On 2nd July 2015 at the International Conference on Public Policy (ICPP), Oxfam, together with Dr. Anuj Kapilashrami of the Global Public Health Unit, University of Edinburgh, convened a session entitled ‘Private sector and Universal Health Coverage: Examining evidence and deconstructing rhetoric’.
As an earlier blog explained, the session aimed to look at new and existing evidence on the role of the private for-profit sector in health, and to critically evaluate this in the context of achieving UHC in low- and middle-income countries. The five papers presented at the session looked at a wide range of private sector actors in health care delivery but raised a number of common themes and challenges.
High costs, and continued challenges around out-of-pocket spending (OOPS), was a common theme across the papers. One paper presented by Asha Kilaru, examined state insurance schemes in Karnataka, India, and found that OOPS were prevalent across the schemes, even where all costs should be covered. The study found 93% of those insured by at least one government scheme sought care from a private hospital, but only 8% reported receiving completely free care. Where healthcare was provided for free, additional costs (such as multiple hospital referrals for different tests and treatment) meant OOPS still occurred. It seems that this was a problem particularly associated with private provision of healthcare, as evidenced by one respondents’ interview:
‘Only the operation [C-section] was free. At the government hospital, a C-section would be only Rs3-4000, but we went to a private hospital since we had insurance and wound up spending so much. It seems like government are agents that send us to a private hospital. In this yojana [Yeshasvini insurance scheme] the government spends and we also spend’.[i]
Difficulties faced in controlling the level of fees charged by private providers were also highlighted. In a paper by Jane Doherty examining the for-profit private healthcare sector in East and Southern Africa, it was noted that out of sixteen countries, ‘no country places a ceiling on the prices that its private hospitals may charge’ (although there may be some limitations to reimbursement payments made by insurers in two of the countries). The paper also explained that ‘there is little control of the fees charged by health professionals or limits placed on their total incomes, except in Kenya’.
Equity and access for the poorest
Challenges in controlling OOPS and the overall costs of private healthcare present significant obstacles to achieving UHC, and especially to ensuring access to healthcare for the poorest. Another recurring barrier to equitable access highlighted is the location of private services. A paper mapping India’s private healthcare provision by Mukhopadhyay et al highlighted that urban, metropolitan areas benefit from the majority of private hospitals, while in rural areas, disproportionately populated by poorer people, the private sector is largely comprised of individual practitioners. Moreover, almost half of India’s private hospitals were located in cities with a population of more than 5 million. Mumbai alone has 16% of all India’s private hospitals.
Poor quality and regulatory challenges
Usar’s paper investigating perceptions of shops selling medicines in Nigeria highlighted major concerns around their ‘pervasive regulatory infringements’ – and especially the selling of drugs beyond the scope of their licenses – as well as the lack of training of staff. The same paper pointed to the challenges of regulating medicine vendors in Nigeria in order to improve their quality, highlighting that regulation has been constrained by inadequate funding, weak institutional capacity, the often-remote location of the shops, and inter-regulatory agency conflicts.
Doherty’s research examining East and Southern Africa’s for-profit private providers pointed out that both an absence of regulation, and poor enforcement of regulation where it exists, contribute to problematic dynamics around private sector healthcare actors there. We have already heard how little legislation exists to control costs within the sector, but the study also found that that there is almost no regulation that guards against anti-competitive behaviour. Furthermore, ‘there is little monitoring by governments of quality and health outcomes, or attention to how the private health sector supports national health objectives’.
The same paper flags additional challenges to regulation, including patchy regulatory frameworks, the high cost of introducing new regulation, limited available information on the private sector, and the resistance of key stakeholders to regulation, or their “capture” of regulation to safeguard their own interests. In South Africa, for example, attempts to regulate dispensing fees for pharmacists have been resisted heavily.
Impact on the public system
Doherty concludes that ‘legislative gaps and enforcement problems, together with the fact that prices are not contained in any meaningful way, either through price controls or active reimbursement mechanisms, mean that for-profit private care in the region is likely to become increasingly unaffordable for any but the wealthiest’. Yet, if the for-profit private sector is poorly regulated and potentially growing, what impact could this have on the public health system left for the majority of the population?
