Choice in Health

Bibek Debroy

                                                            February 2008


Section 1: The National Health Policy of 2002                

We begin this paper with the National Health Policy of 2002[1], since that still remains the bedrock of the government’s thinking on health.  But before that, there was the National Health Policy of 1983.  According to the 2002 Policy, the 1983 Policy was based on four principles.  First, there would have to be a time-bound programme for setting up a comprehensive network of primary health services, with extension and health education.  Second, intermediation would be pushed through health volunteers, who would have knowledge, simple skills and access to requisite technologies.  Third, there would be a well-worked out referral system, so that patient load at higher levels wasn’t burdened by those who could be treated in a decentralized way.  Fourth, there would be an integrated network of specialty and super-specialty services, with the setting up of these facilities encouraged through private investments for patients who could pay, so that public facilities were limited to those entitled to free use.  To repeat, this was in 1983, before the 1991 reforms, with their emphasis on competition, efficiency, choice, private provisioning and targeting of subsidies.  In that sense, what was set out as principles in 1983 was remarkable and were these principles to be rewritten in 2007, nothing would significantly change.                

What was the take of the 2002 Policy on the success or failure of the 1983 Policy?   First, health outcomes are functions of several complementary developmental initiatives like rural development, agriculture, food production, sanitation, drinking water supply and education.  This is an unexceptional proposition, though does one mean food production or its distribution and why leave out sewage treatment?  Second, health outcomes have improved over time.  Smallpox and guinea worm disease have been eradicated. Polio is on its way out.[2]  Leprosy[3], kala-azar[4] and filariasis[5] will soon disappear.  Demographic, epidemiological and infrastructure indicators have improved, but mortality and morbidity levels are still too high and one shouldn’t be complacent.  Malaria, TB, HIV/AIDS are concerns.  Water-borne infections like gastroenteritis, cholera and some forms of hepatitis continue.  Life-style diseases like diabetes, cancer and cardio-vascular diseases have increased in importance and there are requirements for geriatric care.  There are persistent macro and micro-nutrient deficiencies, especially among women and children.  These are unexceptionable points too, though a minor caveat is in order.  If leprosy, kala-azar, filariasis, smallpox, guinea worm disease, water-borne diseases and other conventional diseases are brought under control, the relative importance of so-called life-style diseases like diabetes, cancer and cardio-vascular diseases, or even geriatric care, will increase.  This is a simple statistical consequence.  So why is there this suggestion that this is somehow undesirable?  Third, there are issues of equity, since there are inter-regional variations in health outcomes and differences across socio-economic groups.  For instance, Kerala, Maharashtra and Tamil Nadu are better performing States, but Orissa, Madhya Pradesh, Bihar, Rajasthan and Uttar Pradesh tend to lag.[6]  Again, there can be no debate about the need to address such concerns of equity.  The debate is over the “how”.  The 2002 Policy said, “These unsatisfactory health indices are, in turn, an indication of the limited success of the public health system in meeting the preventive and curative requirements of the general population.”  If this diagnosis is correct, as indeed it is, the focus of policy change ought to be on reforming the public health system. In a different place, the 2002 Policy said, “NHP-1983, in a spirit of optimistic empathy for the health needs of the people, particularly the poor and under-privileged, had hoped to provide ‘Health for All by the year 2000 AD’[7], through the universal provision of comprehensive primary health care services. In retrospect, it is observed that the financial resources and public health administrative capacity which it was possible to marshal, was far short of that necessary to achieve such an ambitious and holistic goal.”  This brings in financial resources, but retains the emphasis on the public health administrative capacity.                 

Given the diagnosis, what did the 2002 Policy suggest as a prescription?  First, as is almost inevitable, it flagged declining public health investments. “The public health investment in the country over the years has been comparatively low, and as a percentage of GDP has declined from 1.3 percent in 1990 to 0.9 percent in 1999. The aggregate expenditure in the Health sector is 5.2 percent of the GDP. Out of this, about 17 percent of the aggregate expenditure is public health spending, the balance being out-of-pocket expenditure. The central budgetary allocation for health over this period, as a percentage of the total Central Budget, has been stagnant at 1.3 percent, while that in the States has declined from 7.0 percent to 5.5 percent….Under the constitutional structure, public health is the responsibility of the States. In this framework, it has been the expectation that the principal contribution for the funding of public health services will be from the resources of the States, with some supplementary input from Central resources. In this backdrop, the contribution of Central resources to the overall public health funding has been limited to about 15 percent[8]. The fiscal resources of the State Governments are known to be very inelastic. This is reflected in the declining percentage of State resources allocated to the health sector out of the State Budget. If the decentralized pubic health services in the country are to improve significantly, there is a need for the injection of substantial resources into the health sector from the Central Government Budget.”   This doesn’t mesh at all with the earlier diagnosis and two questions remain unanswered.  First, if public health administrative capacity and delivery is the problem, without reforming these, what is the guarantee that increased public expenditure on health will result in more efficient health outcomes?                

