Public healthcare, private provisioning

Soham D Bhaduri
Health policy expert

The ravages of the second wave of the coronavirus are still fresh in our memories. In the early days of Covid-19, leading epidemiologists from across the world offered ominous projections about the pandemic’s course in the country, predicting unimaginable loss of life and economic collapse unless the traditionally dichotomous (private-public, rich-poor) health system underwent a radical restructuring. Many advanced the suggestion of nationalising private hospitals into a consolidated state-run service, much akin to what happened in the UK after the Second World War, leading to the creation of the National Health Service (NHS). What actually manifested were a legion of makeshift, complementary public-private collaborations which, presumably coupled with some inherent demographic and biological advantages, helped us endure the unprecedented pandemic. Existing health programmes, such as state and national public health insurance schemes, were built upon and expanded rather than being revisited. This is not to remotely suggest that this was the best route we could have taken, as many of the systemic deformities that are traditionally owed to the large, unregulated for-profit healthcare sector assumed worse forms during the pandemic. However, what was palpable was the tenacity of the dichotomous system in enduring the worst shocks. This, today, paves the way for a liberal-conservative model of universal healthcare within a welfare state originally envisioned along social democratic lines.

Sporting simultaneous public and private sectors, each with very different motives and goals, will entail significant ‘transaction costs’ for the government to continuously check profiteering interests and align the private sector with national health goals

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The Union government is currently in talks for expanding the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana to 85 per cent of the population from the existing 40 per cent, on a voluntary contributory basis

First, a quick peek into history is warranted for a better understanding of where Indian healthcare is headed. The publication of the Beveridge Report in the UK towards post-war reconstruction, from which the tenets of the NHS were derived, was a defining moment in the history of modern welfarism. Quite in contrast to the Bismarckian social insurance paradigm, which believed in healthcare as an individual right, the NHS was built on the idea that ensuring basic levels of health and well-being were state responsibility, resulting in a tax-financed healthcare system free at the point of entry, and based on clinical need, thus ensuring equality of opportunity to all. Similar transitions characterised the US after the Great Depression, only to soon fizzle out in favour of a residual welfare state.

The neoliberal decades witnessed varying degrees of undermining of welfare states, while the Western European “social democratic compromise” meant that a complete reversal was impossible, much unlike what was advocated by the West for many of the developing countries in Sub-Saharan Africa, Central Asia and Latin America. This was an exemplar of how health systems follow path-dependent trajectories that self-reinforce with time and resist change. Starting in the late 2000s, the apostles of the neoliberal agenda awoke to the damages that reckless healthcare privatisation had entailed in the under-developed world. For instance, it was estimated in 2008 that nearly three million child deaths could have been averted had it not been for the introduction of user fees in public healthcare. Around the same time, the World Bank started supporting user fee rollbacks. By this time, however, privatisation in health was irreversibly entrenched, as evidenced even in the card-carrying social democratic Western European welfare states. But this time, what made such privatisation self-perpetuating weren’t just larger economic forces external to healthcare, but also the intrinsic realities of healthcare, which looked nothing like when the welfare states emerged.

India, on the other hand, was among those countries which never embraced the neoliberal agenda in its entirety, the sharp criticism of the post-1991 health sector reforms notwithstanding. While the Bhore Committee’s recommendations for a dominant three-tier public health system were espoused after Independence, the realities back in the day were fundamentally no different than today. In 1938, a mere 23 per cent of doctors in India were in public service. A feeble endeavour to realising the Bhore model post-Independence led to a progressive consolidation of a private sector dominant healthcare trajectory, which was tested successfully during the Covid pandemic.

The failure of a radical shock in the form of Covid-19 to disrupt this trajectory was testimony that it has become practically irreversible today. Quite predictably, as seen in the policy pronouncements before and during the pandemic, the existing public-private initiatives such as public health insurance schemes are being built upon to extend universal healthcare to the masses. Three aspects merit examination here: the irredeemability of public monopoly in healthcare; the rise of a liberal-conservative welfare state, at least as far as healthcare is concerned; and the inexorable compromises that are inherent to this model.

