History of Privatization of Health in India: Adapted from "Do We Care"

This is an excerpt taken from the book titled, “Do We Care”, by K. Sujatha Rao. It talks about various aspects of India’s health system through the eyes of the former Union Health Secretary. In the first such article in the series, which is really undertaken for my own learning, I try to portray from the book the history of privatization of healthcare in India. I believe it is extremely important for budding health policy researchers and scientists to be aware of the series of incidences and forces that led to the current unfortunate situation of the Indian Healthcare System. Such awareness will propel our minds to debate, a luxury in India when it comes to public health.

In 1946, India was spending 4 per cent of its expenditure budget on health against 20 per cent by the UK and 13 per cent by the US. There was a substantial disease burden and reducing this burden required strong implementation of public health measures. But before leaving India, the British abolished the public health infrastructure consisting of Public Health Commissionerate and the Indian Medical Service that provided the cadre of trained doctors and the licentiates who numbered at 29,870 as compared to a mere 17,654 trained allopathic doctors. Instead, what was left behind was a co-opted elite consisting of the Western-educated, upwardly mobile middle classes, which believed that traditional medicine was quackery and allopathy a symbol of modern scientific temper. India’s health structure was thus built upon a system of medicine that was contrary to the present-day realities and the levels of development prevailing in the country at that time.

Clearly, the seeds for the conditions that exist today were sown then- a neglected and weak public health policy of a diffident state, a dominance of a Western-oriented medical system, fiscal conservatism with low priority and funding for health, an asymmetry that made states fiscally dependent on the centre for discharging their constitutional obligations, a huge burden of infectious diseases, and an ideal of ensuring health for all that was soon forgotten. Over the years, with meagre resources in hand, India sought to build the foundations of a health system.
During the time when India got independence, the country was juggling between the urgency to spur economic development, to ensure food-sufficiency, and to protect the country’s unity from internal and external dissensions, its health policy focused on the immediate challenges-reducing the toll of infectious diseases, particularly deaths and morbidity on account of malaria that affected over three-quarters of its population, and ensuring maternal and child health. 

India was helped with expertise from various international agencies to build capacity to cope with the situation. Over the years, such help resulted in a tendency towards adopting a techno-managerial approach to disease control rather than undertaking  the more difficult but sustainable policy of tackling the causative factors and linking disease with the social conditions that produce it-an understanding that continues to elude us to this day. Besides, dependence on external help also meant a reduced ability to reflect on what is best for us in our context. The more damaging impact of this early approach, however, was seen in the neglect in building the foundation of the health system in accordance with the recommendations of the Bhore Committee. Yet, the thinking that rural areas can do with a few public health and disease control interventions while urban areas would need medical care took root at this time, resulting in the fragmented approach to the building of the health system.

As India settled down, populations and incomes grew, and so did the demand for health services and people’s expectations. Demand outpaced supply resulting in the establishment of public and private hospitals in cities with large towns bursting at the seams with patients. Quality fell. Instead of addressing this growing demand, public policy shifted its attention to population control through expanding access to contraceptives. It would not be inappropriate to state that due to limited resources and weak prioritization, investments required for building a sound foundation of primary care were patchy and grossly inadequate. Rather than basing the development of the health system on principles or a vision, the tendency to appoint expert committees with specialists and clinicians to deliberate upon issues that were largely of public health significance. The inadequate attention accorded to the provisioning of medical treatment and hospital care led to the mushrooming of a range of stand-alone diagnostic clinics, nursing homes, and hospitals in private sector, particularly in urban and semi-urban areas, catering to different socio-economic strata of society. In this din of swanky hospitals, modern technology, shifting aspirations backed by the willingness to pay, the concepts laid by Bhore committee were lost and it was a slow birth of privatization of health in India.

In 1983, the first National Health Policy (NHP) was released. Critical of the curative-oriented Western model of health care, the NHP of 1983 emphasized the need for a preventive, promotive, and rehabilitative primary health care approach, based on the foundation of community participation. Notwithstanding this articulation, the NHP did not lead to any fundamental changes in the policy or architecture of the health system: the budgets for health continued to be low and the approach to adopting selective health care delivery remained the same. The private sector that existed alongside was invisible and fragmented, treating sickness on a fee-for-service basis. As per a study in 1963-4 private sector accounted for 61 per cent of the doctors-of whom only 11.4 per cent were working in a private hospital establishment-21.5 per cent of beds, and 16 per cent of hospitals. The liberalization process of the 1980s and 1990s changed the paradigm and the fundamental premises: over the following decades service became a commodity, hospitals became lucrative commercial enterprises, medical education became investment destinations, and patients became clients. In the face of technological innovation in medical devices, discovery of new drugs, rapid changes in disease profile towards non-communicable diseases that required better diagnostic tools, more sophisticated laboratory facilities, and institutional treatment, health care became specialist-dependent, organizationally structured, and resource-intensive. Facing a high fiscal deficit, the government had no option but to rely on the market to bring in the required investment to establish hospitals that could meet the demands of a rapidly growing, aspirational middle class. By 1990, private players accounted for 58 per cent of hospitals and 29 per cent of beds. The government struggled to build the primary healthcare infrastructure in rural areas as the principal strategic tool to achieve the global goal of Health for All by 2000. 

