Encouraged by government subsidies, as private health sector takes on a leading role, not just in India, but now in its offshore acquisitions, president of the Public Health Foundation of India (PHFI), Dr K Srinath Reddy, argues that the state should step in and be the architect of the healthcare framework.
In the healthcare market, demand is driven by the provider and not the consumer, which, in the absence of controls, can result in highly inefficient provisions, says Reddy in a conversation with Kalpana Jain. Excerpts:
The PHFI itself is an example of a public-private partnership. How much of a role should the private sector play in healthcare in India?
The government should be the guarantor of healthcare if not the sole provider. It should strengthen public health systems, partly to ensure equity for low income groups and partly to act as the balance for quality and cost comparison.
Unless you have the All India Institute of Medical Sciences, you don’t know the difference in quality and cost. And it works both ways. The point being that you need a strong public sector as a counter-point. To leave healthcare to private sector militates against equity. Private sector will not spread to low income areas. You need to build your public health sector.
Where the government may have to be a purchaser, it should do it coupled with a strong regulatory system. It must define quality norms, costs and must verify an insurance system.
What should be the structure of such a system?
Primary care should be public financed and secondary and tertiary care for poor should have social insurance. Middle class should have income-linked employer — provided and partly employer — paid health insurance. There could be some element of private insurance. It should be unified into one unitary system, otherwise the potential of abuse is high.
Government should lay down the financing structure. People can exercise a choice whether they want to go to public or private health centres but payment should be done through a single system. The government should be the architect of the whole framework and define the financing mechanism.
The Indian health care system is highly privatised. What is the way forward?
Yes. Insurance covers less than 11 per cent of the population. Seventy eight per cent of health expenditure is out of pocket. No other developing country has so much out of pocket expenditure on healthcare. Developed countries have even less.
There is a huge amount of catastrophic and distress related expenditure. We need to bring it down. It is only possible through a well-designed financing system.
The government could work out the role for the public sector, private sector and non profit bodies. It is possible to do so. Public sector has to be more responsive; private sector more responsible and voluntary sector more resourceful. This is something the government can help facilitate.
The growth of private sector has been largely the result of government subsidies...
Private sector is substantially supported through land, exemption of taxes and duties and later through purchase of services through employees of the government. Without that it could not have been so entrepreneurial. It could be argued that the state is supporting an extension of healthcare services through this move. Then, the state should also ensure that there is accountability and deliverables, such as standards, are defined.
Does the consumer benefit from the choices when healthcare becomes a market?
Healthcare does not represent a perfect market situation where there is adequate consumer choice. There is huge asymmetry of information and decision-making power between the consumer and the provider. The demand is set not by the consumer but the provider. It can have very inefficient provisions because of unnecessary and costly treatments.
The only way to impose controls in this market is to regulate partly through an insurance system and partly through consumer education. In our settings, presence of a fairly strong, extensive public health sector with additional emphasis on quality can also help to ensure that unregulated private sector does not dominate and distort the market.
Managing public health sector has been difficult and in most PPPs (public-private partnerships) the government seems to be handing over existing systems to the private sector. What is your view on this trend?
There is a whole typology of PPPs in healthcare: Contracted services, government purchases, joint ventures and government subsidies for private entities. We have to define the norms.
In many cases, states were unable to handle the management of health services so they were handed over to the private sector. The manner of engagement of the private sector needs to be defined and regulated. There is now a proposal to hand over district hospitals to private sector.
While this may be good in some ways as the private sector could set up a medical college and link it to the public sector hospital. But handing over the management entirely to the private sector brings up several issues. The terms need to be defined. What is the accountability and social commitment of private sector would need to be defined.
