Since the mid-2000s, governments across Asia, Africa, and South America have enabled poor households to receive care in private facilities at substantially or fully subsidized prices. While such public-private partnerships can expand access to health care, their success depends on design and local context.
COVENTRY/KOLKATA – In recent years, governments in low- and middle-income countries have been experimenting with ways to alleviate the financial burden of high out-of-pocket costs for health care, which account for 40% of households’ catastrophic health spending. To ensure universal access, they are gradually shifting away from public provision of health care to publicly funded insurance that covers treatment at private facilities.
India is a prime example. Since the mid-2000s, the central government and various states have introduced such insurance programs in an effort to expand health-care access in low-income communities.
These kinds of public-private partnerships (PPPs) have long been integral to health-policy discussions in developing countries. Given that building physical infrastructure is often costly and plagued by bureaucratic delays, political favoritism, and budgetary constraints, national and subnational governments across Asia, Africa, and South America have implemented health-insurance schemes that enable low-income families to receive private care at substantially or fully subsidized prices.
The success of these programs varies by country and depends on their design and local context. For example, China and Vietnam are often cited as success stories, with nearly 100% and 80% of their populations, respectively, covered by some health insurance scheme as of 2016. But while out-of-pocket expenses for tertiary care in China have increased, they have decreased following the PPP program’s expansion in Vietnam. India’s approach is similar to Vietnam’s, focusing on providing the poorest communities with free access to government-funded insurance.
Fully subsidized insurance can improve health outcomes by providing access to private facilities and freeing up space in public hospitals. Yet, despite numerous free insurance programs and high out-of-pocket expenditures, adoption rates in India remain low. Estimates based on data from India’s National Family Health Survey show that just 41% of Indian households have some form of health insurance. And even those who are covered seem to have little understanding of how these programs work.
This underscores the importance of the unique context of developing countries, where informal risk-sharing networks traditionally help mitigate the impact of health shocks. In rural areas, households often rely on their local communities and even join groups whose members pool money for health emergencies. Some studies show that the presence of these informal groups can reduce the willingness to pay for formal insurance. While this suggests that informal insurance crowds out formal schemes, our research shows that informal networks might actually facilitate the widespread adoption of government-provided plans. For example, the support of such networks can make it easier for people to travel to remote hospitals.
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That said, governments must assess whether the PPP model is the best way to deliver health-care services. The COVID-19 pandemic has shown that health is a public good with many positive externalities and that in some cases, direct public provision might be the only feasible option. Even in less extreme circumstances, it is crucial to understand whether the money spent on one type of program could have been used more effectively elsewhere.
In an ongoing study, we examine the complex implications of the PPP model for health-care access. In theory, if the private system is better than or as good as the public one, health outcomes might improve. But if the public system is better than its private counterpart, overall health outcomes might be adversely affected. For example, one area where India consistently lags behind its peers is maternal and child health, partly owing to the low rate of hospital deliveries, which in turn can be attributed to the high cost of private services and long wait times in overcrowded government facilities. If private care were subsidized, more women might choose to deliver their babies in private hospitals instead of non-institutional settings like their homes.
We find that women often switch from public to private facilities for childbirth following the introduction of a formal health-insurance program. Moreover, such programs lead to a decrease in out-of-pocket expenses, suggesting that individuals who previously paid for private care can now access it at a subsidized rate. Households located far from hospitals, however, remain unaffected by such programs.
Recent estimates from India’s National Health Accounts reveal two significant trends: a massive decline in government spending on tertiary health care and a sharp increase in the government’s social security expenses, including social health insurance. This reflects the country’s shift from direct public provision to the PPP model for tertiary health care.
But if there are too few private facilities, reduced government spending could force people to travel longer distances to access health care. Our findings suggest that in Andhra Pradesh, where hospital density is among the highest in India, the difficulty of getting to a hospital – whether monetary or otherwise – affects insurance adoption rates, even when insurance is fully subsidized. By contrast, Vietnam’s success in achieving universal coverage can be partly attributed to substantial public investment in hospitals and health centers.
If India’s new social insurance policy leads to the establishment of private hospitals, it could expand access to tertiary health care and offset reduced government spending. However, if the growth of these facilities is concentrated in urban areas, far fewer people will benefit. To make essential health-care services accessible to all, it is not enough to foster PPPs. It is also crucial to ensure that private hospitals are accessible in all parts of the country.
This commentary is published in collaboration with the International Economic Association’s Women in Leadership in Economics Initiative, which aims to enhance the role of women in economics through research, building partnerships, and amplifying voices.
