Making Healthcare a Public Good

The vice chairman of the NITI Aayog, Rajiv Kumar, was recently quoted as saying that “Modicare” will expand private healthcare markets and stimulate the growth of the private health sector, especially in tier 3 and 4 towns, which will make healthcare affordable. This statement is most unfortunate because, in the health sector, markets do not work the way they presumably work for other commodities or services. Healthcare in the marketplace works through supply-induced demand. It is the providers who decide the character and quantum of supply for the healthcare demands made. Since there is an acute asymmetry of information, patients succumb to what the healthcare provider forces upon them: the battery of diagnostic tests, the range of medicines prescribed, and various procedures and interventions.

The Food and Drug Administration (FDA) in Maharashtra investigated well-known private hospitals for malpractices like reuse of medical devices such as catheters, which in the first place were charged to the original patient at two to three times the maximum retail price. These kinds of practices not only unnecessarily inflate patients’ bills, but also amount to cheating, and put them at risk of infection for which they may need further treatment. This means increased out-of-pocket spending for patients, and increased earnings and profits for providers.