Public health, private business?

Should the inept public sector continue to run our health care system or should we hand it over to more efficient private sector?


Prasanna Mohanty | September 24, 2012

There is little to dispute that our health care is in a shambles. All the crucial health indices like maternal mortality rate, infant mortality rate, malnutrition and anaemia levels continue to be very high. Health infrastructure is awfully inadequate, doctors are in short supply. Costly medicines and quality healthcare that the private sector facilities provide remain beyond the reach of most Indians, as has been officially acknowledged. India continues to remain at the bottom pile of nations in terms of availability and quality of healthcare and the five-year plans have consistently failed to achieve their targets.

The planning commission acknowledges all these failures and says in its ‘approach paper’ to the 12th plan that there is a “critical imbalance” largely stemming from “deficiencies in the public sector’s capacity to deliver basic healthcare” and “disproportionately high reliance on the private sector”. Out-of-pocket expenditure has gone up to 71 percent of total health care expenditure and 3.3 percent of GDP, while the public spending continues to be a pathetic 1 percent of GDP.

In a situation where the public sector has proved unequal to the task, should we continue to invest more in it or should we turn to the private sector? That is the crucial debate the planning commission has sparked off by proposing a paradigm shift in the public health policy.

Its draft paper for the 12th plan proposes a far greater role for the private sector from this plan onwards. The private sector health care would not only be incentivised by way of viability gap funding (VGF) for public-private partnership (PPP) mode projects, but its services would also be availed and paid through a universal health coverage (UHC) plan being proposed on the lines of UPA’s flagship health insurance scheme, Rashtriya Swasthya Bima Yojna (RSBY). The government’s role is proposed to be largely confined to preventive care.

Predictably, this has caused a huge uproar. The health ministry is livid and health minister Ghulam Nabi Azad has shot off an angry letter to the panel, insisting that the public sector should continue to form the core of healthcare and the private sector merely “supplement” it.

The panel’s own high-level expert group (HLEG), headed by Dr K Srinath Reddy who is also head of the prime minister’s medical team, which was asked to prepare a roadmap, too protested and met planning commission deputy chairman Montek Singh Ahluwalia to underline that it was for primacy of the public sector in healthcare and that the private sector should only “fill the gaps”.

But should we continue to rely on the old socialist model that has consistently failed? Is the private sector all bad and should only remain at the fringe of our public health policy? Before jumping to conclusions here is a look at where the planning commission and its critics stand.

Planning commission’s roadmap
In the first week of August, the planning commission proposed a radical shift in the public health policy which envisages a greater role for the private sector in providing healthcare services with active financial support from the government. The government’s role, though not limited, will be more focused on providing “universal” preventive interventions.

This shift is spelt out in two identical draft papers (one running into 79 pages and dated July 27 and the other into 90 pages and dated August 1) privately shared with a few health experts the commission was consulting, but not made public as was the case with its “approach paper” which was put in the public domain in October 2011 for eliciting public view. 

The new policy paradigm proposes to achieve ‘universal health coverage’ (UHC) over the 12th and 13th plan periods. UHC is defined to include not only preventive and curative services but also to ensure access to “services which are determinants of health, as safe drinking water and sanitation, wholesome nutrition, basic education, safe housing and hygienic environment”. The goals are to be realised through two steps: “First is the universal provision of public healthcare encompassing high impact, preventive interventions which the government would be both funding and universally providing within the 12th five-year plan; the second would be clinical services at different levels, (to be) defined in an Essential Health Package (EHP), which the government would finance but not necessarily directly provide. The latter would take two plan periods for realisation, but a move in terms of pilots and incremental coverage can begin in the 12th plan itself”.

The UHC will be delivered through a “managed healthcare” system which is based on the US model and in which “primary, secondary and tertiary care is managed as a network with payments made to the network per person registered”. Recommendations of its own HLEG headed by Dr Srinath Reddy were cited in support of such a formulation.

There could be two models of the “network”. One is a “public facility network” of public healthcare facilities in a compact area responsible for providing EHP to all families in its jurisdiction. The second is a “public-private integrated network” with a choice to the citizen to decide whether to opt for the services of a public healthcare facility or that of the private one. The objective is to promote competition between the two. Payments can be made by a combination of lump-sum per family for out-patient care and annual premium for in-patient care.

It is further proposed that the facilities that “do not get sufficient patients registered with them will be starved of funds”.

In order to promote greater participation of the private sector, PPPs can be promoted which “offer an opportunity to tap the material, human and managerial resources of the private sector for public good”. Health is now included in those infrastructure sectors which are eligible for 20 percent viability gap funding (VGF). If this is followed, “private sector would be able to propose and commission projects in the health sector, such as hospitals (primary health centres and diagnostic centres) and medical colleges outside metropolitan areas, which are not remunerative per se and claim up to 20 percent of the project cost as grant from the government”.