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COVENTRY/KOLKATA – In recent years, governments in low- and middle-income countries have been experimenting with ways to alleviate the financial burden of high out-of-pocket costs for health care, which account for 40% of households’ catastrophic health spending. To ensure universal access, they are gradually shifting away from public provision of health care to publicly funded insurance that covers treatment at private facilities.
India is a prime example. Since the mid-2000s, the central government and various states have introduced such insurance programs in an effort to expand health-care access in low-income communities.
These kinds of public-private partnerships (PPPs) have long been integral to health-policy discussions in developing countries. Given that building physical infrastructure is often costly and plagued by bureaucratic delays, political favoritism, and budgetary constraints, national and subnational governments across Asia, Africa, and South America have implemented health-insurance schemes that enable low-income families to receive private care at substantially or fully subsidized prices.
The success of these programs varies by country and depends on their design and local context. For example, China and Vietnam are often cited as success stories, with nearly 100% and 80% of their populations, respectively, covered by some health insurance scheme as of 2016. But while out-of-pocket expenses for tertiary care in China have increased, they have decreased following the PPP program’s expansion in Vietnam. India’s approach is similar to Vietnam’s, focusing on providing the poorest communities with free access to government-funded insurance.
Fully subsidized insurance can improve health outcomes by providing access to private facilities and freeing up space in public hospitals. Yet, despite numerous free insurance programs and high out-of-pocket expenditures, adoption rates in India remain low. Estimates based on data from India’s National Family Health Survey show that just 41% of Indian households have some form of health insurance. And even those who are covered seem to have little understanding of how these programs work.
This underscores the importance of the unique context of developing countries, where informal risk-sharing networks traditionally help mitigate the impact of health shocks. In rural areas, households often rely on their local communities and even join groups whose members pool money for health emergencies. Some studies show that the presence of these informal groups can reduce the willingness to pay for formal insurance. While this suggests that informal insurance crowds out formal schemes, our research shows that informal networks might actually facilitate the widespread adoption of government-provided plans. For example, the support of such networks can make it easier for people to travel to remote hospitals.
Secure your copy of PS Quarterly: Age of Extremes
The newest issue of our magazine, PS Quarterly: Age of Extremes, is here. To gain digital access to all of the magazine’s content, and receive your print copy, subscribe to PS Premium now.
Subscribe Now
That said, governments must assess whether the PPP model is the best way to deliver health-care services. The COVID-19 pandemic has shown that health is a public good with many positive externalities and that in some cases, direct public provision might be the only feasible option. Even in less extreme circumstances, it is crucial to understand whether the money spent on one type of program could have been used more effectively elsewhere.
In an ongoing study, we examine the complex implications of the PPP model for health-care access. In theory, if the private system is better than or as good as the public one, health outcomes might improve. But if the public system is better than its private counterpart, overall health outcomes might be adversely affected. For example, one area where India consistently lags behind its peers is maternal and child health, partly owing to the low rate of hospital deliveries, which in turn can be attributed to the high cost of private services and long wait times in overcrowded government facilities. If private care were subsidized, more women might choose to deliver their babies in private hospitals instead of non-institutional settings like their homes.
We find that women often switch from public to private facilities for childbirth following the introduction of a formal health-insurance program. Moreover, such programs lead to a decrease in out-of-pocket expenses, suggesting that individuals who previously paid for private care can now access it at a subsidized rate. Households located far from hospitals, however, remain unaffected by such programs.
Recent estimates from India’s National Health Accounts reveal two significant trends: a massive decline in government spending on tertiary health care and a sharp increase in the government’s social security expenses, including social health insurance. This reflects the country’s shift from direct public provision to the PPP model for tertiary health care.
But if there are too few private facilities, reduced government spending could force people to travel longer distances to access health care. Our findings suggest that in Andhra Pradesh, where hospital density is among the highest in India, the difficulty of getting to a hospital – whether monetary or otherwise – affects insurance adoption rates, even when insurance is fully subsidized. By contrast, Vietnam’s success in achieving universal coverage can be partly attributed to substantial public investment in hospitals and health centers.
If India’s new social insurance policy leads to the establishment of private hospitals, it could expand access to tertiary health care and offset reduced government spending. However, if the growth of these facilities is concentrated in urban areas, far fewer people will benefit. To make essential health-care services accessible to all, it is not enough to foster PPPs. It is also crucial to ensure that private hospitals are accessible in all parts of the country.
This commentary is published in collaboration with the International Economic Association’s Women in Leadership in Economics Initiative, which aims to enhance the role of women in economics through research, building partnerships, and amplifying voices.