical-hospital operators totaled R$ 207.7 basis. However, the behavior of the healthcare billion with an expansion of 8.1% in comparison expenditures has suffered significant changes with 2018. It is the lowest variation rate recorded during the pandemic period as shown in the sec- in the last five years. On the other hand, the tion before the last here at Abramed Panel. Table 2 Revenue, healthcare expenditure and loss ratio according to care segmentation (R$ billion – 2015-2019) Source: Private Health Insurer Registry and Beneficiary Information System/ANS TABNET. Designed by Abramed. Supplementary Health Market in Brazil Medical-hospital 2015 2016 2017 2018 2019 192.1 207.6 Actual services rendered 140.4 158.5 176.0 159.8 172.8 83.2 83.2 Indemntable Events / Claims 118.7 135.6 149.1 2018 2019 3.5 3.8 Casualty Rates (%) 84.6 85.6 84.7 1.7 1.8 47.4 46.3 Exclusively dental 2015 2016 2017 2018 2019 1.8 2.1 Actual services rendered 3.0 3.1 3.3 Indemntable Events / Claims 1.4 1.5 1.5 Casualty Rates (%) 46.7 48.3 46.9 Benefits Management Company 2015 2016 2017 Actual services rendered 1.4 1.7 1.6 18. Income from monthly payments of the individual and collective plans.

80 Average payment period The average payment period indicates the average period, in days, that a health insurance operator takes to pay for events already re- ported by healthcare ben- eficiaries in laboratories, hospitals, medical clinics and doctor’s offices. We emphasize that this period reflects directly in the cash flow and maintenance of the activities of the suppli- ers. The longer periods in- dicate that operators are financing their businesses with resources that should be destined to suppliers. Graph 3 Average period of payment of events by category (unweight data – 2019) Source: Health care operators’ periodic information document – DIOPS/ANS – Extracted on 6/16/20. Designed by Abramed. Note: Only considers operators with a payment deadline of more than 10 days and less than 160 days. 160 155.5 140 105.3 129.4 120 100 Abramed Panel | 2020 80 60 49.3 40 36.1 40.1 20 13.8 9.6 19.9 Group medicine Health insurance company 0 Medical Cooperative Minimum Average Maximum

In the main categories of healthcare plans, the average period of payment can 81 come up to 155 days for medical groups, 129 for the medical cooperatives, and 105 for the specialized health insurers. Table 3 Ten longer payment periods by category (2019) Source: Document for the periodical information on healthcare operators – DIOPS/ANS – Obtained in June 16/20. Designed by Abramed. Note: It takes into account only the operators with a payment period bigger than 10 days and smaller than 160 days. Operator Medical Cooperative Group medicine Health insurance company 1st 129.4 155.5 105.3 2nd 113.8 132.6 66.4 3rd 107.9 129.9 51.2 4th 93.8 112.2 46.4 5th 92.9 110.0 42.8 6th 87.7 99.9 41.8 7th 73.3 90.5 40.5 8th 73.3 81.6 29.0 9th 73.1 76.6 19.9 10th 70.9 74.7 n.d. In 2019, the percentage of operators that paid their suppliers within more than 30 Supplementary Health Market in Brazil days was of 77.8% among insurance companies and 70.4% in the medical groups, which means that for every 10 operators, 7 have paid suppliers like this. Table 4 Payment periods of up to and over 30 days by category (2019) Source: Document for the periodical information on healthcare operators – DIOPS/ANS – Obtained in June 16/20. Designed by Abramed. Note: It takes into account only the operators with a payment period bigger than 10 days and smaller than 160 days. Medical Cooperative Group medicine Health insurance company Up to 30 days 50.2% 29.6% 22.2% Over 30 days 49.8% 70.4% 77.8%

