Public-Private Dichotomy in Providing Health Services
The role of government in establishing and providing the national health system is substantial in all countries. There are several jurisdictional levels of government: from central to provincial to local. While some health services are provided at each level, the distribution of authority and responsibility among the levels differ. They also change over time in tune with developments in socio-economic, political, and technological areas.
Organisationally, Ministry of Health (MoH) functions as the apex policy making body in matters of health in all the countries. While its main responsibility is confined to health, it usually pervades many areas like education, urban development, environment, etc. The essential inter-linkage of all these sectors has broadened the area of operation of the MoH singnificantly. The public health care services provided by the government are also supplemented by several investment/charitable initiatives of the private sector. Their initiatives/motivations of functioning, however, are determined by the socio-economic status of the population and the political system in existence in a country. For instance, in a purely socialistic type of government, the role of public sector is predominant. Such systems are nowadays very rare. In free market economies, the role of private sector will be predominant. If the health system operates under imperfect market situations in such economies, monopolistic tendencies driven by profit motives create distortions in the system. In such a situation, if the health care services are exclusively left to be provided by the private sector players, the fundamental assertion of health as a basic human right will be violated. As a consequence, the needs of the poor and the deprived sections of the population will be severely compromised. Such a situation warrants a regulatory role to be played by the government to correct the market failures and to ensure inclusion of equity considerations in the provision of health services.
Health is a public/merit good. It cannot be freely driven by profit considerations alone. Thus, it should not be allowed to fall into the domains of ‘rivalry’ and ‘exclusion’. Judged by these two factors, private goods may not have externalities of social values. If they have, the services provided by the private goods meet the efficiency criteria; otherwise not. The latter case is an instance of ‘market failure’. Eradicating communicable diseases through immunisation has positive externality, but acquires negative undertones when the same is not universalised. Smoking which has a negative externality is another instance where the interests of non- smokers needs to be protected by provisions of public governance or regulation.
Even in market economies where health insurance is very much widespread and almost compulsory, health insurance markets quite often fail. From an economic point of view, such market failures occur because of ‘cream skimming’ by private insurers who have incentives to insure mainly healthy people who will not need care, or because of ‘adverse selection’ which arises when unhealthy people seek (or continue) insurance coverage more than healthy people. There is also the instance of ‘moral hazard’ of patients who do not respond to the true cost of care (because they are insured) claiming quite often additional diagnostic testing and treatment.