Reforming the health care sector

Obamacare and other such examples make a compelling case for seeking the right combination of roles for the public and private sector in health reform in India

Nail or screw? Which is best to join pieces of wood? In carpentry, the answer is that each offers benefits depending on the application. With health care reform, the choice of public or private sector financing, delivery and regulation is subject to a more polarised discussion. Advocates proclaim that one or the other is always superior. The sharp division of views, and the political friction it causes, can paralyse needed movement toward health care reform.

As India joins many other nations, including recently the United States, in debating how best to reform the health care sector, it is critical that we are thoughtful carpenters. We do not have to choose between the public and private sectors but can use each where its application is best. The new government has initiated discussions which could shape new policies and initiatives. The official announcements are broadly of two types. One, there is articulation for increasing government-provided infrastructure at multiple levels, including primary health centres, speciality hospitals, medical colleges and more. Second, the Prime Minister announced his intention to introduce a universal health insurance, perhaps along the lines of Obamacare. During the previous government’s tenure, there were a few calls for a British or Canadian style universal health service both financed and provided by the government.

Strengths of public sector

How do we know when to reach for the hammer or screwdriver as we design health care reforms? We can start by recognising the strengths of public sector approaches. The government can tax and distribute revenues in a manner that can lessen health care access disparities that might otherwise exist. This redistributional ability of the public sector is consistent with the popular view that health care is a right, not a privilege.

 “The redistributional ability of the public sector is consistent with the view that health care is a right, not a privilege”

Thus, many countries give the public sector a dominant role in funding health care. Even in the U.S., often thought of as a bastion of private sector, nearly half of health care expenditures come from government. There is also a very strong argument for the public sector in funding and delivering health care services where their benefits are realised by those who do not incur their costs. An example is public health campaigns such as vaccination drives. We all benefit when our neighbours don’t carry communicable diseases. Public sector entities also have an important role in policing the health sector to root out fraud and certify quality. While private entities undertake self-regulation, participation is usually voluntary. In contrast, public entities can insist that, for example, doctors meet licensing standards and that pharmaceuticals are safe. At the same time, proponents of a strong public sector role in health care reform must acknowledge that the private sector has its strengths.

This is especially evident when we consider the potential benefits of competition and the profit motive. As in other areas of the economy, private sector competition can drive quality improvement and cost efficiency. When those in need of health care are treated like consumers, competitors must deliver value or risk losing them to competitors.

The private sector has a better opportunity than the public sector to match supply to demand. Whereas government delivered health care often has shortages of doctors and other providers or even denial of care, private sector health care can increase supply by quickly adjusting incentives for providers.

The private sector also has a proven record for innovation in the delivery of care and in the creation of techniques, tools, and products that improve and preserve health. The entrepreneurial spirit involves risk taking wherein capital is accumulated and risked on the development of health care improvements.

One example is the medical products sector. While the public sector has played a critical role in basic research, the record is clear that it is only private sector companies that have had the incentive to take risks to develop this knowledge into new medicines, vaccines, and medical devices.

Lessons from a mixed approach

Thus, even a cursory review of the benefits of each sector reveals that health reformers must sort their options with care for the gains that are possible by employing each. The recent experience in the U.S. with the health reform that has come to be known as Obamacare offers an example. While still highly controversial, the programme provides lessons in a mixed public-private approach. The law relies heavily on the government to provide financing to ensure that access to care is not limited to the wealthy. It also contains a large new public sector role in establishing and policing the rule of competition among health care insurance providers and private employers that provide insurance to their workers.

At the same time, Obamacare relies primarily on private sector competition in insurance provision and in health care delivery. Even ostensively public sector programmes such as Medicaid that provide health care to the poor are increasingly being delivered by competing private sector companies. The law also largely eschews government price setting in favour of allowing the competitive market to establish prices.

This experience and that of others around the world make a compelling case for seeking the right combination of roles for the public and private sector in health reform. It should help the carpenters of Indian health care reform to choose their tools wisely.