82 Disallowance Panel tors can reflect weaknesses and inconsis- tencies providers’ billing processes, as well In the second semester of 200, ANS re- as in the audit and validation processes of leased the Disallowance Indicator Panel19 existing invoices at healthcare operators. for the supplementary health market. This panel is an electronic tool aiming to provide Considering the ten biggest operators transparency on the behavior of the sector based on number of beneficiaries of health- when it comes to payment of procedures care, it can be noted that the percentages performed by beneficiaries and the relative of initial and final disallowance can vary disallowances regarding the providers. The considerably, reaching up to 10.83% and Disallowance Indicators Panel consolidated 10.23%, respectively, for this group of op- the indicators according to care segmen- erators. It is important to highlight that the tation, category and size of the operator. indicators can vary considerably according It is an important instrument to bring more to the size and category of the operator as transparency and offer improvements in the shown on the following graphs: relationship between healthcare operators and health service providers. These indica- Table 5 ANS Disallowance panel – 10 biggest medical-hospital operators by indicated percentages (percentage – 2019) Source: Disallowance panel ANS – Obtained in Sept. 9/20. Designed by Abramed. Note: It takes into account the 10 biggest operators by number of beneficiaries of healthcare plans in December 2019. Percentage of initial disallowance – Determination of the percentage of the initial amount disallowed by the operators regarding the total amount of care services charged by the providers. Percentage of final disallowance – Determination of the percentage of the final amount disallowed by the operators regarding the total amount of care services charged by the providers Percentage of non-return medical requests after 60 days of collection – Percentage of non-return medical requests after 60 days of de date of collection . Percentage of non-return medical requests after 60 days of collection – Percentage of amount informed in non-return medical requests after 60 days of de date of collection. Operator Starting Glose Final Glose Percentage of the number Percentage of the value of Percentage Percentage of tabs without return after tabs without return after 60 days of billing 60 days of billing a 9.8 9.48 16.32 20.63 b 10.23 10.23 0.7 0.22 c 1.46 1.46 62.12 58.76 d00 0 0.02 Abramed Panel | 2020 e 2.76 2.52 5.62 19.34 f 4.72 4.44 4.64 3.69 g 1.27 1.27 0 0 h 4.97 4.97 10.72 9.49 i 2.71 2.71 46.18 34.219 j 10.83 7.66 2.45 2.57 19. Disallowance happens when the healthcare plan suspends the payment of the services hired, such as: doctor’s appointments, exams, medication, ma- terials or fees charged by hospitals, clinics, laboratories, among other.

Graph 4 ANS Disallowance Panel by size of the operator (2019) Source: Disallowance panel ANS – Obtained in Sept. 9/20. Designed by Abramed. 83 Percentage of the value of tabs without return after 60 days of billing Percentage of the number of tabs without return after 60 days of billing Final Glose Percentage Starting Glose Percentage Percentage (%) 0 2 4 68 10 12 14 16 18 Group Medicine Philantropy Medical Cooperative Health Insurance Company Self-management Graph 5 ANS Disallowance Panel by the category of the operator (2019) Source: Disallowance panel ANS – Obtained in Sept. 9/20. Designed by Abramed. Supplementary Health Market in Brazil Percentage of the value of tabs without return after 60 days of billing Percentage of the number of tabs without return after 60 days of billing Final Glose Percentage Starting Glose 246 8 10 12 14 Percentage Large Medium Small Percentage (%) 0

84 Only 0.4% of the healthcare operators’ revenue were spent on Promoprev. Health promotion and prevention of risks and diseases In 2019, only R$ 17.2 were spent by alth and prevention of diseases are the beneficiary of healthcare plan to key to change the paradigm of he- fund healthcare promotion programs althcare in the private sector scope, and prevention of risks and diseases aiming to improve the life of quality in the supplementary health. In total, and the reduction of risk factors to 806.8 million were spent, which is people’s health. This way, there is a only 0.4% of the total revenue from regulatory incentive to encourage the the payment of healthcare plans and operators to rethink the management insurance operators. According to model for the health system and de- ANS, the actions of promotion of he- velop a more effective one. Table 6 PROMOPREV expenditure on supplementary health (2015-2019) Source: Health care operators’ periodic information document – DIOPS/ANS – Obtained in 6/18/20. Designed by Abramed. Note: Expenditures with PROMOPREV in million R$. Abramed Panel | 2020 2015 2016 2017 2018 2019 Number of registered programmes (number) 1,278 1,414 1,559 1,743 1,868 PROMOPREV expenditures (million R$) 316.7 377.4 532.0 663.0 806.8 Not approved by DIPRO (million R$) 77.5 64.5 78.4 92.7 114.3 Approved by DIPRO (million R$) 78.4 165.7 269.2 375.1 428.5 Revenue from services rendered1 140,351.4 158,507.3 176,041.9 192,070.0 207,583.1 Revenue share of PROMOPREV expenditure 0.2% 0.2% 0.3% 0.3% 0.4%

