Private Health Care Dominates Free Public Version in Rural India

A groundbreaking study published in the American Economic Review (AER) titled "Quality and Accountability in Health Care Delivery: Audit-Study Evidence from Primary Care in India" presents evidence that private sector health care in rural India completely dominates the "free" public version. 

From the abstract:

We present unique audit-study evidence on health care quality in rural India, and find that most private providers lacked medical qualifications, but completed more checklist items than public providers and recommended correct treatments equally often. Among doctors with public and private practices, all quality metrics were higher in their private clinics. Market prices are positively correlated with checklist completion and correct treatment, but also with unnecessary treatments. However, public sector salaries are uncorrelated with quality. A simple model helps interpret our findings: Where public-sector effort is low, the benefits of higher diagnostic effort among private providers may outweigh costs of potential overtreatment.

Alex Tabarrok of Marginal Revolution summarizes the paper better than I can in "Private versus Public Health Care in India," which I recommend reading in full. 

The gist of the paper and Tabarrok's review is that rural health care in India is in a miserable state overall where "only 2.6% of patients received a correct treatment (and nothing unnecessary or harmful)." The key here is that the public sector does not provide more, or better quality, treatment than private alternatives, but the private sector does so at a fraction of the cost. 

The study also measured physicians who work in both public and private clinics and found that even the same doctors performed remarkably better when working their private gigs:

…treatments provided in the private practice strictly dominate those provided in the public practice of the same doctor. The rate of correct treatment is 42 percent higher (16 percentage points on a base of 37 percent), the rate of providing a clinically non-indicated palliative treatment is 20 percent lower (12.7 percentage points on a base of 64 percent), and the rate of antibiotic provision is 28 percent lower (13.9 percentage points on a base of 49 percent) in the private practice relative to the public practice of the same doctor.

It's all about incentives. We're in the 21st century now and have quite a bit of massive government centralization behind us. Does anyone still believe that public sector bureaucracies are anywhere near as efficient, energetic, helpful, or innovative as private sector businesses? 

The sad thing is that the entire world seems obsessed with public health care and is uniformly marching in the direction of government monopoly. Hopefully studies like this receive some attention in policy discussions. 

Health care is far too important to allow governments to destroy competition and bureaucratize the industry. 

What are your thoughts? 

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Rob Viglione is a PhD Candidate in Finance @UofSC with research interests in cryptofinance, asset pricing, and innovation. He is a former physicist, mercenary mathematician, and military officer with experience in satellite radar, space launch vehicles, and combat support intelligence. Currently a Principal at Key Force Consulting, LLC, a start-up consulting group in North Carolina, and Head of U.S. & Canada Ambassadors @BlockPay, Rob holds an MBA in Finance & Marketing and the PMP certification. He is a passionate libertarian who advocates peace, freedom, and respect for individual life.  

Image source: http://marginalrevolution.com/marginalrevolution/2016/12/private-versus-public-health-care-india.html