Many international donors propagate the belief that Universal Health Coverage (UHC) can be achieved by enlarging the private health-care sector in low-income countries. Oxfam suggests that there are serious failings inherent in private provision, and that fixing the public sector might be the most efficient and effective route to achieving UHC.

Universal Health Coverage (UHC) is gaining momentum worldwide. UHC means access for everyone to good quality, effective health services regardless of their ability to pay. Realising UHC depends on expanding services and drastic cuts to out-of-pocket payments. Growing research affirms that despite their serious problems in many countries, public health services dominate in higher performing, equitable health systems, and the poor are better reached when systems emphasise universalism, rather than targeting. Successful systems have eliminated financial and geographic barriers for rural populations by providing many facilities (Rannan-Eliya, R., Somantnan, A. 2005).

Yet many international donors would have us believe that UHC can best be achieved by an established, growing private sector. The IFC’s report ‘The Business of Health in Africa’ states that as a major provider and financier of health care for the poor, the private sector should play a central role in scaling up (IFC. 2008). It also claims the private sector can save public money by bringing in resources and improving efficiency and quality. The IFC’s ‘Healthy Partnerships’ report asserts that ‘to achieve necessary improvements, governments will need to rely more heavily on the private sector’ (IFC, World Bank. 2011). But do the arguments stack up? In 2009, Oxfam published what proved to be a highly controversial report concluding that the evidence available failed to support the case for a greater private sector role in health care in low-income countries (Marriott, A. 2009). On the contrary, there is considerable and increasing evidence that there are serious failings inherent in private provision, which makes it a risky and costly path to take. Unsurprisingly, some private sector advocates accused Oxfam of being ideological and selective with the evidence (Harding, A., 2011). Recently, however, a number of peer-reviewed cross-country studies have affirmed many of Oxfam’s findings.

The private sector offers no escape route to the problems facing public health systems

The fact that the private sector is the main provider in many countries does not mean that it should drive scale-up. While in many developing countries it provides a significant proportion of outpatient care, in Africa 40% of this is informal shops selling drugs of unknown quality – this would not be labelled ‘health care’ in the rich world. When comparisons between the sectors is limited to licensed and certified health care personnel, the public sector dominates in all but 3 of 22 low- and middle-income countries where data is available (Gwatkin, D.R., 2000). Besides, the proportion of existing care provided by the private sector is not an indicator of whether the right to health is being fulfilled. In India the private sector provides over 80% of outpatient care, yet half of all women are denied medical care during childbirth. Despite the fact that out-of-pocket payments push 100 million people into poverty each year, (WHO. 2010), the large portion of private expenditure on health is sometimes seen as a signal of profit-making potential for private companies in low-income countries.

The idea that greater private health-care provision can complement and relieve governments is unsubstantiated. Attracting private providers to low-income, risky health markets requires significant public subsidy. Tax relief for private medical scheme contributions in South Africa cost the government the equivalent of nearly 30% of its health budget in 2001. During the same period, the government spent 12 times more on private health insurance for its civil servants than it spent on per-person funding of public sector health services for those reliant on them (McIntyre, D., Thiede, M., 2004). In many countries, rather than adding capacity, private sector growth has had a ‘crowding out’ effect on public services. In Ghana, South Africa, Uganda and Brazil, new private services were found to have reduced revenues available for public sector health facilities that also provided care to the poorer populations (Basu, S., Andrews, J., Kishore, S., Panjabi, R., Stuckler, D., 2012). Private sector growth in Thailand and India has pulled qualified personnel away from rural public facilities (Wibulpolprasert, S., Pengpaibon, P., 2003) (De Costa, A., Diwan, V.K., 2007).

Contrary to the argument that the private sector achieves better results at lower costs, in fact it is associated with higher expenditure. Research across multiple countries including India, Tanzania, Bangladesh, Malaysia and South Africa found significantly higher prescription drug charges in the private health care sector (Basu et al., 2012). Costs increase when private providers pursue profitable treatments rather than those dictated by medical need. Chile’s health-care system has wide-scale private-sector participation, and as a result, one of the world’s highest rates of births by costly and often unnecessary Caesarean sections (Murray, S.F., 2000). Health-care costs in Colombia rose significantly following privatisation reform in 1993, and 52% of capitation fees were spent on administration (De Groote, T., De Paepe, P., Unger J.P., 2005). Private sector expansion has been associated with escalating costs across East and Southern Africa, even where private sector initiatives have been designed to cut costs (Doherty, J, 2011). Even generic drugs were five times more costly in Tanzania’s private facilities compared with the public sector (Makuch, M.Y., Petta, C.A., Osis, M.J., Bahamondes, L., 2010). In China, privatisation has led to a decline of less-profitable preventative health care: immunisation coverage dropped by half in the five years following reforms. Prevalence rates of tuberculosis (TB), measles and polio are now rising and could cost the economy millions in lost productivity and unnecessary treatment, in addition to unnecessary suffering (Huong, D.B., Phuong, N.K. et al., 2007).