Beneficiaries 85 The supplementary health market has totaled a number of 46.7 million beneficia- Supplementary Health Market in Brazil ries of healthcare plans in June of 2020, showing a retraction of 0.5% compared to the year before. On the other hand, the number of beneficiaries of dental plans have totaled 25.3 million, showing an increase of 2.6%. Considering both care segments, the total amount of beneficiaries is 72.0 million20, an increase of 0.5% on the same basis of comparison. In the last four years, the number of beneficiaries of healthcare plans remained vir- tually stable, in sync with the growth pace of the economic activity. It is likely that in 2020 the sector will suffer a retraction due to the developments of Covid-19 and end the year in level below 46.5 million beneficiaries. 20. The term “beneficiary” refers to a binding contract with the healthcare plans, and it may include ties to one individual. ANS records are periodically update, this way the number of beneficiaries matches the date when they were obtained.

Table 7 Beneficiaries of private healthcare plans by care segmentation (Jun.10/Jun.20) 86 Source: Beneficiary Information System – SIB/ANS/MS-Tabnet – Obtained in Sept 1/20. Designed by Abramed. Month Medical care Exclusively dental Total jun-20 46.7 25.3 72.0 jun-19 47.0 24.6 71.6 jun-18 47.1 23.4 70.5 jun-17 47.3 21.7 68.9 jun-16 48.2 20.7 68.9 jun-15 50.1 20.5 70.6 jun-14 50.0 19.6 69.7 jun-13 48.5 18.5 66.9 jun-12 47.0 17.7 64.7 jun-11 45.7 15.8 61.5 jun-10 43.7 13.9 57.7 Variation (%) jun-19/jun-20 -0.5 2.6 0.5 jun-16/jun-20 -3.1 22.3 4.5 CAGR jun-16/jun-20 -0.8 5.2 1.1 jun-10/jun-15 2.8 8.0 4.1 Abramed Panel | 2020 In the most recent scenario, after 18 of beneficiaries decreased by 0.7% be- consecutive quarters in decline, the num- tween March and June 2020. The pace of ber of beneficiaries of healthcare plan recovery of the sector will still depend on has increased 0.4% in March of 2020 in the behaviour of the formal labour mar- comparison to March 2019. This was the ket and of the economic activity. The de- first positive variation in twelve months velopments of Covid-19 will bring a series since the quarter ended in June 2015. of challenges to the health sector, since However, this trajectory was impacted by the growth conditions of the sector are the Covid-19 pandemic and the number directly dependent on these factors.

Graph 6 Beneficiaries of healthcare and dental plans – Variation in 12 months (Jun.13/Jun.20 ) Source: Beneficiary Information System – SIB/ANS/MS-Tabnet – Obtained in Sept 1/20. Designed by Abramed. 87 10% 2.58% 0.53% Absolute variation in the number of beneficiaries over twelve months 8% -0.55% 6% 4% 2% 0% -2% -4% Jun.13 Sep.13 Dec.13 Mar.14 Jun.14 Sep.14 Dec.14 Mar.15 Jun.15 Sep.15 Dec.15 Mar.16 Jun.16 Sep.16 Dec.16 Mar.17 Jun.17 Sep.17 Dec.17 Mar.18 Jun.18 Sep.18 Dec.18 Mar.19 Jun.19 Sep.19 Dec.19 Mar.20 Jun.20 Medical care Exclusively dental Total In the analysis of the type of contract, Supplementary Health Market in Brazil it is possible to notice a sharp decrease in the number of beneficiaries of individual or family plans, going from 0.9% in June 2020 in comparison to 2019, and of 6.5% in the last five years. This reduction is particularly associated with the regulatory rules that often make the sustainability of this type of hiring unfeasible in the long term, consider- ing the setting of the adjustment index by the regulator. This way, it was possible to observe a sharp reduction of the offer and an increase of the values charged by this type of plan in the health market. In the business healthcare plans, the de- crease was of 0.7% in the last year; however, it shows a decrease of 1.6% in the last five years. In the collective plans by membership, there was an increase of 0.9% and a decrease of 4.1% in the same basis of comparison.

