LATIN AMERICA : Many Mexicans Slipping Through Health-Care Net : Beset by the nation’s economic crisis, the Social Security Institute faces a grim diagnosis.

From footpaths winding through the mountains of Chihuahua in the north to the pitted dirt roads of the southern Chiapas jungle, a Madonna-like logo of a woman nursing a child promises vaccinations, antibiotics and even surgery to all Mexican workers and their families.

Stamped on the wood planks of country clinics or sculpted in bronze outside modern urban hospitals, the logo is the symbol of the Mexican Social Security Institute, or IMSS, whose employees provide health care to 37 million Mexicans. (The unemployed are not eligible.) Thanks in large part to IMSS, over the past 35 years Mexico has cut infant mortality in half and added 14 years to life expectancy.

But IMSS is in trouble. The economic crisis that has closed thousands of Mexican businesses and thrown an estimated 1 million workers out of work has also cut deeply into funding for the institute, which is 95% financed by payroll taxes.

“The problem is so serious that IMSS may not survive,” said Sen. Felix Salgado, chairman of the Senate Social Security Committee, which held hearings this week on costs and financing for the institute.

As the crisis has deepened, with Finance Minister Guillermo Ortiz admitting that the economy shrank 6% in the second quarter this year, the government has been forced to choose between making companies pay and allowing them to survive.

In a country where tax evasion is a national pastime and suppliers must bill customers repeatedly to get paid, IMSS had developed a reputation as a ferocious collection agent, rapidly foreclosing on businesses that fell behind in their quarterly payments. As a result, Mexican businesses have become accustomed to paying IMSS before other obligations.

But in recognition of the economic crisis, IMSS Director Genaro Borrego forgave $24 million in overdue payments last week rather than close down 47,793 sole-proprietor construction companies.

“It was the lesser of two evils,” Salgado said. But the decision set a precedent that could have severe repercussions on the institute’s $7.7-billion budget.

Salgado believes that if IMSS is going to forgive such debts, the government should make up the difference so that others insured under the system will not suffer. “Otherwise, as companies go bankrupt and unemployment increases, how are we going to sustain Social Security?” he asked.

The crisis is particularly worrisome because IMSS was already facing problems that will sound familiar to most U.S. residents.

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Over the past half-century, the institute’s responsibilities for Social Security have broadened to include providing retirement pensions, disability insurance and day care. Instead of investing the pension and disability deductions, IMSS used the contributions to finance health clinics and pay pensions.

Demographics have caught up with that policy. People are living longer, requiring more pension money and making more demands on health-care services for the elderly. Moreover, more women are entering the labor force, increasing demand for the day care that workers are promised. Complicating matters, farm workers are allowed to join the system at lower quotas, forcing other workers to subsidize rural clinics.

A diagnosis of IMSS problems, prepared by the institute in March and released this month, urged a radical change in the institute’s financial structure. “Workers will have to start going to medicine men instead of doctors,” aging labor leader Fidel Velazquez predicted after he saw the diagnosis. “Social Security is in terrible economic condition.”

The diagnosis found that nearly half of IMSS employees are “support personnel,” not doctors or nurses. It also noted that while institute doctors earn far less than their counterparts in private practice, non-medical workers are paid nearly twice market rates.

In addition, 28% of workers in companies with fewer than five employees do not receive IMSS benefits, the diagnostic study found. “Why should I pay IMSS, then have the people at the clinic treat my workers like dogs?” said the owner of a small rural restaurant. “I just send them to the doctor and pay the bill.”

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Concerns about the quality of care increased last month after two dozen babies and toddlers died in the course of a few weeks in an IMSS clinic in the northern state of Durango.

Besides the small companies that evade IMSS deductions, the growing number of self-employed Mexicans also lack access to health care. The grim numbers can only be expected to grow as the crisis continues. “These people are victims of the economic imbalance,” Salgado said. “They are people who still need Social Security.”

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Social Insecurity in Mexico

The Mexican Social Security Institute is designed to provide health care, retirement benefits, disability insurance and day care to workers and their families.

1995 budget: $7.7 billion

Source of contributions

Employers: 70%

Workers: 25%

Government: 5%

Workers pay: 5.2% of wages

Employers pay: 15.56% of payroll, plus workers compensation*

* Workers compensation varies from 0.35% for office workers to 10% for construction workers.

Sources: The Mexican Social Security Institute, employers