No short cuts to health

PPPs in healthcare have severe problems

The 12th Five-Year Plan (2012-17), it was widely reported, could shift the emphasis of the state’s role in healthcare provision to a “managed network approach”, wherein the government would provide funding to a system of private providers, who would have their costs per patient partially or wholly reimbursed. The idea of such a shift in approach met with considerable criticism, including from members of the high-level expert committee on healthcare reform whose report was supposed to serve as the basis for the Plan. The health ministry, too, had objected, citing an insufficient commitment of funds — 1.5 per cent of GDP, reportedly, as opposed to the 2.5 per cent of GDP that the ministry would prefer and was suggested in the Budget. Following sustained criticism, the Planning Commission is in the process of revising its approach.

The reasons for the Planning Commission’s emphasis on public-private partnership in healthcare are quite understandable. The public sector has largely failed to scale up provision, and it is far from clear if it has the capability to absorb funds of the magnitude that some would like to see allotted to the healthcare sector. India has only one public hospital bed for every 2,000 citizens; the shortfall of doctors is over 6,000, and patients report long waits because even those doctors are frequently absent. While some states, like Andhra Pradesh, have managed to improve facilities enough that only a third of public sector patients expressed dissatisfaction in a Planning Commission survey, others – Bihar in particular – have made little such effort.

Given the creaking public health infrastructure, Indians have been forced to turn to private providers anyway; over 70 per cent of spending on healthcare in India is in the private sector, according to the World Bank, whereas the worldwide average is almost the reverse, with 63 per cent being spent in the public sector. Even in other low-income countries, the average share of public sector spending is 38.8 per cent. It is far from clear, therefore, if stepping up the share of healthcare that goes through the private sector is in keeping with global best practices. India spends significantly less on health as a proportion of GDP – 4.1 per cent, compared to a global average of 10.4 per cent – and not enough of that is in the public sector anyway. This hits the poor particularly hard, with health-related payments being the largest cause of households slipping into poverty.

Naturally, trying to remedy this imbalance through a brute increase in funding is not the answer — but nor is the abdication of responsibility to the private sector. Unlike other sectors where public-private partnership might make sense, monitoring and regulation of health services are so difficult to carry out that they will strain state capacity quite as much as expanding provision itself would. Cost control is difficult, with private hospitals treating government funds “like an ATM”, according to the head of an official committee, Srinath Reddy. This has malign effects not just on finances, but even on outcomes: reports coming out of Bihar and Chhattisgarh suggest that the private sector has stepped up unnecessary hysterectomies in response to easy government funding. Any managed system will find controlling such abuse difficult. There are no short cuts: the state itself must improve healthcare capacity.