Here is a description from the 2002 Policy and this description is the norm rather than the exception. “For the outdoor medical facilities in existence, funding is generally insufficient; the presence of medical and para-medical personnel is often much less than that required by prescribed norms; the availability of consumables is frequently negligible; the equipment in many public hospitals is often obsolescent and unusable; and, the buildings are in a dilapidated state. In the indoor treatment facilities, again, the equipment is often obsolescent; the availability of essential drugs is minimal; the capacity of the facilities is grossly inadequate, which leads to over-crowding, and consequentially to a steep deterioration in the quality of the services. As a result of such inadequate public health facilities, it has been estimated that less than 20 percent of the population, which seek OPD services, and less than 45 percent of that which seek indoor treatment, avail of such services in public hospitals. This is despite the fact that most of these patients do not have the means to make out-of-pocket payments for private health services except at the cost of other essential expenditure for items such as basic nutrition.”                

Though the data are somewhat dated, it is worth bearing in mind the findings of the National Health Accounts for 2001-02.[9]  First, in 2001-02, health expenditure was 4.6% of GDP.  Second, out of this expenditure, only 20.3% was public expenditure.  77.4% was private expenditure, with 2.3% originating in external support, that is, bilateral and multilateral agencies.  Third, classified slightly differently, households contributed 72% of total health expenditure, including not just expenses for treating illnesses, but also payment of insurance premiums.  State governments contributed 13%, the Central government contributed 6%, 2% came from external agencies and private firms (through medical benefits to employees) contributed 5%.  Fourth, again classified slightly differently, 70% of financial resources flowing to health-care providers went to the “for profit” private sector, 23% went to public providers of health services.  Fifth, “the level of public health spending was relatively higher in the states of Himachal Pradesh, Jammu and Kashmir, Punjab and Kerala while lower in Uttar Pradesh, Bihar Madhya Pradesh, Orissa and Jharkhand. Private expenditure was relatively higher in Kerala, Punjab, Haryana and Uttar Pradesh as compared to Assam, Rajasthan and Orissa. Per capita health spending in Kerala was the highest while Assam was the lowest in the country.”                

A few words are necessary about the structure of public health delivery.  The core of primary healthcare is the primary health center (PHC), which typically lacks human resources (expertise, compounded by absence) and physical infrastructure (laboratory facilities, medicines).[10]  PHCs do not exist in urban areas. Each PHC is supposed to cater, under the norms, to a population of 25,000 on an average and is supposed to cover promotion and preventive, curative and rehabilitative care, under the supervision of a medical officer who is a qualified MBBS doctor.  The PHC is the hub and there are 6 sub-centres (SCs) under a PHC, covering 3-4 villages, that is, 4000-5000 people, with each SC looked after by an auxiliary nurse midwife (ANM).  Above the PHC, as referral centers, there are community health centers (CHCs), 30-bed hospitals and larger public hospitals at the taluka or district headquarters.  A CHC typically has 4 PHCs under it and serves 100,000 people and there is supposed to be one post-graduate surgeon, one physician and one obstetrician-gynecologist at each CHC.  Indian health outcomes cannot improve without improving the PHC network and its functioning.  Financial resources aren’t the key problem.  The main constraint is lack of incentives at the PHC level, and at the level of the District Health Officer, and lack of accountability and inefficiencies.  If a PHC doesn’t function, rural India has no option but to travel to urban India in search of medical treatment.  And the poor have no option but to opt for private healthcare providers.  Hence, a second question needs to be asked.  Why are poor households turning to private providers and where is the evidence for the strong statement in the last sentence of the above-mentioned quote to the effect that the poor cannot afford these services?  Assuming that there are indeed poor people who cannot afford these services, there must be a better way of subsidizing.  A multiplicity of health programmes is pushed through the public health system, happily accepted by States because programmes come with Central funding attached.  Each such national disease programme, over and above family planning, creates its own bureaucracy and administrative costs.               