Table 8 Beneficiaries healthcare plans by type of contract (Jun.10/Jun.20) 88 Source: Beneficiary Information System – SIB/ANS/MS-Tabnet – Obtained in Sept 1/20. Designed by Abramed. Month Single or Family Corporate Group Collective membership Jun.20 8.9 31.5 6.2 Jun.19 9.0 31.7 6.2 Jun.18 9.1 31.6 6.2 Jun.17 9.3 31.5 6.3 Jun.16 9.6 32.0 6.5 Jun.15 9.9 33.3 6.7 Jun.14 9.9 33.1 6.7 Jun.13 9.7 31.7 6.5 Jun.12 9.6 30.1 6.6 Jun.11 9.5 28.3 6.7 Jun.10 9.2 26.0 7.1 Variation (%) Jun.19/Jun.20 -0.9 -0.7 0.9 Jun.16/Jun.20 -6.5 -1.6 -4.1 CAGR Jun.16/Jun.20 -1.7 -0.4 -1.0 Jun.10/Jun.15 1.5 5.1 -1.1 Distribution by region and population size Abramed Panel | 2020 The organization of the healthcare network enabling the formatting of a sustainable care in Brazil shows a higher concentration of ser- network. The distribution of the number of vices of higher technological density, such as beneficiaries and resources of the health sec- hospitals, unities for diagnostic exams pro- tor literally abides to this principle. In 2020, cessing, imaging equipment; and human re- the Southeast region has accounted for nearly sources, such as doctors, nurses and other 28.4 million of beneficiaries of healthcare health professionals in the most economically plans, which represents 60.9% of the total. At developed areas, just like what happens in the same time, this region stands out for its many productive sectors. population size, with 89.0 million inhabitants, nearly 42.0% of the total, and for the high From an economic point of view, it is es- health plans coverage rate when compared to sential to have economies of scale capable of the national average.

Table 9 Beneficiaries of healthcare plans, population (in thousands), municipalities and the coverage rate by region and population size (Jun.2020) Sources: Beneficiary Information System – SIB/ANS/MS-Tabnet – Obtained in Sept 1/2020. IBGE. Research Directory – DPE – Coordination of Population 89 and Social Indicators – COPIS. Designed by Abramed. Notes: 1Beneficiaries of healthcare plans. It does not include the beneficiaries classified in municipalities ignored or overseas. 2Esimates of the resident population in the Brazilian municipalities with reference date of July 1st 2020. Region and population size Beneficiaries1 Population Municipalities Coverage rate Number % Number % Number % (%) Midwest 3.2 6.9 16.5 7.8 467 8.4 19.6 Northeast 6.5 14.0 57.4 27.1 1,794 32.2 11.4 North 1.7 3.6 18.7 8.8 450 8.1 9.0 Southeast 28.4 60.9 89.0 42.0 1,668 29.9 31.9 South 6.8 14.6 30.2 14.3 1,191 21.4 22.6 Up to 5,000 inhabitants 0.3 0.6 4.2 2.0 1,249 22.4 6.2 From 5,001 to 10,000 0.5 1.2 8.5 4.0 1,200 21.5 6.3 From 10,001 to 20,000 1.2 2.5 19.1 9.0 1,334 23.9 6.2 From 20,001 to 50,000 3.0 6.5 33.8 16.0 1,110 19.9 9.0 From 50,001 to 100,000 3.3 7.2 24.2 11.4 351 6.3 13.8 From 100,001 to 500,000 13.5 28.8 54.5 25.7 277 5.0 24.7 More than 500,000 24.8 53.2 67.5 31.9 49 0.9 36.8 Grand Total 46.7 100.0 211.8 100.0 5,570 100 22.1 In the last ten years, the The growth pace of the number of beneficiaries of Supplementary Health Market in Brazil expansion pace of the healthcare plans was faster towards the countryside, sector was more intense in especially until 2014 and 2015. In the following years, the Midwest and Northeast it was possible to observe a decrease in the number of the country. of beneficiaries in concordance with the loss of dyna- mism of the economic activity and the labor market. In the last ten years, the number of beneficia- ries increased 51.7% in the Midwest region, 19.3% in the northeast region and 13.6% in the North region. These regions added 2.4 million bene- ficiaries. In the other regions, the increase in the numbers was smaller: 9.0% in the South region and 0.3% in the Southeast region, with 560 thou- sand and 72 thousand new contracts, respec- tively. It is important to highlight that the number of beneficiaries of healthcare plans in the South- east region remained in the same level of June 2010 to June 2020, with 28.4 million beneficiaries.

