Discussion and conclusions
Identification of the role of the private sector within a strategy defined by public interest requires that the dynamic nature of the relationship between public and private sectors is taken into account. Public and private sectors interact to produce a given division of responsibilities, and public policy can determine only the activities of the public sector, and seek to influence those of the private sector. This suggests that an expectation that increased private provision will unambiguously lead to increased total health-service provision would be naive. In part, a growing private sector will add to the total activity of the health sector, but it will also in part substitute for public-sector activity as a result of its competing with the public sector for specialized resources (especially human resources) and for custom.
In developing policy towards the private sector all countries need to identify the role intended for the public sector, and to ensure that it remains competitive in playing that role. Without this insight, strategies encouraging private-sector involvement in health will have unwanted side-effects. Acknowledgement of competition between the two sectors for human resources might suggest a policy of scaled-down public health sector employment to such targeted areas of provision as are indicated by the strategy, accompanied by a more competitive remuneration and benefit package. Similarly, competition on the demand side suggests that wherever it is intended that public-sector provision of services should succeed, an attractive combination of prices and services needs to be offered to potential users. All this emphasizes the importance of countries developing clear strategies with respect to the relative roles of the two sectors.
The evidence presented in this chapter, and in this section of the volume, is partial – there is still much to know about the behaviour and performance of private-sector providers – but is suggestive of where the most important failures of the private sector can be found. These failures point to where public policy-makers should be directing their attention. For each, policy-makers have a choice between trying to replace private-sector provision by ensuring competitive public-sector provision; regulating private-sector provision to control the factors causing failure; or where the type of failure identified is failure to provide access on an equitable basis, in financing private-sector provision for the under-served.
Similarly, policy-makers have to identify the most important public-sector failures and direct attention there. In the public sector their policy options include reallocating investment to ensure that whatever it is intended that the public sector do well and competitively is adequately funded; implementing managerial reforms; financing the private sector to carry out the activity on its behalf; or allowing public-sector provision to decline and encouraging the private sector to ‘fill the gap’ wherever the decided roles of the two sectors indicate a pure private-sector role. The extent of public-sector failures and their relationship with financing and management failures have been extensively discussed elsewhere, and are not the subject of this chapter, or this book.
The different patterns of private-sector provision suggest that the most important private-sector failures differ between countries. In pat-terns 1 and 2 type of health systems, private-sector failure seems to be most marked in the poor technical quality of care offered by informal private providers at the lowest levels of the health system, and in the most remote regions. Regulation of this problem presents difficulties which are insurmountable in the present context: the number of providers is large, they are not registered, and the problem is remote from the centre of public-sector activity. Most countries have already banned I the sale of drugs, treatments and health advice by non-registered practitioners; and have not authorized the procedures by which the drugs used by these practitioners are brought on to the market, but have had little or no effect on the problem. Since the survival of these providers depends on these practices, this is hardly surprising. The alternative strategy of ensuring effective public-sector competition also presents huge difficulties and is unlikely to be achievable unless this is identified as the priority public-sector role by policy-makers in these countries.
In pattern 3 type of health systems, private-sector failure seems to l be most marked in the excessively technology-intensive service profile of health providers which constitutes extremely poor internal efficiency. As a result, internal efficiency differences between public and private sectors, expected on the basis of the lack of incentives to efficiency in the public sector, do not seem to be observed. In many cases, regulation may be considered an adequate response to the problem. The situation is the opposite of that of the previous paragraph. The number of providers is much smaller, they are usually registered, and close to the centres of public-sector activity.
Under all patterns, the private sector fails to achieve equitable access to the whole population, although the sections of the population excluded and the types of services from which they are excluded vary between health system patterns, reflecting the stages of private health sector development. This suggests a minimum role for the public sector is to ensure access to those services for those sections of the population ; which the private sector fails to reach. This might be achieved either through financing or through direct provision.
