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.
In its seminal World Health Report of 2010, WHO argued that all countries can make progress towards Universal Health Coverage (UHC) by expanding the number of people covered by effective health services and giving them financial protection from the costs of these services. The report also highlighted the pivotal role of equitable health financing reforms in achieving this objective. These processes ought to be easier in wealthy countries, but even in the world’s biggest economy, due to an inequitable financing system, tens of millions of people still lack effective health coverage.
In Malawi (with a GDP per capita 1/226 of the United States) the health financing situation is particularly challenging. This is especially the case following the suspension of considerable sums of aid financing after the “Cashgate” corruption scandal that brought down the former government. So, faced with a high burden of unmet health needs, a heavily constrained government budget and uncertain levels of external funding, how should Malawi take its next steps towards UHC?
With the public financing situation looking bleak, a knee-jerk reaction might be to look for alternative financing sources and in particular to raise health funds directly from the population – in the form of user fees. But evidence from across the continent over the last thirty years shows that this would be a mistake. Charging patient fees would raise very little revenue, would incur high administration costs and most worryingly would exclude millions of poor Malawians from receiving healthcare. Also with the world looking to build resilient health systems in the aftermath of the Ebola epidemic it would be extremely unwise to suddenly create new access barriers to essential health services.
While concerns around fee-paying wards and bypass fees remain, fortunately, the government recently made clear statements to the effect that the majority of services will remain free at the point of delivery.. Not only is this good news for the health and welfare of the population, it is a smart political move by the Government, who may have remembered the last time they introduced health fees following advice from ex-pat advisers. This was soon after independence when new health charges were met with extensive hostility from the population. This triggered a political crisis and resulted in some ministers losing their jobs. Following this lesson of people power, Malawi was one of the few African countries not to bow to donor pressure to introduce fees in the 1980s, when it continued to provide universal free health care. This undoubtedly contributed to Malawi outperforming some of its neighbours in making progress towards the health-related MDGs. With many other African countries now learning that they too should remove user fees, it would be a tragedy for Malawi to move in the opposite direction.
But if user fees aren’t the answer and with private voluntary insurance also proving an ineffective route to UHC, what steps could the Government of Malawi (GoM) take towards reforming its health financing system? As the 2010 World Health Report and subsequent influential reports have shown, the key to achieving UHC lies in public financing reforms. In particular, it requires increasing levels of pooled public financing and in maximizing the efficiency and equitable allocation of these funds. In terms of raising higher amounts of domestic funding, broader public financing reforms could increase the size of the overall government’ budget and a political choice could be made to increase the health share from 8.6 % towards the Abuja target of 15%. Also, it is to be hoped that aid financing will increase again in the near future because external assistance will be essential for Malawi for at least the medium term if it is to reach adequate levels of public health financing.
But to secure this additional funding, perhaps the best strategy for the health sector will to demonstrate to its domestic and external financing sources that it can deliver rapid results with incremental allocations in funding. This will involve investing additional funds in cost-effective interventions that extend health coverage to more people in Malawi – and especially to the poor and vulnerable.
One immediate “quick-win” along these lines, could be to ensure that people relying on NGO facilities in remote areas also receive free services. This would require increasing government grants to these facilities. In fact this is already a policy priority for the new Government. Fast-tracking this reform would bring health and economic benefits to the communities concerned and political benefits to the government. Looking at UHC success stories in other countries, the government of Malawi and donor partners could also achieve rapid progress by implementing extensive supply-side reforms. For example Rwanda and Ethiopia have made spectacular progress in extending coverage through scaling up services provided through publicly-funded community health workers. Also implementing extensive reforms of medicines supply systems to ensure the provision of free generic medicines and health commodities has proved a very effective way to increase coverage of essential services. Furthermore these types of pro-poor initiatives could prove an attractive proposition for donors wanting to re-engage in Malawi’s health system.
Therefore even though the health financing situation may appear daunting in Malawi, this doesn’t mean that a completely new strategy based on private financing will be the solution. International evidence shows that this would probably result in a deterioration in health coverage – particularly for the poor. Instead Malawi would be better advised to learn from its own history and re-invigorate its publicly financed health system, which as the world has learnt is the proven route to achieve universal health coverage.