To get back to the prescriptions of the 2002 Policy, the first recommendation is thus one of increasing public expenditure, irrespective of outcomes.  So public health expenditure would be increased from 0.9% of GDP to 2% by 2010 and overall health expenditure would be increased to 6% of GDP.  Second, there is an emphasis of decentralizing responsibilities to local self-government institutions and third party monitoring through civil society, particularly NGOs (non-government organizations).  Indeed, the argument about de-linking from State Health Departments is stronger.  “The Policy also envisages that programme implementation be effected through autonomous bodies at State and district levels. The interventions of State Health Departments may be limited to the overall monitoring of the achievement of programme targets and other technical aspects. The relative distancing of the programme implementation from the State Health Departments will give the project team greater operational flexibility. Also, the presence of State Government officials, social activists, private health professionals and MLAs/MPs on the management boards of the autonomous bodies will facilitate well-informed decision-making.”  Third, while welcoming choice through private providers, especially at secondary and tertiary levels[11], there is an emphasis on better regulatory standards, including those on food and drugs.  It is somewhat odd that simultaneously, the Policy had a target of increasing utilization of public health facilities from a figure that was less than 20% to more than 75% by 2010.  Fourth, a two-tier primary healthcare structure would be set up in urban areas, with a primary center covering population sizes of 100,000 and referral to a second-tier government general hospital.               

Fifth, let’s get back to the question of public health services and have one more quote from the 2002 Policy. “The patients at the decentralized level have little use for diagnostic services, which in any case would still require them to purchase therapeutic drugs privately. In a situation in which the patient is not getting any therapeutic drugs, there is little incentive for the potential beneficiaries to seek the advice of the medical professionals in the public health system. This results in there being no demand for medical services, so medical professionals and paramedics often absent themselves from their place of duty. It is also observed that the functioning of the public health service outlets in some States like the four Southern States – Kerala, Andhra Pradesh, Tamil Nadu and Karnataka – is relatively better, because some quantum of drugs is distributed through the primary health system network, and the patients have a stake in approaching the Public Health facilities. In this backdrop, the Policy envisages kick-starting the revival of the Primary Health System by providing some essential drugs under Central Government funding through the decentralized health system. It is expected that the provisioning of essential drugs at the public health service centres will create a demand for other professional services from the local population, which, in turn, will boost the general revival of activities in these service centres.”  Beyond external monitoring through civil society and NGOs and the euphoria of decentralization to local bodies, State distribution of essential drugs will stimulate demand and lead to supply-side changes.  That, rather a belief in choice, is the fundamental philosophical belief.               


Section 2: The Sense of Déjà vu               

It is impossible to avoid a complete sense of déjà vu.  All this has been heard before, in a succession of government committee reports.  Here is a sample. 

·         The Health Survey and Development Committee of 1946, appointed in 1943 under the Chairmanship of Joseph Bhore.  This recommended (a) an administrative integration of curative and preventive medicine at all levels; (b) the development of primary health centers (PHCs) in two stages – in the first stage, a PHC with 2 doctors, 1 nurse, 4 public health nurses, 4 midwives, 4 trained dais, 2 sanitary inspectors, 2 health assistants, 1 pharmacist and 15 other Class IV employees would be set up for a population size of 40,000, with secondary health centers providing support to PHCs and in the second stage, primary health units with 75-bed hospitals would be set up for populations of between 10,000 to 20,000, leading up to secondary health units with 650-bedded hospitals and regional or district 2500-bed hospitals; and (c) changes in medical education with 3-month training to produce “social physicians”. Because of fiscal constraints, these recommendations, especially (b), couldn’t be implemented.

·         The Health Survey and Planning Committee of 1962, set up under the Chairmanship of A.L. Mudaliar.  The Mudaliar Committee found that conditions in PHCs were unsatisfactory and suggested that existing PHCs should be strengthened before new ones were set up.  PHCs should not cater to population sizes of more than 40,000 and should provide integrated curative, preventive and promotional services.  There were also recommendations about strengthening of sub-divisional and district hospitals and institution of an All India Health Service to replace the former Indian Medical Service.

·         The M. S. Chadah Committee of 1963 had a focus on the National Malaria Eradication Programme (NMEP) and recommended that this should be carried out by basic health workers (one per 10,000 population) who would also perform the duties of family planning and collection of data on vital statistics, under the supervision of family planning health assistants.

·         The Mukherjee Committee of 1965 found that the recommendations of the Chadah Committee of 1963 could not be implemented, because basic health workers couldn’t do justice to either malaria work or family planning work.  So now the recommendation was to bifurcate the two responsibilities, with family planning assistants looking after family planning work and basic health workers looking after non-family planning work, including anti-malaria activities.

·         The Mukherjee Committee of 1966 found that States faced shortages of funds to undertake multiple and mass programmes like family planning and eradication of small pox, leprosy, trachoma and malaria.  The substantive recommendations concerned tightening of administration above the block level.

·         The Committee on Integration of Health Services was set up under the Chairmanship of N. Jungalwalla in 1964 and submitted a report in 1967.  This recommended an unified, rather than segmented, approach to delivery and administration, improvements in the service conditions of government doctors and the abolition of private practice by government doctors.