It has not been within the scope of this chapter to review public-sector failures thoroughly. Nevertheless, the main respects in which the public sector seems at a comparative disadvantage to the private sector do emerge from the evidence presented. In patterns 1 and 2 type of health systems, the public sector has failed to achieve low-cost access to services for populations in remote areas. However, the substitution private-sector provision in such areas is contraindicated by the analysis of private-sector failure above. The preferability of ‘health-threatening’ private providers over none at all is by no means clear from a public health perspective. Here it seems that there is a strong case for correcting public-sector failure through financial and managerial intervention in order to promote a competitive public service which is accessible to as many as possible. This failure is less marked in pattern 3 type of health systems where infrastructure is generally better, leaving the population less isolated from the services available.
The second major public-sector failure identified by the evidence presented is the failure to offer services which are preferred by the public on a quality basis, rather than on a cost and convenience basis. This failure is most reflected in utilization patterns in higher-income groups, and at lower levels of the system. The effect of this failure is a kind of default targeting, which has been called ‘quality targeting’ by some authors (for example Rannan-Eliya 1996). The theory behind this label is that the poorest users are those who have no choice but to use the cheapest services, whatever their quality perceptions. Maintaining a perceived quality difference therefore effectively targets services to the poorest, arguably more effectively than mechanisms designed to have this effect. One option for policy-makers is to exploit this, leading to a public-private mix in which public-sector provision is in effect targeted at the poorest, and the private sector encouraged to attract the utilization of the rest of the population through ‘quality competition’. The advantage is that the mechanism is infinitely flexible and, by selfselection, minimizes both inclusive and exclusive targeting errors and eliminates targeting costs. The acceptability of this policy depends on the nature of the quality difference implied. If this is restricted to amenity, convenience and choice, aspects of quality which were shown above to be sufficient to affect utilization patterns, there are likely to be fewer objections to the mechanism, than if quality varies along important health-related dimensions.
Assuming that targeting of public-sector provision is chosen, this method of targeting contrasts with that proposed by Hammer and Berman (1995) who suggest that effective targeting is best achieved by directing public provision at those services for which the demand for health care is higher for the poor than for the rich. For example, if the demand for curative services responding to malnutrition-related illness is higher for the poor than for the rich, such services would have a high priority for public provision according to Hammer and Berman’s criterion. In contrast to ‘quality targeting’, this proposal is likely to have major inclusive and exclusive targeting errors to the extent that both groups use a wide range of services. Hammer and Berman contrast their proposal with a cost-effectiveness-based criterion for the I selection of services to be provided by the public sector. ‘Quality targeting, however, can be combined with cost-effectiveness to the extent that the choice of which services the public sector should provide at all could still be driven by cost-effectiveness.
In the poorest countries (patterns 1 and 2), in which universal coverage even of an essential package of services is unlikely to be achievable in the near future, ‘quality targeting’ might be seen as an attractive option. In pattern 3 type of health systems, in which policy-makers have a wider range of choice, considerations of equity with respect to amenity, convenience and choice, and of solidarity principles within the health sector, are more able to assume sufficient weight to discount a ‘quality targeting’ strategy.
It was argued in the introduction that the alternative criteria put forward by WDR and by Hammer and Berman (1995) are not mutually exclusive, but that each provides separate and powerful arguments for public-sector provision of different types of health service. Within the pattern 3 type of health systems, the better functioning of insurance markets, the greater capacity for regulation, and of the public sector as a whole, provide significant manoeuvrability. Theoretical debate provides little guidance, and evidence suggests that a wide set of options combining provision, financing and regulation roles across the full range of services are capable of successful application. In patterns 1 and 2 type of health systems, manoeuvrability is much more restricted – the capacity to regulate, finance and provide services is slight and self-insurance is not an option for the population. Without substantially greater investment in the health sector, stark choices for effectively directing the resources available have to be made. A public health guided choice which emphasizes cost-effective services for the majority has been recommended since the Alma Ata declaration and before, and the arguments behind this school of thought remain persuasive. Nevertheless, this strategy fails to protect the population from catastrophic illness-related costs, and if a majority can finance their own primary health services and are satisfied with the quality of these services, a more democratic strategy might direct public-sector investment to the improvement of accessibility and quality of public hospitals. In all countries, the specification of public- and private-sector roles will be based on the relative values placed on public health and public prefer-ence; and on specific empirical evidence of the implications for both oi the alternative specifications. The evidence presented here suggests that generalization is not possible.
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