An unhealthy choice

NITI Aayog's private hospitals-first approach is misguided

The Union government has prepared a draft contract, in an effort spearheaded by the NITI Aayog, to be offered to private hospitals to provide health services in co-operation with district hospitals. This draft, which had some initial inputs from the Union health ministry, has been sent to the states for comments. The draft provides for 30-year leases for 50- or 100-bed hospitals to be bid out in Tier-II towns. These hospitals will be able to take advantage of the infrastructure, including blood banks and ambulance services, of district hospitals, receive assured referrals from state-run primary health centres and also benefit from some public funds.

It is unquestionable that India’s healthcare provision is abysmally poor. In spite of important progress in many important indicators related to infant mortality and life expectancy, most Indians continue to have to overpay for poor or rationed services. Medical costs are the most common reason for precarious lower-middle class families suddenly descending into poverty. The government’s National Health Policy 2015 said that 55 million people had fallen into a “serious poverty trap because of their healthcare spending” just in the 2011-12 period. This is not surprising, as two-thirds of health spending comes out of patients’ pockets. This is one of the highest ratios in the world. And it is increasing; 18 per cent of households faced catastrophic health costs in the 2011-12 as opposed to 15 per cent in 2004-05.

But the government is going about addressing this grave crisis in quite the wrong way. Private provision with costs borne by the public has been shown to be the most inefficient mechanism for providing healthcare. This is for sound economic reasons. Monitoring and regulation costs are too high to ensure quality in this sector — and this will be doubly problematic in a country like India, where a lack of administrative reform renders state capacity particularly low. The information asymmetries among patients, doctors, hospitals and the government are too vast to be easily bridged, and thus the assumptions for efficient market-based solutions are not easily satisfied. The truth is there is no alternative to using whatever funds are available to improve the delivery of public health, rather than to subsidise private provision.

Attempts to draft clever contracts for private-public partnerships will not cover up the basic problem: That India spends too little on health. According to the World Health Organization, India ranks 178 out of 191 countries in its public health spending. It spends only 1.2 per cent of the GDP on health. The government spends far less on health as a proportion of its total expenditure than in broadly comparable countries such as Thailand or China. The government has accepted that this is a problem; shortly after taking office, it promised to raise spending on health to 2.5 per cent of the GDP. It should focus on making those resources available, and on ensuring sensible and economically rational structures for the training and dispersal of health professionals rather than on working out contracts that will, in the end, benefit only healthcare companies.