·         The Kartar Singh Committee of 1973 was a committee set up to examine an integrated framework for multipurpose workers (MPWs).  It recommended that a PHC should cover a population size of 50,000 and should have 16 sub-centres under it, each sub-centre catering to 3000 to 3500 population sizes.  Each sub-centre would have male (MPW(M)) and female (MPW(F)) health workers.  3-4 MPWs would be supervised by a health supervisor.  Basic health workers, malaria surveillance workers and so on would be converted into MPW(M)s, while auxiliary nurse midwives would be converted into MPW(F)s.

·         The “Group on Medical Education and Support Manpower” was set up in 1974 and submitted a report in 1975 as the Shrivastav Committee.  This recommended creation of para-professional and semi-professional health workers from within the community.  There would thus be 3 cadres of health workers, the community level workers, multi-purpose workers (MPWs) and health assistants and finally, doctors in PHCs.  Health assistants would be a bridge between MPWs and doctors.  In 1977, these recommendations led to the creation of the Rural Health Service.  The Shrivastav Committee also recommended that, along the lines of the University Grants Commission (UGC), a Medical and Health Education Commission should be set up.

·         Finally, an Expert Committee for Health Manpower Planning, Production and Management was set up in 1985 under the Chairmanship of J.S. Bajaj and this committee submitted a report in 1986.  Among its recommendations were health manpower surveys, national policies on health manpower and medical and health education, establishment of an Educational Commission for Health Sciences (ECHS), vocationalization of health-related fields in education at 10+2 levels, establishment of health manpower cells at the Centre and the States and establishment of State-level Health Science Universities. 

Not much new thinking is evident in the recommendations of these Committees.  Meanwhile, it is worth mulling over the following.  The latest GDP figures available for a complete financial year are for 2006-07 and these show a GDP figure of Rs 37,43,472 crores in current prices.[12]  Public expenditure on health is around 1% of GDP and this translates into an annual per capita figure of around Rs 340.  Is this expenditure efficient?  That the question is largely rhetorical is partly due to the multi-layered healthcare service delivery infrastructure that has been set up.  A description of this structure is now warranted.[13] 

First, there is the Union Ministry of Health and Family Welfare, with three different departments – Health, Family Welfare and Indian System of Medicine and Homeopathy.  The Department of Health is supported by the Directorate General of Health Services.  Second, at the State-level, there is a Ministry/Department of Health and Family Welfare.  Mirroring the pattern at the Centre, there is a State Directorate of Health Services, though its structure varies from State to State.  In some States, the Directorate of Medical Education and Research is de-linked from the State Directorate of Health Services.  Third, in some States like Bihar, Madhya Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka, regional organizations (to cover 3 to 5 districts) have been set up between the State Directorate of Health Services and the District Health Administration.  Fourth, the District Health Administration forms the bridge between the State and PHCs and sub-centres.  The District Health Administration is headed by a Chief Medical and Health Officer or a District Medical and Health Officer, though duties and accountability vary from one State to another.  Fifth, at the sub-divisional or taluka level, there is an Assistant District Health and Family Welfare Officer, supported by Medical Officers and Lady Medical Officers.  The taluka hospitals are increasingly being converted into Community Health Centres (CHCs).  Sixth, there are CHCs for every 80,000 to 120,000 population.  CHCs are sometimes created by up-grading taluka hospitals or block-level PHCs.  Seventh, there are PHCs for every 30,000 population (20,000 in hilly or desert districts and difficult terrain).  Some rural dispensaries have been upgraded to PHCs.  Each PHC has one medical officer and two health assistants (one male, one female).  A PHC was supposed to be headed by a Community Health Officer (CHO), but this has not been implemented in many States.  Eighth, there are sub-centres, headed by one male and one female multi-purpose health workers, each sub-centre catering to an average population size of 5,000 (3,000 in hilly or desert areas and difficult terrain).  Ninth, with some variation across States, local bodies have been factored into the organizational structure. 


