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 recent weeks, two separate reports have been released which critique the trend by DFID to increasingly involve the private sector in development, including the provision of health and education.
The first report by Global Justice Now maps a variety of initiatives supported by DFID to open up health and education markets to private firms – from a £25 million project with Adam Smith International aiming to enrol 50,000 more children in private schools in Kenya, to a £7million partnership with Coca-Cola on girls’ education and training in Nigeria. This latter scheme is part of a broader DFID-Coca-Cola collaboration which openly benefits the company’s sales plans, the report reveals. DFID’s support of HANSHEP – or ‘Harnessing Non State Actors for Better Health for the Poor’ – gets a particular profile too, including through their £35 million contribution to a Public-Private Partnerships advisory facility. DFID’s influence is shown to extend beyond the financial commitments it makes, through its advice to governments as they develop private sector-friendly policies for the delivery of services.
The second report by the UK Government’s aid watchdog, Independent Commission for Aid Impact (ICAI), reviews how DFID is working with the private sector to achieve its mandate to tackle poverty around the world. Worryingly it states that ‘DFID should reassess how it appraises, monitors and evaluates its engagements with business to ensure fitness for purpose and a sharper focus on the poor’ and that ‘In some cases… we are not confident that DFID’s support is additional to what businesses would have done anyway’.
For Oxfam, the dangers of the promotion of privatisation of health and education services, especially in relation to the rising tide of global inequality, are clear. Private services benefit the richest first and foremost, leaving people in poverty behind[i]. When health care is sold through the private sector for example, quality care and medicines are often available only to those who can afford it, while poor people may be forced to rely on low-quality or unqualified care like drug hawkers and grocery shops selling medicines[ii].
Indeed ICAI’s report notes that a survey undertaken of a HANSHEP programme operating in Ghana, Kenya and Nigeria – the African Health Markets for Equity – found ‘that less than 1% of people using facilities supported by AHME were from the bottom income quintile in Ghana and other participating countries’.
Prioritising the private sector can see public services eroded as scarce financial and human resources are diverted from the public to the private system, through an internal ‘brain drain’ and expensive public-private contracts. Oxfam’s exposé of a Public-Private Partnership (PPP) hospital in Lesotho, found that the hospital was costing at least three times the amount of the old public hospital it was built to replace for example, amounting to 51% of the total health budget for the entire country[iii]. The International Finance Corporation (IFC) – manager of the DFID-supported PPP advisory facility mentioned above – advised on this PPP arrangement, reaping a $720,000 ‘success fee’ for its work[iv].
When richer people opt out of public systems for health care and education, they also have minimal interest in promoting spending on public services or demanding better quality, as well as less incentive to pay taxes. Thus a downward spiral of deteriorating quality can be set in motion[v]. The result is a 3 tiered system of five star services for the richest people, and a mixture of deteriorated public and unqualified private providers for the poorest. Inequality and poverty thrive.
The same tiered system also develops in education, where children of rich families often attend elite private schools and universities, while poor and lower-middle class children may have a choice between poor quality private education or deteriorating public schools. DFID, as well as other donors such as the World Bank, has been heavily promoting for-profit “low-cost private schools” for delivering better learning outcomes. However, the evidence on quality in these schools is weak. They rely on untrained teachers, standardization and scripted lessons to keep costs down. Moreover, we know that any kind of school fees – as well as other related costs like uniforms and transportation – will block access to schooling for children from the poorest families. Relying on fee-charging schools to deliver education will mean that too many of the world’s future Einsteins and Beethovens will be lost – shut out from accessing a quality education because of their poverty.
Profit-making companies also have clear interests in pushing for their own increased role in social sectors. In South Africa, private health insurance firms have been accused of lobbying against a new National Health Insurance Scheme that promises to provide essential health care for all.[vi] In the USA alone, the pharmaceutical and healthcare sectors spent more than $487m on lobbying in 2013, more than was spent by any other sector[vii].
Debates on the role of public and private actors in health and education are increasingly relevant as the development community prepares for this summer’s Financing for Development (FFD) summit, where mechanisms for financing the new post-2015 development goals will be discussed. A submission led by the International Chamber of Commerce (ICC) responding to the draft negotiating text for the Summit, pushes the insertion of new language to promote ‘blended finance’ (public and private) and a bigger role for private finance, including ‘using limited public finance to mobilize private’. In one shocking suggestion, the submission also advocates for the commitment to ‘move away from harmful, unsustainable [private sector investments]’ to be deleted too.