Difficulties in managing and regulating private providers creates inefficiencies, especially where government capacity is weak and there are too few private providers to ensure price competition. In Cambodia, private providers were found to have lower operating costs in only 20% of contracting programmes for which data were available (Bhushan, I., Bloom, E., et al., 2007). In Madagascar and Senegal, the transaction costs of contracting private providers were found to have increased overall costs by 13% and 17% respectively (Basu et al., 2012). Replacing the main public hospital with a privately built and operated one in Lesotho induced a payment by the government of a USD 32.6 million index-linked annual ‘unitary charge’ to Netcare for the hospital and services. Given that the annual budget for the previous hospital was less than USD 17 million, this represents a massive 100% increase in costs (Lister, J., 2011).

The private sector usually does not raise the quality and effectiveness of health services. Nine comparative studies found diagnostic accuracy and adherence to medical standards were worse among private than public providers (Basu, S., Andrews, J., Kishore, S., Panjabi, R., Stuckler, D., 2012). Outcome data from 24 countries showed that children with diarrhoea were less likely to receive appropriate oral rehydration salts and more likely to receive unnecessary antibiotics when seeing private providers than when seeing public providers. Market incentives to make profits by lowering quality are at their worst in the informal private health-care sector. The inability to pay and low levels of education mean that most people in poor countries become dependent on unqualified drug peddlers, fake doctors, and other providers, who present a serious threat to their health.

There is also no evidence that private health-care providers are any more responsive or any less corrupt than the public sector. Regulating private providers is difficult even in rich countries. The World Bank argument that contracting private health providers will drive up responsiveness and accountability remains theoretical. In reality, contracting has significant potential for corruption both in the awarding of contracts and in the provision of services. A report commissioned by the Government of India found that hospitals contracted and subsidised by the state to provide free treatment to poor patients were simply failing to do so (Qureshi, A.S., 2001)1. Oxfam’s own research into the private health-care sector in poor countries has hit many hurdles because of the lack of transparency of private health care companies. We are repeatedly  told that data on private sector spending of public funds is unavailable due to commercial confidentiality.

Finally, rather than improving access for the poor, private provision can increase inequity of access because it favours those who can afford treatment and have less need. Research reviewed by Basu et al. suggested a systematic bias against indigent patients in terms of both quality and access (Basu, S. et al., 2012). Exclusion of low-income patients by private providers was found in South Africa and Paraguay. Several studies suggest the process of privatising public health services increased inequities in the distribution of services in countries including Tanzania and Chile. Privatisation in China was statistically related to a rise in out-of-pocket expenditure, such that by 2001, half of the Chinese surveyed reported they had foregone health care in the previous year due to costs (Basu et al., 2012).

Achieving health care for all

The private for-profit sector plays an incredibly important role in some aspects of health care, including the production and supply of affordable medicines and medical supplies. Its role and potential added value in the delivery of services for poor people at scale is however still unclear. The private sector brings with it serious and inherent market failures that constitute an additional significant barrier to improving the quality and effectiveness of health services, especially for poor people.
Still, the evidence on the poor performance of the private sector should not be used to play down the problems of many public health-care systems in developing countries. These are real, and addressing them will require resources and skilled leadership.

What can be learnt from the higher performing low- and middle-income countries, including Thailand, is that little progress will be made towards universal and equitable coverage of health services until the best brains and resources are committed to making the public sector work as the main provider. Indeed, the experiences of some more successful low-income countries, such as Sri Lanka, suggest that fixing the public sector might also be the most efficient and effective route to improving the standards of private health care providers. The option for patients of free universal and accessible quality services from the public sector acts as an effective regulator of the private sector, which has no choice but to improve and provide something even better to attract paying patients.


¹ The research undertaken by Justice Quereshi concluded India’s corporate hospitals were ‘money minting machines’.

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