Graph 7 Cumulative variation of beneficiaries of healthcare plans by region (base index number 100 – Jun.10/Jun.20) 90 Source: Beneficiary Information System – SIB/ANS/MS-Tabnet – Obtained in Sept 1/20. Designed by Abramed. Midwest 51.7% Northeast 19.3% North 13.6% South 9.0% Southeast 0.3% Abramed Panel | 2020 Coverage Rate and Northeast regions of the country, Jun.10 the coverage only reaches 4.6% and Nov.10 According to ANS data, the pop- 6.2% of the population. Apr.11 ulation covered21 by healthcare plans Sep.11 have reached nearly 4.1% of the total Historically, the coverage rate of Feb.12 population and it represented 47.0 the healthcare plans maintained the Jul.12 million of beneficiaries in December growth pace until December 2014, Dec.12 of 2019. In exclusively dental plans, when it reached 25.8% of the pop- May.13 the coverage corresponds to 12.3% ulation. Since then, the proportion Oct.13 of the population and total 25.8 mil- of people covered by healthcare Mar.14 lion of beneficiaries. The extent of the plans has decreased every year and Aug.14 coverage rate of the healthcare plans reached 24.1% in June 2020. In the Jan.15 is associated with several socioeco- exclusively dental plans, it is possible Jun.15 nomic factors and the configuration to note a bigger and bigger portion Nov.15 of the offer of health services. For of the population assisted by the seg- Apr.16 this reason, in the capitals, it is possi- ment, considering that average hiring Sep.16 ble to observe a coverage of approx- value of this type of plan is consider- Feb.17 imately 40.9% of the population. In ably lower in comparison to the med- Jul.17 the Southeast, the coverage reaches ical-hospital segment. Dec.17 almost half of the population. In con- May.18 trast, in the countryside of the North Oct.18 Mar.19 Aug.19 Jan.20 Jun.20 21. Ratio, expressed in percentage, between the number of beneficiaries and the population of a specific area.

Graph 8 Coverage rate of the healthcare plans by location (Jun.20) Source: Beneficiary Information System – SIB/ANS/MS-Tabnet – Obtained in Sept 1/20. Designed by Abramed. 91 50 49.3 48.4 45 33.2 42.1 33.3 35.6 40 40.7 26.8 28.8 35 35.4 34.9 24.5 30.1 20.9 21.9 30 14.2 Coverage rate (%) 23.1 22.2 25 24.0 Mid West 20 18.8 15 12.1 10 10.3 5 4.7 6.2 0 North Northeast Southeast South Brazil Region Capital Capital Metropolitan Region Coutryside Graph 9 Coverage rate of the healthcare and exclusively dental plans (Dec.20-Jul.20) Source: Beneficiary Information System – SIB/ANS/MS-Tabnet – Obtained in Sept 1/20. Designed by Abramed. 30 25 Supplementary Health Market in Brazil Coverage rate (%) 20 24.1% 15 10 5 12.3% 0 Dec.00 Dec.01 Dec.02 Dec.03 Dec.04 Dec.05 Dec.06 Dec.07 Dec.08 Dec.09 Dec.10 Dec.11 Dec.12 Dec.13 Dec.14 Dec.15 Dec.16 Dec.17 Dec.18 Dec.19 Jul.20 Medical Care Exclusively dental

