Make the most of private health care

The Niti Ayog has said that after the pathbreaking reforms of Goods and Services Tax, Bankruptcy Code and Real Estate Act, the Government now needs to initiate the reforms in the health and education sectors. The Gorakhpur tragedy of few months ago had also highlighted the shoddy state of our government health system. It appears that certain doctor was running private hospitals under the ownership of his wife. The Government Hospital was only a conduit for him to send patients to his private hospital. Staff of the Government hospital were also involved in corruption and inefficiency. On the other hand, the fleecing of hapless patients by for-profit private hospitals and schools is well known across the country. Doctors write a number of unnecessary tests because they get commissions from the laboratories. They prescribe branded drugs because drug companies give them commissions on the amount of medicines sold. We are, therefore, caught between two equally troublesome alternatives. The government system is inefficient and corrupt while the private system fleeces the hapless patients. A way forward can possibly be found by comparing the approaches to health adopted by the United States of America (US) and the United Kingdom (UK). The US has adopted the approach of private provision while the UK has adopted the approach of government provision. We can learn from both.

The distaste of the intrusion of the government in every facet of life has led the Americans to embrace private health care. The positive aspect is that American healthcare system is hugely effective if one can pay. They have the best technologies and results are better than most other countries. American drug companies are at the frontier of innovations. Patent protection is good and enables them to sell their products and services at very high prices. They plow back part of their incomes in research leading to more innovations. But this leads to very high cost of health care. In India, for example, if one contracts ordinary cold, he self prescribes and goes to a shop and buys antibiotics for about Rs 50 and is done with. The same antibiotics are not available without prescriptions in the US. The patient has to pay about 200 US Dollars or Rs 13,000 to get a prescription from a doctor before he can buy that drug.

The American system has also managed to reduce the supply of doctors by imposing high costs of education and restrictions on immigration. Doctors, therefore, charge astronomical sums as fees. Thus, large numbers of Americans cannot afford healthcare. About 60 percent of the bankruptcies in the US are due to these healthcare expenditures. The private healthcare approach of the US has the positive of good results and research. But due to the absence of pro-people regulation, there is short supply of doctors and high cost of drugs which is leading to high cost of healthcare and large numbers of people going bankrupt.

The lesson for India is that private health care produces good results, but this should be accompanied by aggressive promotion of competition among hospitals and drug companies (which we are doing), and aggressive increase in supply of doctors (which we are not doing). There is a need to do away with the requirement of obtaining an MBBS or a BAMS degree in order to practice. A certification program that examines the basic knowledge of the applicant should be introduced so that the supply of doctors is increased, and the cost of private healthcare is brought down.

The United Kingdom has taken a diametrically opposite approach of relying on government hospitals. Every UK citizen has access to inexpensive and good quality healthcare. The UK government hospitals are rated as the best among the hospitals of the industrial countries. But this has led to an overload on the hospitals. One has to wait many months to get an operation done. Two patients died waiting on the stretchers in the corridors. The government infirmaries have about 50,000 doctors and nurses while the requirement is for about 125,000. The UK Government is not able to increase the budgetary allocation for the hospitals. As a result, the UK hospitals are like the goods placed in the shopping window. Healthcare is good but often inaccessible. The lesson for India is twofold. One, that it is possible to provide good quality healthcare from government hospitals. Our ESI hospitals, for example, are better managed than the Primary Health Care Centres. The second lesson is that it is not possible to provide universal good quality healthcare through the government hospitals due to the huge demand. Our condition is worse with 1.3 billion people; and endemic corruption as evinced in the Gorakhpur tragedy. Therefore, we must not try to emulate the UK approach of government provision of healthcare. At the same time the Constitution mandates a welfare state and it is a solemn responsibility of the Government to provide access to health care.

Overall, we are doing quite well. We have espoused private healthcare provision which is more accountable and efficient. We have a lesser amount of regulations so that large number of drugs are available over-the-counter that keeps the cost of healthcare low. We have successfully promoted competition between drug manufacturers, thus, the cost of drugs is among the lowest worldwide. We have also effectively promoted competition between hospitals that enabled us to emerge as a global destination for health “tourism.” Yet we have problems like the Gorakhpur tragedy.

Thus, the Niti Ayog has rightly said that the next reforms should target the health and education sectors. My suggestion is that we must dismantle the government hospitals and give healthcare vouchers to the people with which they can buy healthcare from private providers. This will rid our country of the corrupt government healthcare system. Also, we need better directives of the private sector to prevent excessive tests and prescription of unnecessary drugs. Perhaps we should create a parallel “health police” where an affected person can file FIR against the erring doctor and hospital and get immediate relief.

THE United Kingdom has taken a diametrically opposite approach of relying on government hospitals. Every UK citizen has an access to inexpensive and good quality healthcare.The UK government hospitals are rated as the best among the hospitals in the industrial countries.

Author is a former professor of Economics at IIM Bengaluru.