Pictures of change in health care
In several industrialized countries there have been far-reaching programmed reforms of the health-care sector. While most reformers would label these reforms as ‘marketization‘, rather than privatization, they have sometimes increased private-sector activity. For example, in the UK the introduction of contracting for health care has enabled private providers to compete more easily with publicly-owned hospitals for government funds. Of perhaps greater importance are trends to encourage greater private activity within the public sector (Propper and Maynard 1990). Many of the reforms in OECD countries have been focused on improving the efficiency of service delivery and promoting greater consumer choice (OECD 1992). The foundations for these reforms lie in Enthoven’s (1988) notion of managed markets; if health-care systems are structured so as to place purchasing decisions in the hands of informed institutional purchasers, then the market failures associated with asymmetric information between purchaser and pro-vider may be ameliorated while retaining the benefits of competition. For example, in the reformed British health-care system, competition between hospitals is driven by district health authorities on the one hand and general practitioner fund-holders on the other who negotiate contracts for care for their respective client populations. Problems of asymmetric information are likely to be far less acute for these agents acting as purchasers than for the average consumer. A further rationale given for industrialized country health-care reforms links to the institutional economics arguments discussed in the previous section; it is argued that contracting for health-care services enhances transparency in the funding of providers so as to create clearer incentives for good performance (Culyer et al. 1990). Recent reforms in Western Europe have attempted to generate structured competition between physicians (Germany and UK), pharmaceutical products (Germany and the Netherlands), hospitals (Germany, UK and The Netherlands) and insurers or fund-holders (UK and the Netherlands) (Saltman 1995).
With a few notable exceptions, such as Chile, there has been a fairly limited degree of programmed privatization in the health sector of developing countries, and until recently virtually no experience with marketization or the development of managed markets. However, several developing countries including Colombia, Mexico and South Africa have health-sector reform plans based upon managed market ideas, and in many countries there has been extensive incremental privatization. Of the various categories of privatization identified by Commander and Killick, the most dramatic form – divestiture -virtually unrecorded in the health-care sector. Contracting out of services, particularly non-clinical services, is more widespread but, at least with respect to clinical contracting, has often arisen as a pragmatic policy measure to improve coverage rather than as part of a pro-grammed policy of privatization. Self-management in the form of autonomous hospitals is increasingly discussed in Sub-Saharan Africa, but is still a fairly infrequent phenomenon (McPake 1996). In a number of countries (Mozambique, Malawi, Tanzania) there has been an explicit deregulation of the private health-care sector; however, most developing countries have in the past neither positively prevented nor enabled private-sector activity in health care and there is little in the way of market liberalization which can take place. Thus, in the health sector the most common of the forms of privatization listed by Commander and Killick is state withdrawal from services.
Generally, state withdrawal has occurred and the private sector has grown because of the inability of the public sector to meet populations’ expectations. In many developing countries, particularly those in Latin America and Africa, resource shortages in the public sector or under social insurance have encouraged private-sector expansion. However, in Sub-Saharan Africa the growth of the private sector under such conditions has been limited; economic recession reduces government funding for public health care but also restricts people’s ability to pay for private care. Thus, although there may be some expansion in the private sector, as has been documented in Malawi and Zambia, this is often small in scale (Ngalande Banda and Walt 1995; Berman et al. 1995b). In contrast, in countries such as Thailand and Malaysia which have experienced rapid economic growth, the demand for health-care services and expectations regarding quality of care have outstripped public supply and there has been a sharp yet sustained growth in private health-care provision (Nitayarumphong and Tangcharoensathien 1994).
An approach to privatization which has not been discussed in the general literature but which appears to have been quite important in developing country health sectors is the use of incentives to encourage private-sector growth. Sometimes these incentives are aimed directly at private providers. For example, the Board of Investment in Thailand provided tax breaks to new private hospitals (Bennett and Tangcharoensathien 1994); in Pakistan private primary-care providers setting up in rural areas were also provided with tax incentives (WHO 1991). It is common for private non-profit providers to receive government subsidies (see chapter 17). A rather more indirect incentive to private-sector development is the establishment of insurance funds (both public and private); in the Philippines the establishment of the Medicare scheme provided substantial stimulus to the private sector (Griffin and Paqueo 1993).
Privatization in developing countries has been further stimulated by decentralization. Several developing countries, including Zambia and Ghana in Sub-Saharan Africa, and Venezuela and Mexico in Latin America, have pursued far-reaching decentralization policies as part of a programme of health-sector reform (Cassels and Janovsky 1995; Werna 1995). Mills et al. (1990) identify privatization as the most radical form of decentralization. However, what would appear to be a more widespread phenomenon is the pursuit of decentralization between levels of government, followed by incremental yet rapid privatization. In Venezuela, for example, decentralization was associated with the widespread adoption of autonomous hospitals or hospital trusts, the establishment of private practice in government facilities, and the renting out of hospital space for non-clinical activities (Werna 1995).
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