92 As mentioned before, the care ar- years old or more have healthcare plan. rangements develop essentially in the In these age groups, the increase was more economically developed munici- of 12.8 and 11.3 percentage points, re- palities in the Southeast, South and Mid- spectively between 2009 and 2019. west. The darker areas of the following The ratio of the coverage rate in com- map represent the municipalities with a parison with the other age groups can coverage rate over 50%. be justified, among other reasons, by the necessity of follow-up and medi- The analysis of the coverage rate cal-hospital care, given that the elderly by age group shows that the 43.9% of population is often affected by perma- women and 34.6% of men that are 80 nent or long-term chronic diseases. Map 1 Coverage rate of the beneficiaries of healthcare plans, by municipality according to the STATE (Jul.2020) Sources: Beneficiary Information System – SIB/ANS/MS-Tabnet – Obtained in Sept 1/2020. IBGE. Research Directory – DPE – Coordination of Population and Social Indicators – COPIS. Designed by Abramed. Note: 1Esimates of the resident population in the Brazilian municipalities with reference date of July 1st 2020. Abramed Panel | 2020 Coverage rate values in % 0 0–I5 5 – I 10 10 – I 15 15 – I 20 20 – I 25 25 – I 30 30 – I 40 40 – I 50 > 50

Taxa de cobertura dos planos 93 de assistência médica foi de 40,4% na população com 80 anos ou mais. Graph 10 Coverage rate of the beneficiaries of healthcare plans, by age and gender (Dec.10/Jul.20) Source: Beneficiary Information System – SIB/ANS/MS-Tabnet – Obtained in Sept 1/20. Designed by Abramed. Total 23.0 25.0 43.9 80 years or older 34.6 33.7 31.9 70 to 79 years 28.5 27.9 29.2 60 to 69 years 28.2 32.4 20.3 50 to 59 years 26.5 14.4 15.1 40 to 49 years 27.9 20.5 Supplementary Health Market in Brazil 24.2 30 to 39 years 29.3 20.8 20 to 29 years 18.1 15 to 19 years 14.0 10 to 14 years 15.3 5 to 9 years 20.9 1 to 4 years 24.8 Up to 1 year old 21.1 Male – Dec.10 Female – Dec.10 Male – Jul.20 Female – Jul.20

Hospitals and hospital beds

95 Supplementary Health Market in Brazil 34.6% of the hospitals in Brazil are private and profit making I n Brazil, there are approximately 6,948 private and public hospi- tals (Specialized, General and Day Hospitals), distributed in three main legal nature: 2,407 private and profit making hospitals (34.6%), 1,822 non-profit hospitals (26.2%) and 2,715 public hospitals (39.1%). Regard- ing their geographic distribution, there is a concentration of hospital units in the Southeast (2,430 – 35.0%), North- east (2,062 – 29.7%) and South (1,078 – 15.5%) regions – that together repre- sent 80.2% of the hospital system in the country -, while the Midwest (796 – 11.5%) and North (582 – 8.4%) regions hold 19.8%.

Table 10 Hospitals by legal nature according to the region and state (Jun.2020) 96 Source: Ministry of Health – National Registry of Health Establishments in Brazil – CNES. Obtained in Sept. 1/2020. Designed by Abramed. Note: The total number of hospitals according to legal nature differs from the amount showed because of the absence of registry of the nature of some establishments. Abramed Panel | 2020 Region / State Total Share Private Private Public FOR profit NON profit North 582 8.4% 359 Rondônia 91 1.3% 176 47 45 Acre 22 0.3% 41 5 16 Amazonas 110 1.6% 2 4 84 Roraima 15 0.2% 22 4 12 Pará 257 3.7% 3 – 146 Amapá 16 0.2% 80 31 11 Tocantins 71 1.0% 3 2 45 2,062 29.7% 25 1 1.123 Northeast 272 3.9% 676 261 210 Maranhão 110 1.6% 53 9 62 Piauí 289 4.2% 39 8 155 Ceará 117 1.7% 77 57 70 Rio Grande do Norte 152 2.2% 28 19 82 Paraíba 297 4.3% 58 12 169 Pernambuco 88 1.3% 89 38 37 Alagoas 62 0.9% 38 13 16 Sergipe 675 9.7% 33 13 322 Bahia 2,430 35.0% 261 92 682 698 10.0% 882 865 155 Southeast 109 1.6% 213 329 33 Minas Gerais 478 6.9% 36 40 193 Espírito Santo 1,145 16.5% 216 69 301 Rio de Janeiro 1,078 15.5% 417 427 231 São Paulo 485 7.0% 313 533 155 260 3.7% 186 143 36 South 333 4.8% 81 143 40 Paraná 796 11.5% 46 247 320 Santa Catarina 112 1.6% 360 116 37 Rio Grande do Sul 167 2.4% 22 53 71 437 6.3% 71 25 191 Midwest 80 1.2% 213 33 21 Mato Grosso do Sul 6,948 54 5 2,715 Mato Grosso 2,407 1,822 39.1% Goiás 34.6% 26.2% Federal District Brazil Ratio by legal status Regarding the number of hospital beds, at region (121,590 – 27.1%), South region (73.794 – the end of June 2020, Brazil had 448,923 hospi- 16.4%), Midwest region (38,248 – 8,5%) and North tal beds distributed among the public and private region (32,659 – 7.3%). It is important to highlight services, in specialized, general and Day hospitals. that the number of hospital beds in June 2020 Similar to the distribution of hospital, most hos- show an increase in comparison to the year before pital beds are concentrated in the Southwest re- because the hospital beds for facing the Covid-19 gion (182,632 – 40.7%), followed by the Northeast were added to the numbers.

