Why Regulation in The Private Healthcare Sector in India

In 2018 the Government of India announced the National Health Protection Scheme which is also known as ‘Modicare’ or ‘Ayushman Bharat’ to provide insurance based health services to 10 million BPL households which started from Jharkhand by the Prime Minister himself. It is the new route for ‘Strategic bargaining’ from private healthcare providers. It has been launched with the motivation to reduce inequality in accessibility to quality healthcare in India. The other most important motivation for this is to reduce high out-of-pocket expenditure, which has become one of the most important causes of poverty in India. It pushes vulnerable families below poverty line because of indebtedness or assets selling. Out-of-pocket expenditures in recent time has become a symbol for measuring inequality. At the same time the effectiveness of the private sector has to be measured against all the parameters of access, quality, equity and efficiency[1]. In case of a country like India, the private sector is highly unregulated and has monopoly to the extent where they use to influence the health policy also. This paper seeks to provide a broad overview of the present condition of health services providers in India, the need and effectiveness of monitoring as well as regulation for private health service providers by state and the way towards achieving public health goals.

2. Background

From the Alma Ata Declaration to till now many governments including India’s have realized fully and adopted partly ‘Health as a fundamental human right’ and it is the responsibility of the state to provide, fulfill and protect this right. Actually, India has not yet invested enough in the enhancement of human resources (in the form of social security in health and education sector). The public expenditure in India is very low especially in the health sector which is approx. 1.2 % of its GDP. In 2013, out-of-pocket expenditure (OOPE) for health care expenses stood at 62.6%.[2] India has a highly-privatized healthcare system in terms of financing as well as provision of services with the private sector catering to 70% outpatient services and 60% inpatient services[3]. The health system in India, like other Low and Middle Income countries has a kind of mixed health systems syndrome (Nishtar, 2010) straddled with weak public health systems and a dominant private sector that is in general unregulated and sometimes unethical with their profit oriented approach.

3. The private sector

In all over the world as well as in India, the governments want to reduce their fiscal deficit to consolidate government surplus by revenue. So, they are trying to harness markets to deliver universal health care for people. Many economists are of the opinion that after bringing private sector in health care it will reduce the cost, enhance the performance, create accountability to people and will provide good space for innovation in this sector including finance. The other thing is that it is always argued that “private sector is more capable of being efficient due to competitive market forces. In the private health sector, inputs are linked to outcomes and hence ‘could’ encourage a performance driven environment in comparison to the public health system. The private health sector, as in the case of Private Finance Initiative (PFI), by assuming some of the financial risks, frees up the government resources (for instance, the tolled highways) thereby providing for innovative financing options.”[4] All this in combination would result in potentially providing a ‘value for money’ service.[5]

4. Public Private Partnership

The new National Health Policy (NHP) largely focuses on the role of the private sector through strategic purchase and contracting of services for the shorter term. This NHP is seeking support mostly from the not-for-profit private organizations but the time period for ‘Short-term’ has not been specified. The main reasons behind the introduction of PPP in the Indian health sector are :-

  • To procure services form the private sector
  • To innovate the CSR, voluntary services
  • To increase efficiency, equity, sustainability and accountability
  • To avoid the financial responsibility of government by increasing the budget in the health sector.

Core principle of partnership[6]

  • Relative equality between partners
  • Mutual commitment to health objectives
  • Autonomy of each partners
  • Shared-decision making and accountability
  • Equitable outcomes/returns
  • Benefits to the stakeholders
  • Demand-side financing for institutional delivery and infant care

Paltry budgetary allocation, to reduce gaps in services provided by private and public sectors and private investment in the health sector. The main reason to encourage PPP or private sector in health is not the lack of funding or finance problem but the lack of managerial and technical abilities in the public health sector.

 5. Problem Identification in PPP model based health services (Need of strong regulation)

But hence there is changing form of PPP in health care services. The era of globalization or neoliberal economic scenario promotes the free movement of all goods and commodities across countries. Generally, people become confused in other attributes of globalization such as improvement in communication technologies, the potential for rapid exchange of knowledge etc. PPP in the health sector is also the result of globalization itself. But the problem here is the ‘ illegitimate use of public power to benefit a private interest (Morris 1991).  Here in Bihar, I have seen many times that the private partner captures the regulatory structures of State who are also the subject of states’ regulation. They bypass the state’s laws. ‘The role of the state thus becomes that of a ‘manager’ or a ‘regulator’ of services rather than one of the providers of the services (“Healers or Predators?”, 2018). In other words, it is called ‘Regulatory Capture’. In such a system we can see the clear split in ‘Provider-purchaser’ on the issue of financing and management which are two completely divorced aspects from provisioning. A ‘provider-purchaser’ split puts a high price on the services, that is, commodifies them, which is the precondition for their transaction in the marketplace (Laurell 2007).

Now, WHO has become ineffective because many rich countries have refused to fund it adequately. This organization basically relies on WB and WTO for their funds. So, the rise of Global Public-Private Partnership Initiatives (GPPPIs) has been launched to fulfil the absence of WHO’s funds. This new kind of partnership is promoted by philanthropic foundations and multilateral co-operation. Partnerships with the private sectors and civil societies are thus held up as the way to achieve what government and UN cannot manage alone (Martens 2007). Change in the ideology of the Indian government by public policy has tried to institutionalize public health sector for profit making by private industry. So, it is called as public policy in India is the greater facilitator of private profit.

(This is first in a two-article series, the second will be published in next issue.)


[1] Liu et al 2007

[2]  (National Health Accounts, https://mohfw.gov.in/sites/default/files/National%20Health%20Accounts%20Estimates%20R

eport%202014-15.pdf )

[3] Selvaraj S et al., 2015

[4] Sheikh, K., Saligram, P. S., & Hort, K. (2013). What explains regulatory failure? Analysing the architecture of health care regulation in two Indian states. Health policy and planning, 30(1), 39-55.

[5] Valila 2005

[6] http://www.who.int/global_health_histories/seminars/Raman_presentation.pdf

Vikash Prakash
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Vikash Prakash studied M.A Development (Public Health) at Azim Premji University, Bangalore.

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