It is critical that any public funds used to leverage private investment, and private finance generally, comply with development effectiveness principles and be subject to robust environmental and social safeguards, be fully transparent and accountable, and be equitable in risk and benefit sharing between governments, donors and private investors. Public Private Partnerships (PPPs) should be considered only where evidence of effectiveness is abundant and where alternative delivery options are not. Sustainable development criteria for PPPs should be adopted and endorsed by the private sector and by governments. Such criteria should also include the PPP design and implementation process being fully owned by the ostensible beneficiaries, full transparency of contracts and terms, and assessment in terms of equitable and affordable access to infrastructure and services. Oxfam, together with other agencies, have developed a series of sustainable development principles to guide how public-backed private finance is used.
DFID should learn from past experiences and revise its support for private sector financing and delivery of these critical services, prioritising instead investments in strong public services that can deliver universal health coverage and education for all.
[i] Basu et al found that the private sector in health care tends to serve higher socio-economic groups for example. Basu et al (2012) ‘Comparative Performance of Private and Public Healthcare Systems in Low- and Middle-Income Countries: A Systematic Review’, PLoS Medicine, Vol. 9., Issue 6. http://www.plosmedicine.org/article/fetchObject.action?uri=info:doi/10.1371/journal.pmed.1001244&representation=PDF
[ii] Oxfam (2009) ‘Blind Optimism. Challenging the myths about private health care in poor countries’, pp.10-12, http://policy-practice.oxfam.org.uk/publications/blind-optimism-challenging-the-myths-about-private-health-care-in-poor-countries-114093
[iii] Oxfam (2014) ‘A Dangerous Diversion. Will the IFC’s flagship health PPP bankrupt Lesotho’s Ministry of Health?’ http://policy-practice.oxfam.org.uk/publications/a-dangerous-diversion-will-the-ifcs-flagship-health-ppp-bankrupt-lesothos-minis-315183
[v] T. Smeeding (2005) ‘Public Policy, Economic Inequality, and Poverty: The United States in Comparative Perspective’, Social Science Quarterly, Vol. 86 (suppl): 955-83.
[vii] Oxfam (2015) ‘Wealth: Having It All and Wanting More’. https://www.oxfam.org/en/research/wealth-having-it-all-and-wanting-more
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.
John Lister is well-known as a researcher, writer and campaigner against cutbacks and privatisation in the NHS. But his new book Global Health Versus Private Profit focuses on the changes taking place in global health care systems. It has received glowing endorsements from a number of specialists in the field, and described as “penetrating, highly readable, and extremely well researched”. We caught up with John and asked him to talk about the book.
Can you sum up the book’s main point in two sentences?
Who will be interested in reading the book?
This book is for all those working to achieve universal access to health care, and anyone interested in the evolution of international health and the different ways in which the
I also hope it might be read by some of the people working for the institutions assessed in the book including the WHO, World Bank (and especially IFC), for national health care systems and for NGOs and donor agencies. My analysis is based on research, analysis, literature and evidence, and I would be delighted to see a debate on issues which people find contentious. neoliberal agenda has brought its influence to bear on international health over time.
Global Health versus Private Profit offers a detailed analysis of the main “menu” of market-style reforms to health care systems that have been rolled out in country after country, despite the absence of evidence for their effectiveness, and ignoring the evidence of harm that is being done.
These include the emphasis on competition rather than planning and cooperation, the splitting of health care systems into purchasers and providers, privatisation in various guises – including buying in services from the private sector that were previously delivered by public sector providers – the imposition of user fees, and the focus on health insurance and managed care in place of social provision and universal coverage.
Many of these policies are being implemented in rich countries and poor alike, but they are having the most devastating impact on the poorest. They sap vital resources, dislocate and fragment systems, prevent them from responding to health needs, and obstruct the development of planning.
What evidence does the book bring to light of this conflict between global health and private profit?
