Transforming Health Markets in Asia and Africa

Improving Quality and Access for the Poor

Gerald Bloom, Barun Kanjilal, Henry Lucas, David Peters

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136238239
• Edition: 1
• Topic: Medicine
• Subtopic: Health Policy

There has been a dramatic spread of health markets in much of Asia and Africa over the past couple of decades. This has substantially increased the availability of health-related goods and services in all but the most remote localities, but it has created problems with safety, efficiency and cost. The effort to bring order to these chaotic markets is almost certain to become one of the greatest challenges in global health. This book documents the problems associated with unregulated health markets and presents innovative approaches that have emerged to address them. It outlines a framework that researchers, policy makers and social entrepreneurs can use to analyse health market systems and assess the likely outcome of alternative interventions. The book presents a new way of understanding highly marketised health systems, applies this understanding to an analysis of health markets in countries across Asia and Africa and identifies some of the major new developments for making these markets perform better in meeting the needs of the poor. It argues that it is time to move beyond ideological debates about the roles of public and private sectors in an ideal health system and focus more on understanding the operation of these markets and developing practical strategies for improving their performance. This book is ideal reading for researchers and students in public health, development studies, public policy and administration, health economics, medical anthropology, and science and technology studies. It is also a valuable resource for policy makers, social entrepreneurs, and planners and managers in public and private sector health systems, including pharmaceutical companies, aid agencies, NGOs and international organisations.

1 Introduction

Gerald Bloom, Barun Kanjilal, Henry Lucas, David H. Peters and Hilary Standing

Introduction

This book is an output of the collaboration between the Future Health Systems Consortium and the STEPS Centre in a series of studies of the rapidly emerging health markets in Africa and Asia and the management of health system change in dynamic and complex contexts. The work arose out of consultations with national advisory groups in several countries and several workshops for researchers and policy-makers, which identified a lack of systematic evidence on the performance of these markets in meeting the health needs of the poor. The studies focus particularly on the very large informal markets through which the poor obtain a large proportion of their medical care. This book has been organized to provide a combination of case studies and overviews of certain aspects of the dynamic reality of health markets.

During the past two decades there has been a dramatic spread of market relationships in the health sector of many low- and middle-income countries (Mackintosh and Koivusalo, 2005). Typically, out-of-pocket payments account for a large proportion of total health expenditure, and a big share of healthcare transactions include some form of cash payment (National Health Accounts, 2007). Many countries have pluralistic health systems in which providers of health-related goods and services vary widely in terms of their practice settings, their type of knowledge and associated training, and their relationship with the legal system (Bloom and Standing, 2001). The spread of health-related markets has created both opportunities and challenges for improving the performance of health systems in relation to poor people. It has produced easier access to drugs and some form of medical advice for those who can pay. There are examples of excellent market-driven services, but, as Das et al. (2008) document, the quality of services both public and private health workers provide is often poor: the services are ineffective or dangerous.

The policies of some international organizations in supporting strict limits to government expenditure and advocating an increased role for health-related markets have arguably influenced these developments. But this phenomenon is widely associated with the rapid spread of market relationships in many countries. In some cases its emergence has been linked to the failure of state-provided health services to meet popular expectations. In other cases it is associated with a rapid spread of markets with economic growth. The spread of markets has often been much faster than the capacity of the state and other key actors to establish regulatory arrangements to influence their performance. A large proportion of market transactions now take place outside any national legal regulatory framework or in settings where regulatory regimes are poorly implemented or lack clarity. A common feature is also the blurring of boundaries between public and private sectors, with staff moving across these boundaries, often informally and sometimes in the course of one day, and users making informal payments for services or drugs at public facilities, or consulting government health workers ‘privately’.

Much analysis of healthcare markets draws heavily on the experiences of the advanced market economies where there is a clearer demarcation of the roles of, and boundaries between, the public and private sectors in delivering services. This has led to a tendency to seek models for ‘working with the private sector’ from these countries, without taking sufficient account of their strong institutional and regulatory arrangements for both market and non-market services (Bloom and Standing, 2008).

This book takes a different approach, basing the assessment of the likely outcome of different reform options on a closer understanding of the realities of the markets that have emerged in developing and transitional economies. It focuses particularly on their performance in meeting the needs of the poor. It has two main aims. The first is to develop an exploratory framework for understanding how health markets operate in these contexts, primarily using a political economy rather than a public health approach to health systems. The argument rests on our view that theoretical perspectives grounded in an understanding of the dynamics of markets and their interplay with different contextual conditions offer fresh insights for health systems development. The second is to begin to lay out the implications of these different ways of thinking about health markets for policies and programmes. This points us away from standard health policy approaches to planning and regulation and towards questions of knowledge transfer and learning in highly dynamic environments.

Markets, institutions and health systems

This section provides a brief background to past and current debates about how health markets function. In particular, we note – and raise some problems with – the dominance of thinking drawn from the experience of the advanced market economies with long histories of regulation.

The limits of markets

The advanced market economies have created complex institutional arrangements within which state, market and civil society actors cooperate to translate scientific medical knowledge into widely accessible goods and expert services (Bloom et al., 2008). Debates about health system organization, based on a combination of economic theory and historical evidence, have led to a widely held consensus on why markets, in themselves, do not produce efficient or equitable health systems.

