The role of the private sector in health financing and service delivery

When we debate the appropriate role of the private sector in health care, we often tend to stray from the evidence base and become ideological. To focus the debate it is imperative to use a clear definition of what we mean by a private sector role in health financing or service delivery. An easy to understand taxonomy, which is rooted in the real world also helps. Alone the word: ‘privatization’ immediately triggers an emotional response when it comes to health care. The appropriate role of the private sector in health care should be seen as a continuum, ranging from private financing and provision in one extreme, to full public financing and provision in the other extreme—and anything in between.

The paper by Albreht cites a taxonomy used by Saltman, which largely focuses on care provision. However, in the real world, service delivery is much more complex: for example, in almost any country in Europe we see vibrant private markets in the health sector, irrespective of the general orientation of the health system. Usually such markets include not only clinical services, but also ancillary services, out-sourcing and in-sourcing of non-core services, and private service delivery within tight government regulation of price and quantity of the service package.

The Maarse taxonomy used in the Albreht paper is rather categorical and somewhat abstract: what about a public–private partnership (PPP) for sterilization of surgical packages? Let us use a real world example that entails joint public/private investments in capital, mostly public, but also some private financing of operating costs, a service which caters to a largely public delivery system of clinical services, and as part of the outfit's business plan, there are payments for outsourcing of services, such as transportation, cleaning, logistics, and there are extra revenues from the private sale of sterilization services to foreign hospital networks. This is a good example how in many countries the public and private sectors are already interwoven and do not fit easily into a narrow taxonomy of private versus public.

But for policy makers, what are the reasons to involve the private sector in the first place?: speed, innovation, the need for private capital, more efficiency and quality of service delivery are often mentioned. But the political debate frequently plays up a false dichotomy of public versus private: while indeed there are ‘clean’ public and private boundaries (and the examples given in the paper are largely correct) it is also true that such separation and clear delineation is often missing. For example, even during communism the notion of ‘concessions’ was well established in countries in Eastern Europe, including in the health sector—essentially allowing a PPP. And many formerly communist states had concessions firmly anchored in their original legal framework, without the need to import new ideas from the capitalist West. The political debate often exaggerates: just as today in the USA there is fear mongering regarding a ‘government take-over’ many pundits in Eastern Europe fan the public's fear of ‘privatization’, when in fact what we really mean is a more appropriate role for the private sector in health care delivery.

We should not forget that (based on empirical and anecdotal evidence) in the formerly Socialist countries there was a significant ‘informal’ private role in health financing and provision in the context of gratuities, illegal under-the-table payments and bribes, and purchase of inputs (drugs, food, medical devices) by patients.

The paper raises the question of access, which is legitimate. But we then we need to question access to what? In many countries in the former Eastern Bloc, there was uneven access to health services and what was available was of often of unacceptable quality. There was a gap between consumer demand and available public resources for health care: the difference had to be paid for from private sources.

The author is correct in assessing the risks of privatization, in particular private financing of health care. In fact, there is much empirical evidence, suggesting that private health financing, without proper risk pooling and strict regulation rarely works and when it does it may be highly inefficient.

Even HICs have difficulties to assure appropriate regulation, for middle income countries (approx $1000–$12 000 GDP/capita) and low income countries (below $1000 GDP/capita) it is close to impossible. But we should not throw the baby out with the bathwater: the private sector role could be gradually increased, depending on local institutional and regulatory capacity. There are good examples in CCEE ranging from out-sourcing of ancillary services to appropriate co-payment policies for pharmaceuticals and out-patient visits to private supplementary insurance schemes. There is also a perception gap—many who perceive the existence of ‘socialized medicine’ in Old Europe forget that with the notable exception of the UK in most European countries the out-patient provision of care is handled by private doctors under contract by (largely public) health insurance agencies. Beyond basic needs, many aspects of health care have become ‘commoditized’, demonstrated by the increased demand for alternative medicine, wellness, cosmetic surgery, high-tech interventions (Lasik, dental implants, hearing aids, etc.) which may go beyond what the public is willing and able to provide fully from public resources. Finally, there is a need to balance equity of access and over-consumption of services: the demand for any good at a zero price is indefinite!