Section 3: The government snapshot 

If one focuses on government documents, one doesn’t get the sense that the possibility of choice is yet accepted.  Consider the Annual Report of the Ministry of Health and Family Welfare, last available for 2006-07.[14]  Here is a quote from the introductory chapter. “The year 2006-07 was the last year of X Plan and was simultaneously a year of path breaking health sector reforms as well as an year to reflect upon the initiatives undertaken during the past five years. The X Plan witnessed renewed focus on the health sector in the country. The annual allocations on health during the plan period increased….. The basic paradigm for health sector reforms during the X Plan was determined by the National Health Policy 2002. This policy document enunciated certain targets for scaling-up health investments to control all communicable diseases and expanding and strengthening secondary and tertiary health care for the benefit of the common man…. The country has registered significant progress in major indicators of health over the past years. An unacceptably high proportion of the population, however, continues to suffer and die from preventable diseases, pregnancy and childbirth related complications as well as malnutrition. The rural public health care system in many States and regions is in an unsatisfactory state leading to pauperization of poor households due to expensive private sector health care. Premature morbidity and mortality from chronic diseases is also a major economic and human resource loss for India. To combat this situation, the Plan saw birth of major policy initiatives like Pradhan Mantri Swasthya Suraksha Yojana for establishment of AIIMS like institutions in identified States and the Reproductive and Child Health Programmes which is now in its second phase. Towards the end of X Plan, the sector wide approach of the RCH II programme was further consolidated in the form of the National Rural Health Mission (NRHM) which became the flagship programme of the UPA Government…. The National Rural Health Mission (NRHM) is well into the second year of implementation. During this period, all institutional arrangements including merger of the Departments of Health & Family Welfare, integration of various societies, setting up of State and district Health Missions, signing of MoU with government of India by all States, have been completed. MoUs provide for enhanced expenditure on health, effective decentralization under the umbrella of Panchayati Raj Institutions, and setting up of effective programme management structures at each level. NRHM is an effort to provide a full functional platform for health action with full community ownership at all levels – the village, the Sub Centre, the PHC, the CHC and the district level.”  The idea of increasing public expenditure is hardly “path breaking”.  Given the postulated proposition that poor households cannot afford “expensive private sector health care”, what then are these path-breaking reforms in the NRHM?  Is there anything beyond decentralization to local bodies and community ownership? 

One gets a better sense of how NHRM is supposed to be different from Chapter 2 of the Annual Report.[15]  The NCMP[16] mandates an increase in expenditure in health sector, with main focus on Primary Health Care from the current level of 0.9% of GDP to 2-3% of GDP over the next five years….The main aim of NRHM is to provide accessible, affordable, accountable, effective and reliable primary health care facilities, especially, to the poor and vulnerable sections of the population. It also aims at bridging the gap in Rural Health Care Services through creation of a cadre of Accredited Social Health Activists (ASHA) and improved hospital care, decentralization of programme to district level to improve intra and inter-sectoral convergence and effective utilization of resources…. The Mission further seeks to build greater ownership of the programme among the community through involvement of Panchayati Raj Institutions, NGOs and other stake holders at National, State, District and Sub-District levels to achieve the goals of National Population Policy, 2000 and National Health Policy….The original Cabinet note of the Mission envisaged the selection of a trained female community health worker called Accredited Social Health Activist (ASHA) in each village in the ratio of one per 1000 population in the 10 states. Under the detailed Framework of Implementation, the ASHA has been extended to all 18 High Focus states[17]. For tribal, hilly, desert areas, the norm could be relaxed to one ASHA per habitation depending on the workload. ASHA is envisaged to be a primary resident of the village with formal education upto Class VIII and preferably in the age group 25-45. She would be selected by the Gram Sabha following an intense community mobilization process. She would be fully accountable to Panchayat…. There is a shortage of 21983 Sub-centres, 4436 PHCs and 3332 CHCs as per 2001 population norm. Further, almost 50% of the existing health infrastructure is in rented buildings, which coupled with poor upkeep and maintenance, is also a cause of high absenteeism of manpower in rural areas. The NRHM seeks to strengthen the Public Health delivery system at all levels. The Sub-centre and PHCs are proposed to be revitalized through better human resource development, clear quality standards, better community support and an untied fund to enable local planning and action and more Multi Purpose Workers (MPWs). All the facilities are also being provided untied funds to enable the local management committee to carry out locally relevant initiatives for better service delivery. The Hospital Management Committees (Rogi Kalyan Samitis) at various levels are being set up as registered societies with Panchayati Raj Institutions representation. These societies are also being given funding support under the NRHM to allow local action… Flexible, Decentralized Planning is the pivot on which the entire concept of the Mission revolves. The planning process in the sector shall be initiated by the Village Health & Sanitation Committee The blocks plans would eventually converge into district plans which would thereafter converge into state plans….The NRHM seeks to strengthen the service delivery by ensuring community ownership of the health facilities. The Sub centres are envisaged to be under the management of the local Panchayat. The Pradhan shall be operating the Joint account with the ANM for utilization of the Untied Funds. Similarly the PHCs and CHCs are also proposed to be transferred to the local elected Panchayati Raj Institutions for management. The management committee of the health facilities, which would have the representation of the local SHGs and NGOs, elected representatives of the Panchayati Raj along with the MO of the facility shall be authorized to undertake local action for ensuring that the agreed service guarantees for the respective facility are fulfilled.” 

