Regulating the informal sector and respecting people’s choices in the health system

About 10 years ago, I was working with Usar Iornumbe whose PhD focused on understanding the retail pharmaceutical market in the Katsina-Ala Local Government Area of Benue State, Nigeria. Many of the authorities he interviewed believed that people used the informal drug vendors, known as patent medicine sellers, because they didn’t understand the dangers of taking unqualified advice and potentially taking or giving their children the wrong medicines that could turn out to be anything from ineffective to dangerous. Careful interviewing of the patent medicine sellers’ clientele however, revealed a different story. Access to qualified advice was hard to obtain in local facilities, where absenteeism was rife, or required a long and expensive trip to the nearest public hospital which was often out of stock of the appropriate medicines.

People understood the dangers associated with the patent medicine sellers but their real choice was not qualified or unqualified advice, but nothing or something. Faced with a critically ill child or an illness that would cause the loss of vital work, they took their chances.

Katsina-Ala is not so different from a lot of other places, and when about 5 years ago, Kara Hanson and I edited a series for the Lancet on the public-private mix for health care: Markets, Profit and the Public Good, we explored this insight from a global perspective. We looked at the extent to which the evidence supports an understanding that extensive reliance on the worst elements of the private sector, where people might be exposed to dangerous advice, was really a reflection of the shortfalls of public systems intended to provide universal access to free health care but often falling far short of that ideal.

We found the evidence consistent with the idea but far from conclusive. For example, contributors to the series showed that countries such as Sri Lanka and Thailand, that have developed strong public health systems delivering Universal Health Coverage, appeared to have much lower rates of use of informal providers. The mechanism by which this correlation had emerged could not be observed or implied.

The idea of ‘regulation by participation’ was developed and advanced particularly in the 1980s, initially by Harris and Weins, to describe a situation in which instead of government attempting to regulate an industry by imposing rules from the outside, a publicly managed firm participates in it and by offering superior combinations of price and quality, forces the private sector to match those levels or go out of business. We inadvertently relabelled this idea ‘regulation by competition’ and proposed it as a health system regulatory strategy. Instead of trying to outlaw unqualified health providers or impose limits on their scope of practice, we argued that government should ensure that better combinations of quality and price are available through the public system. In other words, instead of trying to impose the ‘nothing’ choice in a ‘something’ or ‘nothing’ scenario, ensure there is a ‘something better’ available instead.

One riposte to this argument we have frequently encountered,  is too many  governments are simply unwilling, or incapable of investing in public health services in ways that ensure a combination of price and quality levels that can attract people away from unreliable providers. For this reason I believe our paper published in Social Science and Medicine this week, led by Patrick Mulcahy in collaboration with other colleagues at the Nossal Institute and at the National Council for Applied Economics Research in India, is critically important. India is surely one of those countries many have had in mind in making this riposte. Its own Lancet series, published in 2011 , highlighted the contrast between the booming Indian economy, lack of control of infectious disease, burden of death and disability particularly among women and children and failure to address its emerging epidemic of chronic disease.

Public health expenditure in India is, at 1.26% of GDP, among the lowest in the world, yet some have argued that inefficiency of the public system is the greater problem than shortage of resources. Our paper shows those Indian States with higher levels of health expenditure see more people using their public health systems and fewer using unreliable private sector providers than those States with lower levels of expenditure. I think we succeed in largely ruling out alternative explanations, implying that higher levels of expenditure translate into better combinations of price (including all the costs of accessing care such as embarking on long journeys to find adequate services) and quality than the private sector can offer. This pattern is most clear for the case of poorer people for whom opting for higher price quality combinations is most difficult.

As all good health economists know, markets fail in health care but governments can fail too. We show that instead of surrendering to a counsel of despair, governments can strengthen health systems through greater investment in public health provision. By doing this, they regulate the health system and direct people to where they are likely to receive better services. Universal Health Coverage will only be achieved by resourcing the public sector to play the critical role of providing a baseline of service quality that is genuinely available to all, and competing out of business the quacks and charlatans who thrive in the gaps in public coverage that otherwise persist.

This article was written by Professor Barbara McPake

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