Health under minimum needs programme of the central government proved to be inadequate forcing people to resort to quacks or private facilities in accordance with their ability to pay, thereby  fostering the entrepreneurial spirit of the private sector.  It was no accident that Apollo, the first corporate hospital in India, established in 1984, was greeted with curiosity and measured relief by the rising middle classes since it brought in a new definition of quality with its corporate management and modern diagnostics. From then on, the growth of the private sector has been unstoppable; starting with tertiary hospitals, it seamlessly expanded to secondary care, medical and nursing education and diagnostic centres and laboratories. By 2004 the private sector accounted for three quarters of outpatient department, 60 per cent of in patients and three quarters of the specialists and technology. By the mid-1990s , the economic collapse, the International Monetary Fund’s (IMF) conditionalities to cut back on public expenditures to contain the fiscal deficit ,and the ideological thrust towards the private sector impelled the government to introduce a two-pronged approach: the first was a further reduction of what was an already low government budget, and the second was to promote the private sector through fiscal incentives. In terms of GDP, public spending increased from 0.98 per cent in 1975 to 1.36 per cent in 1986, only to fall to 1.28 per cent by 1991- this contracted further to 0.9 per cent by 2000, resulting in marginalization of the state as the primary player in health service delivery. In India, during 1993, the World Bank pushed the private-sector agenda, introducing the concept of PPPs. justified on the grounds of improving organizational efficiencies, the concepts of ‘outsourcing’ and contracting services such as sanitation, laundry, diet, and the delivery of allied services took root, gradually expanding to co-opt NGOs and private-sector care providers as partners. USer fees, based on a large number of ‘willingness-to-pay’ studies, was promoted as a means of mobilizing resources for the cash-strapped hospitals struggling to meet their very modest recurring costs. This argument did not impress many who commented: ‘USer fees are a mere mirage, for no one who can afford anything uses a government hospital; bribes notwithstanding, they are the only sources of surgical and even minimally advanced medical care for the poor.

Starving the public health sector of funds resulted in the collapse of the slender social security nets the poor had, particularly in rural areas, forcing them to go to private clinics for every blood test or treatment of fevers. By 2005, India was a sick country with huge morbidity and mortality and a dysfunctional health system. Eventually, NRHM was launched in April, 2005; its main objective was to revitalize the rural primary healthcare system though that was only a partial response to the crisis. Meanwhile, there were reports that argued that health policies were resorting to technological solutions while ignoring the social dimensions of disease causation and neglecting the importance of social determinants. In confining the NRHM’s focus to revitalizing primary care consisting of a few essential services, the issues left to addressing rural impoverishment on account of medical expenses were left unaddressed. The launch of a variety of tax-funded insurance schemes contributed to the further strengthening of the private sector that was also in a crisis of sorts for want of an effective market and the slow growth of voluntary, commercial insurance. Thus, during the years 2007-2014, India witnessed the strange playing out of a zero-sum game. On the one hand, the government, by deliberate policy, injected into the private sector over 200 billion per year(public as well as private out-of-pocket expenditure that was tax-exempted) as premium for health insurance, thus helping it expand and consolidate its market presence in the secondary and tertiary care markets; on the other hand, it invested an equal amount of money under the NRHM for strengthening the public sector delivery system, largely in the primary healthcare segment. While states initiated tax-based tertiary insurance schemes in active collaboration with the private sector, they did not strengthen primary health care, promote prevention, and establish a referral system. Nor was there adequate investment in expanding the services and quality of public sector hospitals to enlarge access to affordable or free care. Money was available to conduct a heart surgery, a cochlear implant, or a C-section but not for essential medicines and basic diagnostics, preventive education, rehabilitative care, home nursing for the elderly, school health, and adolescent care, or for addressing the direct causal factors of communicable and non-communicable diseases, or treatment of injuries, fever, snake bites- conditions that were critically important for the poor.

The burgeoning private sector estimated at USD 230 billion (or Rs 15 trillion by 2020 and growing at 15 per cnt per year) dominates every aspect of health policy formulation and implementation. Promoters of the corporate sector mobilize resources by sale of their own assets or borrowings from financial institutions such as banks, equity firms, venture capitalists, and share markets. In their pursuit of profits, they exploit the vulnerability of patients and auction medical seats to the highest bidders. It is this increasing trend towards the ‘financialization’ of the health sector that is disturbing. The commitment, then, is not to the health outcomes of patients but to declaring dividends and safeguarding shareholders’ interests. The world over, a growing body of opinion considers such profiteering from the sick as unethical.

In India’s health history, the emergence of privatization of the health sector appears to have been accepted without much contest. There was no explicit outrage when medical education was being privatized in India, except for one incident in 1984 in Mumbai. Even as late as in 2016 when the circular of the MCI, issued in February, permitted promoters to take 300-bed district hospitals on a long term lease of 33 or 99 years for establishing medical colleges, there has been only deafening silence from the academics, civil society, or bureaucracy. The public and private sectors have coexisted in a seamless manner from the village quack to government doctors who run private nursing homes or pursue private practice in private hospitals. Academic institutions, too, were not funded or incentivized to undertake high quality operational research providing credible data on the nature and character of the private sector, comparing it to the public sector in terms of outcomes or unnecessary or exploitative behavior to guide policy. Good research does prevent public policy from causing unintended harm.

Asymmetrical information endows providers with power and authority over the patients who have incomplete information about what ails them. Providers often take advantage of such moments of vulnerability by ordering a battery of tests, unnecessary surgeries, or prescribing high-cost medicines, thus contributing to price inflation. What is, therefore, required are e a set of strong regulations to reduce discretion in fixing prices, treatment protocols, computerization of medical records and monitoring of deviations, supervising for quality through patient-satisfaction surveys, and instituting grievance redressal mechanisms and a revamp of the existing systems of judicial redressal to make them less cumbersome and more accountable.  There are no regulations, accountability, and transparency regarding the functioning of private hospitals and diagnostic centres per se, though they provide major share of care. Apart from illiteracy and absence of grievance redressal systems, information campaigns on unhealthy habits or behavior have been severely compromised for want of funding and attention. The biggest challenge India faces today is solving this riddle called public-private mix in health care.


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