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World Bank Conference Fuels Debate

What is the role for the private sector in providing and financing health care in developing countries, and what does that mean for public health systems? The tension between public and private sector advocates was in full view at a March World Bank conference in Washington entitled Scaling Up Health Insurance and Financial Protection in Health.
Mark Pauly, PhD, Professor of Health Care Management and Business and Public Policy at the Wharton School, chaired a panel on the private sector and describes
world bank
Photo: World Bank
A developing world clinic.
the situation in a number of low- and middle-income countries. "A poor country's economy begins to grow, and many people who were formerly poor now become middle class. When they do that, they prefer privately produced medical care and private insurance to existing governmental systems."

'Worrisome' development?
He admits that he is puzzled by the reaction of international public health experts, who generally regard the emergence of the private sector as a "worrisome, if not adverse, development."

Pauly has been involved in the debate since 2005, when a joint Wharton School/World Bank conference called attention to high levels of private out-of-pocket spending in developing countries with publicly funded systems of care. This uninsured spending, Pauly wrote, represents the "public systems' widespread failure to provide insurance coverage that satisfies the needs and desires of citizens in developing countries for financial protection."

The latest conference took stock of the debate about the pros and cons of expanding private health insurance, and spotlighted mixed public-private models. For example, Nigeria is using subsidized health maintenance organizations to provide coverage for its population; Ghana is using nongovernmental District Mutual Health Organizations.

'We've seen this movie before'
So what's the problem with private sector approaches? According to Ezekiel Emanuel, MD, PhD, the University of Pennsylvania's Vice Provost for Global Initiatives, we need look no further than our own shores for the answer. "People end up preferring private health insurance to cover acute care -- drugs, surgical procedures, hospitalizations. The consequence is that the other things that have been done before -- vaccinations, preventive services, and a whole lot of other measures that are very cost effective -- get reduced attention. We have seen this movie before -- the American health care system."

Dan Polsky, PhD, Executive Director of Penn's Leonard Davis Institute of Health Economics (LDI), has seen the dynamics of this underinvestment in public health play out in Abu Dhabi. He says,"The private sector explosion does not seem to have done anything to improve the health in that country." He describes a highly profitable private sector that faces incentives to treat the healthiest patients, leaving the less profitable patients for the quasi-public hospital system. Because the quasi-public hospitals must also deliver public health, the unintended consequence of a growing private sector is a squeeze on resources available for their public health responsibilities.

Pitch and counter pitch
Pauly takes a practical approach. "Non-poor people think that the public system is both inefficient and low quality, and so want an alternative more to their tastes (whether or not it actually improves the usual indicators of health). So the pitch for private care is that it is better than a terrible public system, and the counter-pitch is that the public system does not have to be terrible. I wonder who is (more) right."

The jury is still out on that. A recent review of research into the comparative performance of private and public health systems in these countries concluded that the studies "do not support the claim that the private sector is usually more efficient, accountable, or medically effective than the public sector; however, the public sector appears frequently to lack timeliness and hospitality towards patients."

Pauly is not optimistic about the likelihood of improving public systems, given that the financial and managerial resources needed usually lie beyond the existing public health establishment. "It may be that public health care is an inferior good [a good that is consumed less when incomes rise] even in the best of circumstances, so this opting out is probably inevitable -- and these countries ought to plan to deal with it rather than arguing and finger pointing about it."

Private sector as villian
Stephen Sammut, MBA, an expert on the use of private equity and a Senior Fellow in Health Care Management at the Wharton School, agrees. "It does seem that in the global health world the villain is the private sector, whether it be access to medicines, providing care or providing mechanisms for risk pooling," he notes. "Like it or not, private care is a trend throughout the emerging and frontier markets."

Mr. Sammut questions how carefully public-sector advocates have thought through the implications of marginalizing the role of the private sector. "We would all like to see some reconciliation and fruitful collaboration, but before we do that it might be valuable to study just what is behind the thinking and whether the positions are intractable."

"I don't think the answer is to prevent health insurance," Emanuel explains, "but it is to be sure we don't throw out these other measures that tend to get underinvested in when people pay for private insurance."

Polsky agrees that the solution lies a third direction. "What is needed is a priority on smart incentives and good governance, rather than on any ideological tilt towards private or public."

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Janet Weiner, MPH, is Associate Director for Health Policy at the Leonard Davis Institute of Health Economics.

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