These formulations are based on a vision document, called the “approach paper” to the 12th plan, which the panel had put in public domain in October 2011. The approach paper had sought more investment in healthcare but said, “Public financing of healthcare doesn’t necessarily mean provision of the service by public providers. It is possible to have public financing while the service itself is provided by private sector players, subject to appropriate regulation and oversight”. RSBY, a scheme that provides insurance cover of '30,000 towards in-patient care to a registered family belonging to the underprivileged segment of society with a registration fee of '30, is cited as a good example in this connection. In fact, the draft paper proposes to expand RSBY to cover all kinds of secondary and tertiary care for the BPL families.

So what’s wrong?

When the planning commission’s formulations came to public notice, though its restricted consultations with a select group of individuals and organizations, it led to brouhaha. For one, it was against the stated policy of the government. No less than prime minister Manmohan Singh had said in February this year that, “We need to accelerate our efforts to achieve our goal of providing universal access to healthcare. This needs first and foremost a determined effort to strengthen our public health system.”

Secondly, it goes against the observation of the plan panel’s “approach paper” to the 12th plan which blamed “disproportionately high reliance on private, particularly households’ out-of-pocket expenditure” for a “critical imbalance” in the healthcare system.

The first ones to react were health ministry officials. Opposing the shift in approach, health minister Ghulam Nabi Azad shot off a letter to the plan panel saying that “the private sector should not substitute but actually supplement the public sector”.

Plan panel’s HLEG, headed by Dr Srinath Reddy, was livid too. Dr Reddy and Dr Gita Sen, a member of that group, met Ahluwalia to protest against misinterpreting their recommendations and drawing a deeply flawed policy framework on such misinterpretations. They told Ahluwalia that HLEG was of the view that for the UHC to succeed “public sector health services need to be strengthened to deliver both public health related services and clinical services. It would be inappropriate to reserve the primary healthcare functions exclusively for the public sector and allocate secondary/tertiary care predominantly to the private sector”. The private sector was only for “filling the gaps”.

In a statement that was sent to Ahluwalia, it was said, “The HLEG did not suggest a shift to a managed care model. It laid emphasis on the integration of primary, secondary and tertiary health services and pointed out the shortcomings of the present insurance-based models (referring to RSBY) which disconnect primary from secondary and tertiary healthcare and fragment the health services. In that context, it listed Managed Care Framework and public sector provision supplemented by direct contracting-in of private providers when necessary, as alternative models to overcome such fragmentation”.

As for basing UHC entirely on the insurance-base model of RSBY, even the policy draft of the planning commission acknowledges it to be flawed because it has created “incentive for unnecessary treatment which in due course raises costs and premiums”. HLEG told the plan panel that “insurance schemes are fiscally unsustainable, lead to cost escalation, provide poor financial protection and unnecessary care”. Newspaper reports and studies by civil society groups have pointed out how in Chhattisgarh and elsewhere RSBY has turned into a cash cow for private hospitals that carry out unnecessary procedures and misrepresent illness to pocket insurance money. Needless to say, the private sector is profit-driven.

Another element that has not gone down well is the proposal for public financing of the private care that UHC proposes. Explaining how to achieve the goal of UHC, the draft said: “First is the universal provision of public healthcare encompassing high impact, preventive interventions which the government would be both funding and universally providing within the 12th five-year plan; the second would be clinical services at different levels, (to be) defined in an Essential Health Package (EHP), which the government would finance but not necessarily directly provide”. 

Add that to the proposal for promoting the private sector through 20 percent VGF, which means public funds will be provided to the private sector to the extent of 20 percent of project cost to set up hospitals, the direction of the plan panel’s is clear: public money be used to promote private healthcare!
Critics also pointed out that by giving a “choice”, under UHC, to citizens to choose where they would like to avail health services would help the more professionally managed private sector. And since UHC also proposes that the facilities that “do not get sufficient patients registered with them will be starved of funds”, the private sector would be able to ease out the public healthcare facilities over time.

Where does that leave the government sector? Firstly, though the plan panel doesn’t say it will withdraw from curative and clinical care, it certainly means it when it says the government will both finance and provide “preventive care” – largely involving immunization, antenatal and post-natal care and management of malaria, diarrhoea etc which are not lucrative to the private sector – and finance but “not necessarily directly provide” secondary and tertiary care – far more lucrative for the private sector.

In essence, apart from preventive care, the government will become “manager” of healthcare and finance a system that will be primarily run by the private sector.

Is this the model we want?



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