Times today are very different from what they were when welfare states arose and cemented. Business interests in healthcare apart, the massive strides achieved in technology, the vistas and choices they have opened, and their swift diffusion across the globe have entailed that public monopolies in healthcare, poignantly yet practically, are a thing of the past. The widened frontiers of healthcare are beyond what the state could possibly offer, militating against the “equal for all” paradigms that social democratic welfare states envisioned. For instance, imagine someone going for a surgical procedure to which there are multiple (incrementally less painful, but costlier) alternatives over basic open surgery. A universal public monopoly at best could manage to cover basic surgery and a level above, but not any further. These costlier alternatives become the preserve of the rich. Denying these costly alternatives in the private open market in the interest of “equality for all” presents ethical issues. Such an irrepressible rise of private alternatives has often meant an unavoidable middle and upper class walk-out on universal healthcare programmes, as evidenced even in countries like Sweden, which have been exemplars of welfare states over decades. This tells enough about the hopes one could reasonably keep for a Bhore model like resurgence in India.

On the other hand, the current global climate militates against reverting to outright neoliberalism in healthcare, despite the rampant privatisation. With the dampening of neoliberalism in health over the past two decades, and the ensuing global push for universal health coverage (UHC), as espoused by the Sustainable Development Goals, countries like India, in aspiring to be an economic powerhouse, are left wanting for a universal healthcare system which, apart from fueling its development engine, brings it legitimacy on the world stage. What this has entailed are a host of public initiatives to expand healthcare in the public-private partnership mode, mainly through the insurance route, as exemplified by schemes such as Ayushman Bharat.

Much predictably, the Union government is currently in talks for expanding the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) to 85 per cent of the population from the existing 40 per cent, on a voluntary contributory basis. At its best, this will come to resemble a liberal-conservative system having multiple categories of insured beneficiaries and entitlement criteria, majorly private provisioning of public healthcare, and a significant open private care market. As practical as it may be today, it departs from the social democratic welfare principles originally enshrined in our directive principles.

The liberal-conservative model shouldn’t ever be equated with major cutbacks in public health spending. The latest two iterations of the National Health Accounts have only shown a reduced share of out-of-pocket (OOP) expenses and an increased public share in total health spending. If anything, creating a consequential national health insurance system will be a highly costly affair for the government. The important concomitant, however, is that despite such costs, it will be characterised by significant access disparities, a reliance on beneficiaries’ ability and willingness to pay, and limited redistribution. Sporting simultaneous public and private sectors, each with very different motives and goals, will entail significant ‘transaction costs’ for the government to continuously check profiteering interests and align the private sector with national health goals. The future universal healthcare system will also feature a parallel private sector that would continue to operate outside the public insurance fold, catering largely to the affluent class. This is because OOP payments and private insurance offer much more lucrative deals than public schemes, and a dominant private sector will ensure their continued existence.

We may need to wistfully reconcile with the reality that social democratic, tax-financed public monopoly in healthcare is no longer practically feasible. As such, any further strides towards UHC will necessarily involve accretions upon the extant public-private mix. This, however, should only inspire greater investments in the public health infrastructure to bring it on par with private players within a competitive healthcare ecosystem. This will be instrumental in upholding healthcare quality and cost-effectiveness. The traditional bureaucratic disposition of public hospitals funded through line-item budgets will need to be modernised into a more responsive, accountable and dynamic one, with a near-full reliance on output and outcome-based funding, especially for operational expenses.

Further, in addition to countering the conventional market distortions such as supply-induced demand, adverse selection, and cream skimming, attention will need to be paid to the many practical problems presented by health insurance due to poor insurance literacy and unresponsive grievance redressal systems. The insurance setting involves a perpetual battle between private healthcare providers and insurance companies, often culminating in patients having to pay large sums out of pocket. Finally, population health and preventive care will inevitably continue to be public domains, as also outpatient medical care in rural areas, at least for much of the foreseeable future.