Doherty points to South Africa as an example, where one impact of a strong private sector has been the ‘brain drain’ of human resources away from the public sector to much more lucrative private providers. The final paper by Jisha C. J., examining a state health insurance scheme in India (Kerala), highlights an additional worrying trend, where some private hospitals register in the state insurance scheme, only to de-register themselves once they have attracted some new patients to their facility. It can be assumed this trend will waste public resources spent on administration, as well as raising serious concerns about both equitable access and the behaviour of private providers.
The evidence presented at the Oxfam-University of Edinburgh session makes a further contribution to the debates over the role of the private sector in achieving UHC. While the papers can only shed light on the specific areas they analyse, it is clear that the wider themes they highlight chime with the findings of broader studies on the comparative roles of the public and private sectors.
Oxfam hopes to continue these discussions further, and will be hosting additional blogs on Global Health Check from the contributing authors and discussants exploring the details of the evidence presented in the coming months.
[i] The paper notes that ‘while it is claimed that [the] Yeshasvini [scheme] is self-funded, it received Rs. 40 crore as a government grant in 2012-13 and Rs. 45 crore in the 2013-14 budget’. Rs 40 crore is equivalent to more than USD 6 million while Rs 45 crore is equivalent to almost USD 7 million.
As the Financing for Development Conference in Addis Ababa ends, we present the case for financing health care in India. India is losing vast sums of potential tax money that could finance universal health coverage (UHC) while at the same time decreasing the health budget and promoting private finance and delivery of health services. A recent Oxfam India paper explores available evidence around financing healthcare for all in India and offers recommendations.
1. The potential for tax funding
Free services like healthcare and education are vital to fight poverty and inequality yet India is being denied the resources to fund them. The International Monetary Fund (IMF) estimates that developing countries are three times more vulnerable to base erosion and profit shifting activities of multinational companies- they lose 0.84% of GDP in the short run, compared to 0.23% lost by OECD countries. Recent research covering 1500 Multi-National Companies (MNCs) in India showed that those with links to tax havens reported 1.5 % less profit than those with no such links – a strong indication that the former are engaged in profit shifting (a global euphemism for cheating) more intensively than those with no tax haven links.
A study in 2013 showed that according to official sources, the amounts involved in mispricing –manipulation by over-invoicing of imports and under-invoicing of exports- in India ran at US$8.1bn in 2010-11, escalating to US$12.6bn in 2011-12. Corporation tax of 33% on these amounts would have provided US$6.9bn that could have helped fund free quality public services for all in India.
The Indian government can raise funds to invest in public services from a better tax system. The latest report from Global Financial Integrity lists India among the top five countries in the world with almost half a trillion dollars lost in illicit outflows in the past decade alone. Just to compare, India’s annual central expenditure on health and rural housing put together is $ 5.4billion.
India’s tax to GDP ratio is among the lowest of all G20 countries- far below other BRICS countries (Brazil, Russia, India, China and South Africa). Moreover, the revenue foregone due to tax exemptions by the central government is estimated to be 43.2% of total tax revenue for the year 2014-15, or nearly 5% of India’s GDP. This shows that there indeed are alternative sources that can generate more resources for health.
2. Current financing model and the impact on service use
Out of pocket (OOP) expenditures push an estimated 60 million Indians into poverty every year. User charges still remain in the public healthcare system. The overall public spending hovers at about 1% of GDP – the corresponding figures are around 4.5% for Brazil and 8% for the United Kingdom. During 1986-87, about 60% of the hospitalised cases were treated by the government institutions in urban and rural areas. In 2004, this figure fell to about 40%, reflecting the poor public spending on health. Fortunately, the following decade saw focused attention on rural areas through increased health spending on improving infrastructure in rural India, which is slowly yielding results. Most deliveries across urban and rural areas are now taking place in government hospitals as the following chart shows.
This is a remarkable result given that government funded schemes across the country offered incentives to deliveries in private sector facilities. It shows that people’ trust in the public sector has improved.
