The Indian government is making a rapid shift from being a provider of healthcare to being merely a financier. This presents two formidable concerns. One, reverting to an earlier set of unsuccessful and cataclysmic strategies. Two, expansion of the private sector in a manner that could be counterproductive and wasteful.

In this year’s Union Budget, the government restated its commitment to expanding health protection through insurance by almost tripling the allocation for the Pradhan Mantri Jan Aarogya Yojana, or PMJAY. The scheme aims to cover nearly 10 crore poor families for hospitalisation expenses up to Rs 5 lakh per family per year. Nearly half of the total increase in allocation for health was for the PMJAY while allocations to critical programmes like the National Health Mission and Reproductive and Child Health continue to fall.

The National Health Policy of 2017 envisions wider and deeper public private partnerships, or PPPs, in healthcare. The PMJAY is designed to attract private sector participation in the mission. The government recently rolled out two initiatives to enable this.

Niti Aayog’s draft guidelines on PPPs for non-communicable diseases proposes to offer sections of district hospitals, including land, in Tier 2 and Tier 3 cities to private partners to construct, run and maintain hospitals with between 50 to 100 beds. The government has also issued guidelines for private investments in setting up hospitals empanelled under the PMJAY in Tier 2 and Tier 3 cities, offering them incentives like land allocation and viability gap funding. Both initiatives aim to make healthcare available at the PMJAY rates and more accessible to the rural poor by enabling participation by private healthcare providers.

An expensive model

In pushing through such broad private participation in public health services, the government is squandering the state’s significant bargaining power. Studies have shown that a strong public health sector can nudge the private sector to keep rates reasonable. With a strong public health sector, the state is in a better position to persuade the private sector to provide fairer, more efficient and better quality care, thereby driving down prices and enforcing necessary regulations and standards.

While public healthcare in the country has long been in disrepair, the decision to lease parts of government hospitals to private players, even if out of an inability to strengthen the public system as claimed in Niti Aayog’s PPP document, may further undermine the state’s role in healthcare. This could move the private sector into a more hegemonic position, giving it control over cost and quality.

The government’s current position also also hurts the spirit of social provisioning. People not covered under the PMJAY or a state insurance scheme will have to pay out of pocket for treatment of non-communicable diseases at government hospitals, which are otherwise meant to provide free or subsidised care to everyone. With a private partner providing non-communicable disease management, the government hospital will most likely pay less attention to the same.

Many people from low-income and middle-income families who are not covered by schemes such as the PMJAY depend on government hospitals for affordable treatment. Unless well over 90% of India’s population can be covered by insurance, charging for treatment of non-communicable diseases at public hospitals can result in catastrophic hospital expenses for many families.

'Primary health centre need to be supported by public provisioning and cannot be left to the market.' Photo credit: Menaka Rao
'Primary health centre need to be supported by public provisioning and cannot be left to the market.' Photo credit: Menaka Rao

While the discourse on incentivising private participation mainly revolves around economy in state expenditure, there is little to indicate it will succeed in controlling healthcare costs. It is pointless to expect that, in unprofitable areas and regions, the private sector can be incentivised to operate with frugal pay-outs. It is more likely that it will quickly lobby for higher rates. This has already been seen with the PMJAY where the government has been compelled to consider raising the rates by up to 40% than what was first announced. There is also the possibility of large healthcare corporations attaining greater monopoly, and shrinking the space for small and medium healthcare establishments that now provide nearly 80% of care.

If the government is determined to go ahead with the expansion of the private sector under healthcare financing, it needs to create a robust administrative and supervisory framework to check dishonest and wasteful practices. Right now, India does not have the institutional capacity and building such capacity is a costly affair.

Bad model in Punjab

Punjab has recently announced a pilot project handing over some constructed and furnished primary health centres to the private sector to run, charge patients, and also receive an assured grant to cover losses. This goes against the principles espoused in the National Health Policy and is an overzealous crusade to resuscitate public healthcare that can end in disaster. Primary health centres dispense merit goods – a service regarded by society or government as deserving public finance – and cater to the most fundamental health needs of the rural poor. They need to be supported by public provisioning and cannot be left to the market.

When the government is fiscally incapable of recruiting staff and operating a remote primary health centre, how can a private partner run it without charging exorbitant fees? With the government assuming full risk, such a model is certain to raise costs of care. This is apart from the fact that making services chargeable to patients will drastically cut utilisation. History is replete with instances of how even nominal user fees decreased outpatient attendance and even facilitated the spread of dreaded epidemics like HIV.

The government must realise that switching its role in healthcare from provider to financier is not an instant panacea to the maladies of the healthcare system that have accrued over decades. Substantial investments are needed in public health, and attempts to simply reallocate scarce resources will create a new set of problems.

India’s healthcare system cannot function effectively without a supervisory framework to deal with everything from fraud to denial of services. It needs a robust regulatory structure to assure basic standards of care and adequate institutional and technical capacity to handle large financing programmes and deal with issues of pricing and cost-effectiveness. In addition, a robust public health sector is necessary as a buffer between patients and private healthcare providers.

Soham D Bhaduri is a doctor, healthcare commentator and editor of The Indian Practitioner, a peer-reviewed monthly medical journal.

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