Perhaps the most important examples come in the chapter entitled “The Missing Millennium Development Goals” which underlines the massive global gaps in provision of care for the growing elderly population, in mental health care and services for people with physical disabilities.
All of this is health need, but countless millions of people can’t pay a market price for care, and so they are the “customers the private sector doesn’t want”. The longer health care is shaped by the quest for private profit the larger these gaps will become.
So are we just looking at wrong-headed ideas, or is there more to it than that?
My book argues that these so called “reforms” are driven not by evidence, but by ideology – but that behind the ideology is a massive material factor: the insatiable pressure from the private sector which is desperate to recapture a much larger share of the massive $5 trillion-plus global health care industry, much of which only exists because of public funding.
That’s why rather than relying on hopes of expanding on the basis of private insurance, the private sector has been eager to get a larger slice from public sector budgets.
Why do you draw specific attention to the UK’s NHS in your book?
The costly experiments with competition, and slicing up publicly provided services to encourage private providers, have gone furthest in England, but that’s partly because compared with other countries there was a more integrated and publicly-provided service to dismantle.
But sadly England is not unique. Similar “reforms” from the same discredited menu are being adapted in different ways to different systems across much of Europe, and are even being driven in to the poorest developing countries where they are even less appropriate and more disastrous in their consequences.
For example, one growing problem is the international spread of “Public Private Partnerships,” to finance new hospitals, many of them drawing on the trail-blazing Private Finance Initiative (PFI) in the UK, which is proving itself to be a major liability, bankrupting hospitals in a cash-strapped NHS.
Despite many costly flaws, failures, and false starts, more PPPs (P3s in Canada) are now under way in OECD countries, but also in Latin America, Asia, South Africa and even Lesotho – in a costly $120m scheme I have written about for Global Health Check.
Where do you get the information for your critique?
I have made a point of using the most up to date material available from the World Bank (and its privatisation wing, the International Finance Corporation) and the IMF, as well as official figures from governments and the rich countries’ club, the OECD. It’s important to use data that cannot be refuted – and in many case, let’s be honest, these are the only figures available.
Does the book raise any new issues?
I am not claiming to have invented many of the ideas in the book, but I hope I have helped to update, popularise and develop the argument for them.
And my concluding chapter “It doesn’t have to be this way” brings together a lot of different ideas, emphasising that the policies we are opposing are not inevitable products or even a rational response to the current situation, but choices that have been deliberately made by politicians working to a neoliberal agenda. They can be rejected and defeated by mass political action.
How do you hope the book will be used?
As I say in the preface, good ideas must be turned into political action to change the world. Bad ideas must be fought through political action too.
Sometimes good arguments can begin to prevail, such as the success that has been achieved by Oxfam and other campaigners challenging the logic of imposing user fees on health care.
So I hope my book will not sit gathering dust on library shelves, but be brandished — even used as a weapon — by those fighting for change.
A reinforced hardback edition may yet be needed to ensure we win!
Health Policy Reform: Global Health versus Private Profit, by John Lister is available from www.libripublishing.co.uk
(use voucher code HPR13 when purchasing to get discounted price of £20).
As world leaders prepare to gather for the 66th World Health Assembly on May 20, social movements are questioning the market-friendly version of universal health coverage (UHC) it is promoting.
One organization, Jan Swasthya Abhiyan (JSA), is denouncing India’s emulation of this UHC strategy, as contained in the country’s 12th Five Year Plan, which uncritically endorses the private medical sector and focuses on health insurance schemes. In a recent paper – JSA proposes an alternative UHC model.
Public financing for whom?
In the past five years there has been an impressive roll out of government-funded insurance schemes in India that are supposed to improve the country’s public health system. In theory, treatment covered under these schemes can be provided by any accredited facility. But in practice the majority of providers are found in the largely unregulated private sector which already accounts for 80% of outpatient and 60% of in-patient care according to the National Sample Survey Organisation (NSSO), making India one of the most privatized systems in the world. India’s healthcare system is increasingly dominated by big hospitals chains (e.g. Apollo Hospitals) with an infamous track record of expensive services and unethical practices. As it is, health insurance schemes mostly channel public monies for private profit. For example, from 2007 to 2013 the state of Andhra Pradesh allocated a total Rs.47.23 billion to facilities accredited under the Arogyasri scheme, of which Rs.36.52 billion went to private facilities.