The shift towards demand side financing was based on a rationale from survey findings during 1987-2004. The argument that even the poor preferred the private sector by 2004 however ignores the fact that this was a period when the public sector was systematically starved of resources and market principles were introduced into the system. Forgone care due to financial reasons had doubled between 1986-87 and 2004, from 15% in rural and 10% in urban areas to 28% and 20% respectively. Data for more recent years will be available by next year.
The spending cuts on public services in the central budget of 2015-16 are deeply concerning. Not only was the total allocations for health cut by about $945 million, but other budget cuts would affect peoples’ health too. For example the allocation to the child nutrition scheme was cut by half. At the same time, according to latest available estimates, 48% of children under the age of five are stunted due to chronic under-nutrition, with 70% being anaemic.
3. Where the money should be spent: The privatisation trend
Unfortunately, there seems to be a trend against expansion of public sector provision of service especially from influential think tanks such as Niti Aayog, which just replaced India’s Planning Commission. A recent book co-authored by Niti Aayog Vice Chairperson advises against any further expansion of free primary, secondary, and tertiary health care services in the public sector. Instead, it advises the government to focus on providing financial resources to the poor so that they can buy services. It even calls for the government to insist on full cost recovery.
Niti Aayog’s latest Working Paper on financing healthcare too veers dangerously towards privatised financing for health care which excludes poor people; unsustainable programs based on Corporate Social Responsibility and Public Private Partnerships (PPPs) without examining the evidence of effectiveness or problems of any of these approaches.
 according to the OECD the term refers to tax planning strategies that exploit gaps and mismatches in tax rules to make profits ’disappear’ for tax purposes or to shift profits to locations where there is little or no real activity but the taxes are low, resulting in little or no overall corporate tax being paid.
 Still, 60% of all people from the bottom 20% were getting hospitalised in the public sector in 2004.
 The Planning Commission was an institution in the Government of India which formulated India’s Five-Year Plans, among other functions.
Civil society groups at the recent World Health Assembly criticized the continued focus on insurance schemes in the push for Universal Health Coverage (UHC), which all too often includes significant private sector participation. Evidence to support the claim for private sector involvement of this kind remains extremely thin and a new study by the Municipal Services Project shows it could jeopardize public health in the South.
The study compares health outcomes in Chile and Costa Rica, two countries that have come to epitomize contrasting approaches to ‘Universal Health Coverage’ in Latin America. Chile’s focus has been on insurance-based UHC while Costa Rica has built a single public health system. The research provides strong evidence to show that there are widespread and consistent advantages to promoting UHC through a strong public system that funds and provides all medical and preventive services to citizens rather than through a fragmented public-private mix.
It is important to note that both countries have achieved the lowest infant mortality rates and the highest life expectancies in the region thanks to major advances in primary care. But Chile’s health ‘market’ has led to inefficient use of resources, with higher administrative costs and more irrational medical procedures (e.g. caesareans) resulting from oligopolies and collusion among private providers.
One of the major goals of UHC is financial protection for poor households when they face illness. Yet Chileans systematically need to make higher out-of-pocket payments to get medical care in comparison with Costa Ricans. This situation is produced in part by the fact that Chileans pay for health conditions, services or products that are not covered by their insurance (e.g. prescription drugs).
In contrast, Costa Rica’s public health care system remains relatively affordable and more efficient, with total per capita health expenditure standing at US$811 compared to US$947 in Chile. Importantly, Costa Rica has also consistently prioritized preventive health care. Expenditure on prevention and public health services from 2002-2006 in Costa Rica is more than double that of Chile (6-7% vs 2-3%). This focus on prevention is more cost-effective and can yield greater public health impacts in the long term.
Using comparable data (Latinobarómetro), the Municipal Services Project study shows that twice as many people reported facing access barriers to health care in Chile compared to Costa Rica, citing distance to hospital, time to obtain an appointment, and cost of seeing a doctor as the major reasons. In addition, lack of access to health services as a result of financial barriers in Chile still stands at 4.2% compared to 0.8% in Costa Rica.
Costa Ricans continue to be largely satisfied with the quality of their healthcare services, more so than Chileans. Interestingly, LAPOP 2012 results show that most people in both countries think that government, rather than the private sector, should be responsible for health care (71.1% in Chile and 67.5% in Costa Rica).
