Private Health Care under the Microscope

THE recent controversy relating to Sri Kumaramangalam’s death and the enquiry instituted to probe allegations of negligence against the Apollo Hospital in this regard, has opened a virtual Pandora’s box. The Ministry of Health appears to have suddenly woken up to the ills of privatised health care. It is rather unfortunate that it required the death of a senior minister in the government to focus attention on an area that endangers the lives of millions of Indians.

The government would do well to consider how its own acts of omissions and commissions have led to a situation where private medical care constitutes a major menace. It is seldom realised that the private health industry in the country is the largest unregulated sector in the Indian economy. No other sector has as extensive a reach as the health industry. It is a sector that has an assured market, and further a market that has the potential for almost unlimited growth. The last decade has witnessed a virtual explosion in the growth of the private health sector. This growth has been fuelled by two developments—a proactive thrust by the government to encourage the private sector in health care, and advances in medical technology that help promote the penetration of the corporate sector in health care.


India has one of the poorest records in health care expenditure by the government—both in terms of real expenditure and in terms of percent of the total health care costs. The situation has further worsened as prescriptions for restructuring of the health sector in the past decade have been designed to maximise outputs from greatly reduced government support.

At 22 percent, government share of the total expenditure on health care is

one of the lowest in the world. It may be contrasted with 70-80 per cent share of

expenditure on health care by governments in most of N.Europe, and even

the 44 per cent expenditure by the government in the U.S. While successive Five-Year Plans have shown a fall, in percentage terms, in allocation for health care,

the present mantra of liberalisation is being used to legitimise further privatisation in the health sector.

The manner in which the existing public health care delivery system has been undermined speaks volumes for the callous and cynical attitude of recent governments towards the social sectors. The new policies pursued in the last decade have led to a cut in budgetary support to the health sector.

Compression of funds has had a number of far reaching effects. Expenditures on salaries and infrastructure constitute 70-90 per cent of expenditure for most major programmes. Faced with limited funds, while salaries and infrastructure costs still require to be maintained at previous levels, the burden of cutbacks has been placed on supplies and materials. As a result, in many parts of the country, a skeletal structure survives, incapable of contributing in any meaningful manner to the amelioration of ill health. Expenditure cuts have further distorted the picture of inequitable resource allocation, with the axe on investment falling first on rural health services.

After having virtually destroyed the public health infrastructure, the same government now says that public health services are inefficient and need to be replaced by “high quality” private services. Thus by a diabolic sleight of hand, the dismantling of the public health system is now being sought to be justified on the grounds that the system has failed to deliver!


The abandonment of the government’s basic duty in providing health care facilities has greatly enhanced the ability of the private sector to penetrate into the health sector. The distinction between health care and medical care is important and needs to be noted.

Health care involves a lot more than just medical care, i.e. diagnosis and treatment of illnesses. Health care involves nutrition, drinking water and sanitation facilities,

good housing, and a lot more. These aspects of health, for obvious reasons cannot be catered to by the private sector.

But what of the medical care that is provided by the private sector? There is a fundamental contradiction that exists in the concept of private medical care. By definition private medical care can survive only if it is profitable. What logically follows is that a private medical care provider stands to profit from ill-health—the

more people fall ill and the longer they remain ill, the larger the profit for the care provider!

The fundamental inconsistency can also be illustrated by the simple demand and supply logic of the market place. It can be legitimately argued that the demand for health care will always be infinite, for there is really no limit that one can set on good health. Thus, the demand for health care will always outstrip supply, and hence,

under “free market” conditions, the cost of health care will always rise exponentially! We have commented earlier about the fact that developed capitalist economies continue to pledge resources on public funded health care—to the tune of 70-80% of total health care costs. They do so, not out of any altruistic motives, but because conventional wisdom dictates that health care in the private sector is expensive and inefficient. And yet, our government wishes to argue that privatisation of health care leads to more efficient utilisation of resources!


In spite of all the virtues of the “free-market” that are being sought to be foregrounded, the private sector is thriving because of a host of direct and indirect subsidies it receives from the government. It is ironical that a government which declares that it makes poor economic sense to “subsidise” health care for the poor, provides such subsidies to the private and corporate medical sector, which caters exclusively to the needs of the rich. Thus, after providing medical education at a very nominal cost the government provides concessions and subsidies to private medical professionals and hospitals to set up private practice and hospitals. It may be recalled that the Apollo Hospital in Delhi was built on land provided by the Delhi government at a throwaway price!

The government also provides incentives, tax holidays, and subsidies to private pharmaceutical and medical equipment industry. It allows exemptions in taxes and duties in importing medical equipment and drugs, especially for expensive new medical technologies. The government has allowed the highly profitable private

hospital sector to function as trusts which are exempt from taxes, thereby

exempting them from contributing to the state exchequer even while being

allowed to make huge profits. Moreover, medical and pharmaceutical research and development is largely carried out in public funded institutions but the major beneficiary is the private sector. Many private practitioners are given honorary positions in public hospitals, which they use openly to promote their personal interests.

The decade of the nineties has seen another transition taking place in the private health sector. Prior to this, the private sector consisted of a large number of individual practitioners and private hospitals and nursing homes run by medical professionals. For the first time, today, we see the entry of the organised corporate sector in medical care. As the practice of medicine becomes more technology intensive, the role of the medical professional is becoming narrower. The control of technology has thus become the key factor in determining who or which entity controls private medical care. Corporate entities, given their ability to invest in “state of the art” medical technologies, are fast wresting control of the medical care “industry”. Henceforth, the return on investment made by such corporations, and not any esoteric concept of professional ethics, will determine the kind of care provided. As corporates try to maximise profits they will attempt to further push up cost of medical costs by introducing high cost technologies, and expensive diagnostic aids and medicines. This is not merely an imaginary futuristic scenario. In the United States, such an approach to medical care has lead to health care costs being the highest in the world.

Alongside the move towards reduced support to health care facilities, the government’s new-found fascination with health insurance is designed to facilitate privatisation of the health sector. Wary, that a total collapse of the public health infrastructure would also affect the more vocal sections of the people—the elite and the middle class—health insurance is seen as a useful ploy to replace the government health sector. But such a system addresses the needs of a small fraction, because, when the government today talks of health insurance, it means private health insurance. All countries with a developed health care infrastructure have health insurance, but in most the major share is made up of by government supported health insurance. For example, in Japan, France, Canada, England and Netherlands the whole or majority of the population is covered by government funded health insurance. The only large country where private health insurance is dominant, is the United States—a country that has the most inefficient and expensive health care system in the developed world.


It is foolhardy to argue that health care delivery would improve in India if the government sector were replaced by the private sector—a fact that was so poignantly illustrated by Sri Kumaramangalam’s demise. We would be making a mistake if we believe that the Apollo Hospital is the disease. Apollo Hospital is just one symptom of a disease that today threatens to ravage the whole health care system in the country. One can only hope that a probe into the role played by the hospital in misdiagnosing Sri Kumaramangalam’s illness will not end at merely pointing fingers at a few individual doctors. For the probe to have any meaningful impact, it needs to question the very concept of Corporatised Medical care.

Contrary to what is being currently advocated, there is a need to greatly increase the involvement of the government in providing health care. Global experience shows that private health care serves to drive up costs, is inefficient, and is prey to corrupt practices. No country has succeeded in providing universal access to health care without pledging a major share of public resources to the health sector. What needs a closer look is not just a single Hospital, but the whole philosophy of health care in our country.