The government’s Economic Survey has often been reform-minded than actual implementation of reforms, because the Survey document sets out the reform agenda.  To the above, Economic Survey 2006-07 adds the following.[18] “In a developing country, private health care tends to be too expensive for the common citizen, especially the poor, while public health systems tend to suffer from inadequate resources and poor service delivery. Reforms of the public health system in a developing country often include the introduction of user charges to respond to the challenge of augmenting resources of and removing inefficiency in public health service delivery system. There have been successful attempts at introducing user charges in a majority of the States. User charges enhance the stake of the user, and improve accountability. Furthermore, such user charges often recover only a part of the cost of operation and maintenance of the health service delivery system, and continue to be only a fraction of the corresponding charges under private health care. Below poverty line users are normally exempt from payment of such charges. “Free” public health care services often involve a lot of non-financial costs such as waiting time, lack of access and inadequate facilities such as hospital beds, equipment and medicines.”  Other than flagging the inadequate quality of public health services, this quote makes an important point about non-financial costs borne by consumers when services are not paid for. 

Since reforms were introduced in 1991, various States have experimented with user charges.  Typically, such charges are imposed for diagnostic and curative services on patients who are above the poverty line and those below the poverty line (BPL) are exempted and continue to receive free and subsidized services.  While there are inter-State variations, States that have experimented with such models are Assam, Gujarat, Haryana, Himachal Pradesh, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tripura, Uttar Pradesh, Uttaranchal and West Bengal.   There are also variations across States in what services user charges are levied for (primary versus secondary or tertiary), whether different rates apply to different geographical regions (as in Orissa), who determines these charges (in Madhya Pradesh and Kerala the system is decentralized), the degree of cost recovery and what the recovered funds are used for. 


Section 4: Choice is Possible 

In the course of formulating the 11th Five Year Plan (2007-2012), the Planning Commission constituted a Task Force on Public Private Partnerships (PPP) to improve health-care delivery.[19]  Instead of the classic obsession with increasing public expenditure and assuming that public expenditure must be equated with public provisioning, this Task Force’s report indicates how choice and competition can be introduced.  This report begins by accepting the inevitable, instead of questioning it. The private sector provides 58% of hospitals, 29% of beds in hospitals and 81% of doctors.  In rural areas, the private sector provides 78% of the treatment of illnesses, with a figure of 81% in urban areas.  77% of OPD cases in rural India and 80% in urban India are serviced by the private sector.  The use of the private sector is highest in a State like Bihar, the classic instance of a poor State.  The use of public health care is lowest in Bihar and Uttar Pradesh, both poor States.  The success of health care in States like Tamil Nadu and Kerala isn’t due to the public sector alone.  The private sector has had an important role to play.  The private sector doesn’t mean the corporate private sector alone. It also includes NGOs that are not funded out of government budgets.  Such NGOs have produced dramatic improvements in primary health care services at costs that range from Rs 21 to Rs 91 per capita.  This doesn’t negate the point about lack of regulation, since the quality of health care provided by the private sector is heterogeneous and of variable quality.  In general, private health care services are also more expensive than public ones, more so for in-patient services.  One therefore needs to figure out how the poor can be subsidized.  However, even if private health care is relatively more expensive, and perhaps even inequitable, it is more accessible, better managed and more efficient. 

Instead of pre-determining models from above, it is far better to learn from what already exists on the ground.  And here are a few examples of how the private sector has brought in competition, choice and efficiency.  This is not meant to be an exhaustive list, but is only indicative. 

·         Sawai Man Singh (SMS) Hospital in Jaipur has contracted out the operation of a Life Line Drug Store to a private contractor through competitive bidding.  SMS Hospital provides drugs to the store and also provides physical infrastructure (electricity, computers, physical space, stationery), with the contractor paying for the staff.  So it is not quite the case that there is a completely private drug store inside the hospital.  Instead, the operation of a public drug store has been contracted out.  SMS hospital has also contracted out installation, operation and maintenance of CT-scan and MRI services to a private agency.  The agency is paid a monthly rent by the hospital and has to render free services to 20% of patients, identified as poor.

·         The Uttaranchal Mobile Hospital and Research Centre (UMHRC) is a trilateral partnership between Technology Information, Forecasting and Assessment Council (TIFAC), the Government of Uttaranchal and the Birla Institute of Scientific Research (BISR) to provide health care and diagnostic facilities to poor and rural people in their villages, especially in difficult and hilly terrains.