According to the notions of “active purchasing” and “managed competition” – frequently used to promote insurance schemes – the existence of different providers competing for resources should have produced higher levels of quality at lower costs in Chile. The evidence presented in this report shows that such assumptions are not always true.
The Chilean health system is an example of how segmentation produced by the coexistence of private and public insurances is detrimental to efficiency and equity. Collusion among private providers and oligopolies are realities that are ignored in the competition argument.
Debates over the best institutional arrangements to organize universal health care are far from over, but this case study demonstrates that insurance schemes as promoted by some proponents of the UHC agenda are neither the only nor the best option.
Luis Ortiz Hernández is Professor in the Health Care Department, Universidad Autónoma Metropolitana Xochimilco, Mexico and visiting professor at Queen’s University, Canada. His most recent publication, “Chile and Costa Rica: Different roads to universal health in Latin America,” is available here.
At a high-level meeting in Tokyo a couple of weeks ago World Bank Group President Jim Yong Kim was unequivocal – “achieving universal health coverage and equity in health are central to reaching the [World Bank] global goals to end extreme poverty by 2030 and boost shared prosperity.”
Kim’s emphasis on equity and the need to prioritize policies that actively redistribute resources and reduce disparities in health coverage marks a crucial and welcome turning point for the World Bank. As Oxfam argued in a recent paper, UHC reforms must be explicit about reducing inequality in access to health services, so that everyone has the same financial protection and access to the same range of high quality health services – according to need and not their ability to pay. Equity must be designed into the system from the beginning with governments and donors ensuring that the poor benefit at least as much as the better off at every step of the way towards universal coverage.
But by far the most significant outcome of the conference was the release of a joint World Bank and World Health Organization proposed framework for monitoring progress towards UHC. The framework sets out clear commitments to reduce out-of-pocket payments and improve access to health care for the poor with two new targets:
These clear targets and deadlines give something progressive to hold the World Bank Group accountable to but why set an 80% rather than 100% target? And if the Bank is serious about them the targets they should be monitored annually and included in the Bank’s new corporate scorecard currently under negotiation. And most importantly, what action will the Bank take to deliver against them?
User fees are the most inequitable method of financing health care services, yet they continue to exist in most poor countries. Three people every second are pushed into poverty because of them but donor support for fee removal has remained unacceptably low. The World Bank should break from history and play a clear pro-active role in helping governments to remove fees and to raise and distribute revenue for health equitably across populations.
At the same time the Bank needs to be much clearer that user fees should not be replaced by health insurance schemes that have been proven to prioritize already advantaged ‘easy to reach’ groups in the formal sector or rely on collecting premiums from people who are too poor to pay. As Oxfam’s recent paper showed, the countries making most progress towards UHC have prioritized spending on health from general taxation – either on its own or pooled with formal sector payroll taxes and international aid. Governments and donors, including the World Bank, should use the recent lessons from these countries and build on them.
At the Tokyo event we once again heard calls from Jim Kim for investment in ‘affordable’ ‘quality’ ‘health coverage’ for all, with an emphasis on ‘primary health care’. This is positive but we need greater reassurance that the Bank has shifted to a genuine focus on comprehensive primary health care for all as part of its UHC agenda. This would stand in stark contrast to its historic emphasis on ‘basic’, ‘selective’ or ‘minimum’ interventions or packages of care.
We hope world leaders listen to the clear call from the World Bank and WHO for UHC to be included in the post-2015 development framework. Universal health coverage provides the opportunity to accelerate progress on the health-related Millennium Development Goals, address the growing burden of non-communicable diseases, and most critically to move towards a more comprehensive approach to deliver on the right to equitable and affordable health care for all. This is something all world leaders should embrace as negotiations on the post-2015 development framework commence.
Ceri Averill is a Health Policy Advisor for Oxfam GB and author of Universal Health Coverage: Why Health Insurance Schemes are Leaving the Poor Behind
This great new two minute video captures the motivation and the rationale for the movement against a greater role for the private sector in the health care systems of low- and middle-income countries.
The video highlights the manipulation of the Universal Health Coverage agenda to serve the interests of profit making companies while simultaneously starving already crumbling public health services from badly needed investment.