Levy J 2015 In U.S., Uninsured Rate Dips to 11.9% in First Quarter Gallup 13 April 2015 Available at http://www.gallup.com/poll/182348/uninsured-rate-dips-first-quarter.aspx Accessed 23 June 2015
List of countries by GDP (nominal) per capita Wikipedia Available at: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita Accessed 23 June 2015
Tran M 2014 Malawi aid freeze could hit health and education sectors The Guardian 14 January 2014 Available at http://www.theguardian.com/global-development/2014/jan/14/malawi-aid-freeze-health-education Accessed 23 June 2015
Yates R 2009 Universal health care and the removal of user fees The Lancet Volume 373, No 9680 pages 2078 to 2081 available at http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(09)60258-0/abstract Accessed 23 June 2015
Heymann D L et al 2015 Global health security: the wider lessons from the west African Ebola virus disease epidemic The Lancet, Volume 385 , Issue 9980 , 1884 – 1901 available at http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(15)60858-3/fulltext Accessed 23 June 2015
Chauwa A 2015 Malawi govt backtracks on hospital user fees Nyasa Times April 5 2015 Available at http://www.nyasatimes.com/2015/04/06/malawi-govt-backtracks-on-hospital-user-fees/ Accessed 23 June 2015
Messac L 2014 Moral hazards and Moral Economies: The Combustible Politics of Healthcare User Fees in Malawian History South African Historical Journal Volume 66 Issue 2 Available at http://www.tandfonline.com/doi/abs/10.1080/02582473.2014.903292?journalCode=rshj20#.VYmGt1xa_ww Accessed 23 June 2015
Cortez R et al 2014 Achieving MDGs 4 & 5: Malawi’s progress on maternal and child health The World Bank Knowledge Brief 92548 Available at http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/11/11/000406484_20141111141118/Rendered/PDF/925480BRI0Box30August0201400PUBLIC0.pdf Accessed 23 June 2015
Chuma J, Mulupi S, McIntyre D Providing Financial Protection and Funding Health Service Benefits for the Informal Sector Evidence from Sub-Saharan Africa RESYST Working paper 2 April 2013
Evans DB et al 2010 The World Health Report Health Systems Financing – The Path to Universal Coverage The World Health Organization
Mogombo K 2015 Gondwe unveils MK901.6 billion 2015/2016 Budget Mana online 25 May 2015 Available at http://www.manaonline.gov.mw/index.php/business/item/3011-gondwe-unveils-mk9016-billion-20152016-budget Accessed 23 June 2015
Crowe S 2013 In Ethiopia, a far-reaching health worker programme has helped reduce child mortality across the country UNICEF Available at http://www.unicef.org/infobycountry/ethiopia_70372.html Accessed 23 June 2015
Joychen P J 2013 Free medicine scheme makes a big splash in Rajasthan Deccan Herald 8 February 2013 Available at http://www.deccanherald.com/content/310818/free-medicine-scheme-makes-big.html Accessed 23 June 2015
Even before the devastating Ebola epidemic in West Africa, development agencies were highlighting that health indicators in this region were lagging the rest of the continent. In a 2013 report UNICEF noted:
“West and Central Africa in particular requires a special focus for child survival, as it is lagging behind all other regions, including Eastern and Southern Africa, and has seen virtually no reduction in its annual number of child deaths since 1990.”
But as Ebola has overwhelmed some countries and threatened many others, questions are being asked about the role of international agencies in undermining health systems in West Africa. Specifically, fingers have been pointed at the 1980s structural adjustment policies of the World Bank and IMF for forcing poor African countries to cut public spending on health. These policies also shifted the financing burden of health services onto poor populations by charging them user fees. Interestingly at the time one of the leading critics of this policy was none other than the current President of the World Bank.
Other health policies promoted at the same time were also damaging to poor people’s access to health care. The Bamako Initiative (BI) launched in 1987, was prompted by UNICEF and WHO as community management of “revolving drug funds”. However, BI institutionalized user fees for essential medicines in some of the poorest countries in the world. Not surprisingly, with most households unable to pay these fees, utilization of health services in the countries concerned slumped, with the poor most likely not to seek care. In West Africa where the BI became established, typical utilization of curative services at the start of the millennium was around one visit per person every three years!
Thankfully a huge volume of research evidence over the last 20 years has conclusively proved the folly of this approach. User fees have been shown to be ineffective in raising health revenues, inefficient in incurring high administration costs and inequitable in excluding the poor. They have also resulted in outrageous human rights abuses where poor people (often women and babies) have been detained in hospitals because they can’t pay their bills. Sadly this practice continues to this day.
As a result of these findings many prominent aid agencies have radically changed their health financing policies, including the World Bank whose President has referred to user fees as “unnecessary and unjust”. Even one of the architects of the World Bank’s previous pro-user fees policy has publicly stated his change of position on user fees although he did not admit that it was a mistake then.
However, not all agencies have been so clear in making a break with the past. As recently as 2008 in its State of the World’s Children Report, UNICEF was still championing the Bamako Initiative and openly criticizing NGOs that were advocating the removal of user fees Indeed one of the countries singled out for praise in implementing the BI was Guinea, from where the current Ebola epidemic has spread
It is true that the international agencies involved in promoting the BI have gradually shifted their positions on health financing and are now rallying behind the goal of universal health coverage. However, the agencies that promoted the BI need to acknowledge their past mistakes rather than assuming that the Bamako Initiative never happened.