·         In Gujarat, the State Malaria Control Society has contracted out information, education and communication (IEC) services to the private sector.  Pharmaceutical companies contribute to a pool and this IEC budget is then allocated to private agencies for rendering services.

·         In Himachal Pradesh, Karnataka, Orissa (cleaning contracted out to Sulabh International), Punjab, Tripura (upkeep, cleaning and maintenance contracted out to Sulabh International) and Uttarakhand[20], services like cleaning and maintenance of buildings, security, waste management, scavenging, laundry services and catering have been contracted out to the private sector.

·         In Andhra Pradesh, an Arogya Raksha Scheme was started in collaboration with the New India Assurance Company and private clinics for providing health insurance to BPL (below the poverty line) families.

·         In Gujarat, SEWA-Rural has been handed over the management of one PHC and 3 CHCs, with government grants.

·         The Municipal Corporation of Delhi and Arpana Trust have developed a partnership to provide comprehensive health services to Delhi’s urban poor in the Molarbund resettlement colony, especially targeted at women and children.  MCD provides the physical infrastructure, while Arpana Trust maintains it and manages staff and medicine dispensation.

·         In Karnataka, the management of PHCs in Gumballi and Sugganahalli, tribal and hilly areas, have been contracted out to Karuna Trust.  90% of the expenditure is borne by the government and 10% by Karuna Trust.  Karuna Trust has the responsibility of maintaining assets and staff and providing free treatment.

·         Especially in tribal areas, lack of adequate transport facilities is often a reason for high maternal mortality.  In Theni district in Tamil Nadu, an Emergency Ambulance Scheme (to carry pregnant women to health institutions) has been contracted out to Seva Nilayam, with World Bank funding.  An Emergency Accident Relief Centre is also operated by Seva Nilayam.

·         In Andhra Pradesh, under the Urban Slum Health Care Project, the management of health centers in the slums of Adilabad has been contracted out.  192 Urban Health Centres (UHCs) have been established under this project and there are 5 Mahila Aarogya Sanghams (Women’s Well-Being Associations) under each UHC, with the management of UHCs contracted out to NGOs.

·         In Arunachal Pradesh, the management of PHCs has been contracted out to VHAI (Voluntary Health Association of India) and Karuna Trust.

·         In Haryana, in 19 urban slums, a private health practitioner has been identified to provide services under the national disease control programme, contraception, immunization and ambulatory care.  Each such practitioner caters to between 1000 and 1500 targeted beneficiaries and is paid Rs 100 per year per beneficiary by the government.

·         Under the Samaydan scheme in Gujarat, honorary and part-time specialists have been appointed in rural hospitals, to ease vacancy problems.  Under the Urban Health Care Project, there is a similar attempt to use community-based volunteers in urban slums.

·         In Raichur, Karnataka, the Rajiv Gandhi Super-Specialty Hospital has been set up as a joint venture between the Government of Karnataka and the Apollo Hospitals Group, to provide super-specialty health care to BPL households.  The government provided the infrastructure, while Apollo provided staff and equipment.  For the first three years, the government subsidized the losses.

·         In collaboration with Karuna Trust and the National Health Insurance Company, Karnataka has started a community health insurance scheme, completely subsidized for SC/ST BPL households and partly subsidized for non-SC/ST BPL households.

·         The Department of Cooperatives in Karnataka and a super-specialty heart hospital in Bangalore (Narayana Hrudayalaya) have jointly started a health insurance scheme for the poor.  This is known as the Yeshasvini Cooperative Farmers’ Healthcare Scheme.

·         A Rogi Kalyan Samiti (Patient Welfare Committee or Hospital Management Society) has been formed as a registered society in Bhopal’s Jai Prakash Government Hospital to manage and maintain it with representation from local body institutions, NGOs, local elected representatives and government officials.

·         In Hyderabad’s Mahavir Trust Hospital, a public/private partnership was developed between private service providers (doctors, nursing homes) and the government. As these examples illustrate, there are several different forms of public private partnerships.  Services can be contracted out on a temporary basis to the private sector.  The government can pay an outside agency to manage a specific function.  Government facilities can be rented out or leased to private entities.  And government assets like public health facilities can even be sold to private groups.  Finally, subsidies meant for the poor can be routed through private entities.  And experiments also include levy of user fees and insurance schemes.  There can be no universal template.  But all these examples demonstrate that there are alternatives to the simplistic notion of increasing public expenditure and channeling it exclusively through public delivery. 


