Profit insured

Universal healthcare has been a promise that is made by every regime, but in the seven-decade-old history of Independence, the ground reality remained the same. While the public healthcare facilities increasingly deteriorated, proliferation of non-state service providers soared ever since the National Health Policy was announced in 1983. Private investments in the sector started growing exponentially particularly after the introduction of neo-liberal economic reforms in early 1990s that saw a decline in the public spending on healthcare.

As an outcome of these developments, almost entire healthcare sector started getting commercialised. Private sector entered the sector with profit motive that led to several malpractices such as needless referrals, unnecessary medicine prescriptions, prescribing branded medicines, unnecessary diagnostic tests and avoidable surgeries. These malpractices were largely triggered by the phenomenon of 'supplier induced' demand.

In fact, there exists an issue of 'information asymmetry' in healthcare sector, which leads to lack of informed choices for the patients that vitiates the market dynamics. 'Asymmetric information' occurs when one party to an economic transaction possesses higher material knowledge vis-à-vis another, e.g., a doctor, because of his education and experience he knows more about medical practices compared to the patients. Besides, in India, the collusion among doctors, pharmacies and diagnostic centres under neo-liberal settings is fleecing the patient. For example, a private hospital had handed over a bill of Rs 16 lakh for dengue treatment of seven-year-old child in Gurugram even as the child subsequently died. 

A recent report by the Competition Commission of India (CCI) observed that there has been an absence of well-implemented regulations that would ensure transparency and ethical practices in the Indian healthcare sector. It has also pointed at almost non-existent competition between hospitals on the parameters of price, quality or choice. All these culminate into the phenomenon of higher and unaffordable household cost of healthcare services, which leads to another phenomenon of socio-economic inequalities in optimal utilisation of healthcare services. 

The average costs of the medicines are astronomical vis-à-vis price of the same medicine under public procurement and distribution system. This is due to unreasonably high trade margins, which is mainly due to unethical practices of pharmaceutical industry. Pharma companies provide gifts and other incentives to doctors. Unquestionably, the pharma companies should have a reasonable level of profit margin, but margins like 1,000 per cent are unwarranted and need to be regulated. 

It is, therefore, not surprising that 50-65 per cent of the Indian people do not have regular access to essential medicines. Thus, the argument that the health outcomes would be efficient if healthcare sector is left to the open market, is erroneous. Rather, the private sector works with the motive of profit maximisation, rather than welfare of the people. 

Notwithstanding so many issues with the non-state healthcare sector, the governments over the decades have increasingly been reliant on it to deliver healthcare. Even recently introduced flagship initiative of the government, 'Ayushman Bharat', which aims to provide health insurance cover for hospitalisation in secondary and tertiary healthcare (with a cap of Rs.5 lakh per year per family) to economically deprived sections, is mainly reliant on the private sector. Given the aforesaid issues with the private health providers these private healthcare providers are expected to earn huge profits from this scheme.

The government must, therefore, recognise that healthcare facilities are essential for all citizens and it is the prime responsibility of the welfare state. This critical sector cannot be left to be served by the market forces. The state must own up the responsibility and take the lead in providing healthcare facilities.  It should not be forgotten that public spending on healthcare is associated with manifold externalities and, as such, is considered as the most productive investment. 

In order to check the malpractices in health sector, it is important to implement measures such as Clinical Establishment Act, 2010 in letter and spirit. Furthermore, it is also important to cultivate a sound culture of ethics amongst healthcare providers. In order to keep prices of medicines under check, the suggestions of CCI should be implemented. There is a need for the public procurement of essential drugs and setting up of e-pharmacies to make medicines affordable. The task is, however, difficult. A strong political will is necessary for an affordable healthcare system, which is not possible in a system that is overweighed by corruption and crony capitalism. 

Ayushman Bharat

  • Ayushman Bharat National Health Protection Mission (AB-NHPM) provides for an annual financial protection up to Rs 5 lakh per family to 10.74 crore families for secondary and tertiary hospitalisation
  • So far, 25  states and union territories signed memorandum of understanding for its implementation
  • Uttar  Pradesh,  Andaman & Nicobar Island, Lakshadweep, Dadar & Nagar Havelli,  Daman & Diu, Chhattisgarh, Mizoram, Jharkhand, Bihar, Puducherry, Madhya  Pradesh, Assam,  Haryana, Uttarakhand, J&K, Manipur, Meghalaya, Gujarat, Himachal Pradesh, Chandigarh, Tripura, Nagaland, Arunachal Pradesh, Sikkim and Andhra Pradesh

— The writer is faculty, Department of Economics, Panjab University Rural Centre, Kauni