Getting it right
Health is a right, and priorities should be based on citizens’ needs. What the majority of Indians lack is comprehensive primary care, but current health insurance “packages” only insure beneficiaries for ailments that require hospitalization. They cover a very small portion of the burden of disease, excluding out-patient treatments for tuberculosis, diabetes, hypertension, heart conditions, and cancer among others. Evidence from the first such scheme in India – Arogyasri – suggests that it consumed 25% of the state’s health budget but addressed only 2% of the burden of disease.
Who inverted the pyramid?
This situation ends up distorting the very structure of the health system by starving primary care facilities to the benefit of more profitable secondary and tertiary care. In 2009-2010, direct national government expenditure on tertiary care was slightly over 20% of total health expenditure, but if one adds spending on the insurance schemes the total would be closer to 37%. In Andhra Pradesh, following the implementation of Arogyasri, the proportion of funds allocated for primary care fell by 14%.
A good health system is like a pyramid: the largest numbers should be treated at the primary level where people live and work. We need to flip the inverted pyramid that has been created and offer a new roadmap predicated on public funding and provisioning of a public system that reprioritizes primary health care, and is comprehensive, integrated and accessible to all.
The health insurance schemes in place fail to address another key issue: access to medicines. Paradoxically, India is the largest producer of drugs in the developing world and at the same time the country where the WHO estimates the greatest number can’t afford the medicines they need. Since the Patent Act was amended in 2005, domestic pharmaceutical companies can’t produce cheaper versions of new drugs, which are now sold by multinationals at prices well beyond the reach of most patients. Poor regulations also means more than 50% of the average family spending on medicines is on irrational or unnecessary drugs and diagnostic tests according to the NSSO. Clearly, the pharmaceutical sector must be reigned in, and all essential drugs should be made available, free of cost, at all public facilities.
Addressing public health gaps
The task of achieving health for all in India will not be easy. Current public health services are marked by poor access, low quality and limited choice. Besides rampant corruption, poor management results in mismatches between demand and supply of services: facilities aren’t distributed optimally; equipment and funds fall short of requirements and don’t flow efficiently. Labour shortages can be partly explained by disinvestment in medical education and flawed deployment mechanisms. Although programs such as the National Rural Health Mission have made some inroads to improve services, much remains to be done. The problem is largely one of unresponsiveness to citizens coupled with unreliable technical estimates of costs and disease burden, leading to ill-informed prioritization.
It is necessary to recast the UHC debate and propose alternatives to strengthen the public health systemto address these problems and to build integrated, comprehensive services with strong mechanisms of accountability. Key to these changes are the following:
Over the short term, we also need to explore alternate ways of harnessing private resources for public health goals. Given the sheer size of the private sector, it is not possible to entirely ignore it while planning for equitable access to public services. It’s not a monolithic entity either; some segments such as charitable, faith-based and other not-for-profit healthcare facilities that work in less developed parts of the country can fill certain critical gaps in the public system. Under clear terms and conditions, other private providers such as general practitioners or small and medium-sized hospitals could be in-sourced to complement available public health services. Importantly, there should be no transfer of assets and resources into private hands and kickback statutes should be put in place to ensure there are no referrals with conflict of interests.
All the possible mechanisms for harnessing the private sector should be seen as supplementary (and often interim) measures, and not as a substitute for very significant scaling up and strengthening of the public system both in terms of quality and accessibility.
There is a need to reclaim public systems, to strengthen and expand them. Moving toward health for all requires major transformations in health care, but also in a wide range of social determinants of health – food security and nutrition, water supply, sanitation, working conditions, housing, environment, education and more. We need to build broad-based alliances for social change to redefine the relationship between people and their public systems.
Amit Sengupta is a Research Associate with the Municipal Services Project and Associate Global Co-ordinator with the People’s Health Movement, a global network of 18 national chapters that includes India’s Jan Swasthya Abhiyanfor which he acts as National Co-convenor.
Madeleine Bélanger Dumontier is Communications Manager for the Municipal Services Project, a global research initiative that explores alternatives to the privatization and commercialization of service provision in the electricity, health, water and sanitation sectors.
Photo: Rajeev Chaudhury