This is problematic because whereas other development agencies are aware of the changing consensus on health financing, this may not be the case in many countries. Some governments are still laboring under the illusion that the BI is working and thus user fees policies are still implemented. Thankfully, some countries in the region are now replacing user fees with public financing, for at least some of the population, most notably in Liberia, Ghana, Senegal, Niger and Sierra Leone. The latter’s free health services initiative for pregnant women and children under 5 has been a particularly good example of the impact of removing user fees.
However in West and Central Africa, out-of-pocket payments including user fees remain by far the biggest health financing mechanism. With the Ebola virus not beaten yet in the region, the lack of effective healthcare coverage doesn’t only threaten the health of the population in the region but also poses a threat to global health too.
Therefore, as the international community begins to support countries in West Africa to develop more resilient health systems, there is one immediate action they should take as a top priority. This action would cost practically nothing but its impact could be profound in helping put countries on a path towards equitable universal health coverage. After a twenty-eight year failed experiment, it’s time that agencies including UNICEF and WHO formally and publicly end the Bamako Initiative.
 UNICEF 2013 Committing to Child Survival, a Promise Renewed, Progress Report 2013 Available at: http://www.unicef.org/publications/files/APR_Progress_Report_2013_9_Sept_2013.pdf
 IDS Practice Paper in Brief 2015 Ebola and Lessons for Development Available at: http://opendocs.ids.ac.uk/opendocs/bitstream/handle/123456789/5849/ID557%20Online.pdf
 Kim JY et al editors 2000 Dying for Growth Global Inequality and the Health of the Poor. Common Courage Pres
 UNICEF 2009 Maternal and Child Health the Social Protection Dividend: West and Central Africa
 Yates R 2009 Universal Health Care and the Removal of User Fees The Lancet 373: 2078–81 Available at http://www.thelancet.com/pdfs/journals/lancet/PIIS0140-6736(09)60258-0.pdf
 Kippenberg J Burundi A High Price to Pay Detention of Poor Patients in Hospitals 2006 Human Rights Watch Volume 18 No 8(A) New York, USA
 See https://www.youtube.com/watch?v=RNfzXh4I-Pw
 Kim JK Poverty Health and the Human Future [Speech] World Health Assembly, Geneva, Switzerland 21 May 2013 Available from: http://www.worldbank.org/en/news/speech/2013/05/21/world-bank-group-president-jim-yong-kim-speech-at-world-health-assembly
 Boseley S (2012) From user fees to universal healthcare – a 30-year journey. The Guardian
 UNICEF 2008 State of the World’s Children: Child Survival available at: http://www.unicef.org/sowc08/docs/sowc08.pdf
A new report published by Oxfam last week calls on governments to reduce inequality by changing the rules and systems that have led to extreme inequality, and by prioritising policies that redistribute money and power. ‘Even It Up: Time to End Extreme Inequality’ firmly presents universal public services – including health and education – as part of the solution to out-of-control inequality.
Health is both a human right and a building block to tackling poverty and reducing inequality. The provision of good quality health care for all – free at the point of use – can mitigate the impact of skewed income and wealth distribution, by closing the gap in life chances between the rich and the rest. Moreover, universal free health care (UHC) with other public services, especially education, puts ‘virtual income’ into the hands of ordinary people, further helping to level the playing field. Between 2000 and 2007, the ‘virtual income’ provided by public services reduced income inequality by an average of 20 percent across OECD countries for example.
In addition, quality health care and education can transform societies, by giving people the tools and ability to challenge unfair rules that perpetuate economic inequality. For example, healthy and well-nourished children are more likely to spend more years at school and to have better cognitive skills that help learning.
But the extent to which public services are able to achieve their inequality-busting potential is heavily dependent on how these systems are designed, financed and delivered. Low levels of public spending and a continued reliance on out-of-pocket payments to fund health services are disproportionately harming poor and marginalised women and men. User fees and other forms of out of pocket payments can push struggling families further into poverty and prevent people from getting the treatment they need.
“I went for a cataract operation. They told me it costs 7,000 Egyptian pounds. All I had in my pocket was seven so I decided to go blind” – a 60-year old woman in a remote village in Egypt”
When health care is not free, poor people are excluded from service or are forced to sell assets and borrow money; leading to debt and thus further perpetuating existing economic hardships. This happens even in rich countries; in the USA, medical debt contributed to 62 percent of personal bankruptcies in 2007.
All too often the amount of money available for governments to spend on public services is limited. Taxation is critical to ensure sufficient public funds can be invested in delivering free healthcare for all. However, the exploitation of tax loopholes, unfair tax rules and tax dodging results in governments’ loss of millions of dollars each year. For example, in 2008/09 the Rwandan government authorized tax exemptions that could have been used to double the health and education spending.
Decent investments in public health services that are free at point of delivery will boost the rights and opportunities of poor people. The growing momentum for UHC – under which all people should get the healthcare they need without suffering financial hardship – has the potential to vastly improve access to healthcare, and drive down inequality.