Role of Private Sector in Health Care

One of the biggest policy challenges for the government is to decide on the appropriate areas and a suitable policy framework for having a shared public-private role in providing health services. Decisions of public finance are distinct from the decisions of organising the actual provision of health care. In principle, while public goods need to be financed by the government, they need not be directly provided by the government.

Experience across the world shows that the decision on delegating/demarcating the functional areas between the public and private service providers cannot be made easily. They cannot be divided on the basis of tasks better suited for one over the other. It requires considering the entire environment in which the tasks are to be undertaken. This needs to be based on the principle of ‘make or buy’ (Musgrove,1996). The principle requires looking into factors of cost and efficiency. The aim is to answer the crucial question: ‘is it less expensive to buy from outside or to produce the same internally’? In the case of provision of health services, the strategy translates to a question of ‘is it preferable to be kept under the public domain or is it better to either have a mix or leave it entirely to the operation of private sector players’? Although efficiency is usually the relevant criterion for deciding between the public and private mix, sometimes the decision may require a trade-off between efficiency and equity.

In such circumstances, the decision would also depend on implementational constraints. Important programmes such as the immunization programme cannot be carried out by the private sector. Such programmes carry enormous social derivatives which can be addressed only by the government. The national AIDS programme, on the other hand, usually involves both public and private players. All education and communication programmes are generally retained with the public sector. Programmes like rehabilitation, family planning, etc. can be undertaken by the private sector with the assistance/support of the government. Some of the other factors that need to be considered while allowing the private sector to function in health care services are identified below.