Table 11 Hospital beds (Specializes, General and Day Hospitals) by legal nature according to region and state (Jun.2020) Source: Ministry of Health – National Registry of Health Establishments in Brazil – CNES. Designed by Abramed. 97 Note: The total number of hospitals according to legal nature differs from the amount showed because of the absence of registry of the nature of some establishments. Region / State Total Share Private Private Public FOR profit NON profit North 32,659 7.3% 20,357 1.0% 6,486 3,793 2,584 Rondônia 4,431 0.3% 1,023 370 1,096 1.3% 48 189 4,684 Acre 1,559 0.3% 730 282 1,169 3.3% 257 – 7,788 Amazonas 5,972 0.3% 3,796 2,605 910 0.7% 6 183 2,126 Roraima 1,527 27.1% 626 164 62,508 3.3% 23,792 24,557 9,861 Pará 14,888 1.8% 2,931 880 3,810 4.3% 1,539 735 9,204 Amapá 1,266 1.7% 3,411 5,273 3,699 1.9% 1,124 1,487 4,685 Tocantins 3,016 5.2% 2,197 881 12,022 1.5% 3,734 5,189 2,222 Northeast 121,590 0.8% 2,155 1,573 1,363 6.6% 974 1,032 15,642 Maranhão 14,818 40.7% 5,727 7,507 58,404 9.7% 39,123 78,921 10,092 Piauí 8,034 1.8% 7,816 23,927 2,196 8.0% 1,916 3,248 17,884 Ceará 19,207 21.2% 10,737 6,417 28,232 16.4% 18,654 45,329 12,627 Rio Grande do Norte 7,650 6.3% 13,042 46,513 6,728 3.4% 7,232 13,642 2,817 Paraíba 8,434 6.8% 2,021 9,871 3,082 8.5% 3,789 23,000 14,894 Pernambuco 23,433 1.3% 13,110 8,837 1,289 1.6% 983 3,215 3,459 Alagoas 6,592 4.0% 1,867 1,739 6,457 1.6% 7,663 2,909 3,689 Sergipe 3,587 100.0% 2,597 974 168,790 95,553 162,621 37.6% Bahia 29,835 21.3% 36.2% Southeast 182,632 Minas Gerais 43,374 Espírito Santo 8,104 Rio de Janeiro 35,979 São Paulo 95,175 South 73,794 Supplementary Health Market in Brazil Paraná 28,227 Santa Catarina 15,117 Rio Grande do Sul 30,450 Midwest 38,248 Mato Grosso do Sul 5,719 Mato Grosso 7,304 Goiás 17,880 Federal District 7,345 Brazil 448,923 Ratio by legal status

Total health expenditure

99 Supplementary Health Market in Brazil Health expenditures correspond to nearly 9.24% of the GDP I n Brazil, the share on expendi- tures with health activities have reached 9.24% of the GDP, which represented nearly R$ 608.3 bil- lion in 2017 (considering 2020 values). Form this total, 3.85% were spent by the Government (R$ 253.7 billion) and 5.39% by families and non-profit insti- tutions (R$ 354.6 billion). This percent- age as proportion of the GDP is similar to other developed countries that also have similar health systems, such as the United Kingdom (9.6%) and Spain (8.9%). However, the composition of health expenditure in Brazil is very dis- tinct and counts with a significant par- ticipation of the private sector.