Section 5: In Conclusion 

The core problem remains one of identifying the poor, be it for medical insurance or for health-care delivery.  The usual counter-argument against privatization and choice is that the poor cannot afford the high cost of these services, though empirically, the evidence suggests that the poor are much more willing to pay than one thinks, provided that the quality is commensurate, and that the costs of private sector delivery are often over-estimated.  However, everyone in the country cannot be poor and there is thus the major question of identifying the poor.  The technological problem of using a unique identification number (UIN), a bit like social security numbers, with biometric cards, is less of an issue.  This identification problem is not one that is typical to health-care alone, but plagues all public services.  Understandably, there are allegations of leakage, the poor not being given BPL cards (relevant for schemes like the public distribution system), or the non-poor receiving such cards.  BPL numbers are produced by the Planning Commission through National Sample Survey (NSS) results and these remain surveys, not censuses.  This is also true of State-level BPL surveys undertaken by State governments for schemes routed through the Ministry of Rural Development.  For a while, the Planning Commission suggested decentralized identification of the poor, based on ownership of physical assets, type of the household, availability of infrastructure and so on.  Barring some States, this idea doesn’t seem to have been taken very seriously.  A similar idea occurs in the 2005-06 National Family Health Survey (NFHS).[21]  Information on 33 household assets and housing characteristics, such as ownership of consumer goods, type of dwelling, source of water and availability of electricity is used to construction a single wealth index.  Provided this BPL identification is decentralized through local bodies and is not based on surveys, it should become much more acceptable and serve to determine individuals (or households) who deserve subsidized health-care delivery and even medical insurance.  In its classic economic sense, health-care is not a public good.  It is a private good.  To the extent that it is a merit good, it can be subsidized, but only for those who deserve such subsidies.  And in this fiscal transfer, it is important to differentiate between public sector provisioning and public sector financing.  Because, even if there is subsidization through the State budget, vouchers (or their equivalents) can offer choice, competition and efficiency.  Increasing public expenditure without any caveats is not the answer.


  About the Author 

Bibek  Debroy (born 25 January, 1954) is an  Indian economist, who is currently a Research Professor at the Centre for Policy Research, New Delhi. He was educated at Presidency College, Calcutta, Delhi School of Economics and Trinity College, Cambridge. Prof. Debroy has taught at Presidency College, Calcutta, the Gokhale Institute of Politics and Economics, Indian Institute of Foreign Trade and National Council of Applied Economic Research. His past positions include the Director of the Rajiv Gandhi Institute for Contemporary Studies at Rajiv Gandhi Foundation, Consultant to the Department of Economic Affairs of Finance Ministry (Government of India), Secretary General of PHD Chamber of Commerce and Industry and  Director  of the Project LARGE (Legal Adjustments and Reforms for Globalising the Economy), set up by the Finance Ministry and UNDP for examining legal reforms in India. Between December 2006 and July 2007, he was the rapporteur for implementation in the UN Commission on Legal Empowerment for the Poor. Prof. Debroy has authored several books, papers and popular articles, has been the Consulting Editor of some of the most prominent financial newspapers in the country and is now Contributing Editor  with Indian Express. He is a member of the National Manufacturing Competitive Council. He is also a member of the Mont Pelerin Society.

[1] National Health Policy, 2002,

[2] The 2002 Policy set an eradication target of 2005.

[3] The 2002 Policy set an eradication target of 2005.

[4] The 2002 Policy set an eradication target of 2010.

[5] The 2002 Policy set an eradication target of 2015.

[6] Madhya Pradesh, Bihar and Uttar Pradesh have since been sub-divided.  The inter-State variation was also flagged in Bibek Debroy, The Demographic Deficit, Indicus White Paper Series, November 2007.

[7] This target was dictated by the Alma Declaration of 1978, to which, India was a signatory.

[8] The Central grant component was projected to increase to 25% of total health spending by 2010.

[9] National Health Accounts India, 2001-02, National Health Accounts Cell, Ministry of Health and Family Welfare,

[10] Patients don’t usually visit PHCs in early stages, so PHCs have to handle relatively serious cases.

[11] Elsewhere, the Policy states that the role of the private sector will primarily be in urban primary healthcare and the tertiary sector, with a relatively smaller role in secondary care.

[12] These are Central Statistical Organization (CSO) figures,

[13] See, for example,


[15] Ibid.

[16] The National Common Minimum Programme.

[17] Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Himachal Pradesh, Jharkhand, Jammu & Kashmir, Manipur, Mizoram, Meghalaya, Madhya Pradesh, Nagaland, Orissa, Rajasthan, Sikkim, Tripura, Uttaranchal and Uttar Pradesh.

[18] Economic Survey 2006-07, Department of Economic Affairs, Ministry of Finance, Government of India.

[19] Draft Report on Recommendation of Task Force on Public Private Partnership for the 11th Plan, Planning Commission, Government of India,

[20] Uttaranchal.

[21] NFHS-3,