The health sector is characterized by a number of well-understood ‘market failures’ (Bennett et al., 1997). Government functions and other formal arrangements have arisen to compensate for these failures. For example, a variety of non-market institutions have developed to prevent possessors of expert knowledge from abusing their power, including professional self-regulation and internalized codes of ethics, public provision of services, government regulation and tort law. These institutions and mechanisms are also present, to some degree, in many low- and middle-income countries. In addition, markets have capacity for self-regulation on the basis that market share is often protected by demonstrated adherence to rules and standards. Again, institutions for creating greater market order are present in low- and middle-income countries, but in many contexts they are largely informal and predominantly local. Health system analysts have paid much less attention to the operation of informal health markets.

Box 1.1 ‘Market failures’ in the health sector

• Health-related services include public goods, such as public sewerage and water supply systems, that would be undersupplied if left to the market.

• Services such as immunization have positive externalities in that an individual’s consumption confers benefits on others, so that decisions based only on individual needs are likely to result in sub-optimal funding.

• Markets tend to under-insure against major health expenditure because they cannot control costs effectively and there is little incentive for a healthy person to join an insurance scheme.

• Markets may not adequately reflect the greater willingness of the population to finance basic health care than other, non-health goods and services.

• Markets can worsen distributive outcomes and hence health inequities.

• Markets for goods and services that embody expert knowledge produce information asymmetry between providers and clients that can make clients vulnerable to abuse of provider power.

‘Path dependency’ and institutional change

The experience of the advanced market economies provides useful insights into the problems of health systems in low- and middle-income countries, but it is dangerous to assume that the development of their institutions will follow a similar path. The concept of path dependency of technology (David, 1985) and institutions (Pierson and Skocpol, 2002; Thelen, 2003) describes the process by which a small early decision profoundly influences future development because of the increasing returns to institutionalization and the high cost of changing to a different path. The dominant model of health system organization is an example of path dependency: highly regulated professions and pharmaceutical markets reflect the social and economic context and associated institutional decisions within which the first modern health systems were embedded. It is important to keep this in mind when attempting to adapt institutional arrangements from one context to another and when assessing the likely future consequences of reforms.

Institutional arrangements in the health sector are notoriously ‘sticky’, mainly because they reflect the intrinsically political nature of health system reforms. Substantial resistance to change by stakeholder groups must be expected, where reforms might threaten their existence and the ideological stances that have evolved to justify the existing organizational arrangements (Altenstetter and Busse, 2005; Gordon, 2005; Rochaix and Wilsford, 2005). During the second half of the twentieth century, the right to health care became a highly charged political issue and governments became heavily involved in health financing and service delivery. The high political profile of health may have slowed the rate of institutional change. This could explain why health systems in advanced market economies preserve many aspects of their early-twentieth-century structure, while the organization of other economic and social sectors has changed much more.

The tendency of health systems to be path dependent has important implications for policy analysts in low- and middle-income countries. First, frameworks for understanding health systems are highly influenced by the history of institutions in the advanced market economies. This means their transferability is questionable. Second, the regulation of health systems in advanced market economies has precluded the development of certain other types of organization which may be equally or more effective. This means that low and middle-income countries may be in a better position to innovate institutionally. Third, the regulatory arrangements in the advanced market economies strongly influence international standards and the development of health systems in other countries. However, this does not mean that the direction of development of global health systems is already determined. The rapid growth of demand for health-related goods and services and the emergence of a variety of organizations to meet this demand have created opportunities for major changes in the organization of both national and global markets. Thus, policies and interventions over the next few years are likely to influence the path of development of these market systems for many years to come (Bloom and Standing, 2008).

Health systems in low- and middle-income countries

National health systems in developing countries reflect different historical legacies. Most countries have long-established health-related markets based on different medical knowledge systems and embedded in ‘traditional’ institutional arrangements. During the second half of the twentieth century, anti-colonial and/or post-revolutionary governments in much of Africa and Asia attempted to provide equitable access to ‘modern’ health services for all. Strategies for achieving this aim were influenced by a shared understanding of development as a state-led process for creating the building blocks of a modern economy. Many governments constructed a network of basic health facilities, trained and deployed health workers, established drug distribution systems and created vertically organized public health programmes. There was little interest in the previously established health markets, and their importance diminished in many countries.

The subsequent history of national health systems has varied greatly (Bloom and Standing, 2008). Some countries have established and sustained well-organized government health services, but health services in many others have evolved into pluralistic health systems with large informal markets. Some have experienced shocks such as war and civil disturbance, natural disasters, prolonged economic crisis and the pandemic of HIV and AIDS, which have eroded the financial basis of the public health system and led to changes in the attitudes and behaviour of government employees. Much economic activity in these countries occurs outside the organized economy. The health sector has mirrored these changes with a rapid spread of markets into services previously organized through ‘traditional’ relationships or by the state. Other countries, including many transition economies and other countries that are encouraging the growth of markets, have substantially altered the balance between the state and markets. Some are well on the way to becoming advanced market economies. Others have experienced substantial economic decline and resemble those described above. Still others have experienced rapid economic growth and concomitant increase in market-oriented activities in health.

Implications for markets and states

Private providers in advanced market economies operate within a highly regulated context. The situation is quite different in countries where the legal framework established to support a state-led health system remains intact and government health workers generally have contracts that imply they are in full-time employment, yet in practice they rely on market-like activities to maintain their income. Some ‘public’ health services could more accurately be described as publicly subsidized markets, with a number of regulatory rigidities and where the gap between formal employment contracts and long-established reality provides anomalous incentives for health workers. Informal providers, and public-sector employees who receive informal payments, may operate outside any legal framework, and there is limited capacity to enforce regulations because of a lack of resources, inadequate understanding by regulators of their role or because they have little incentive to act (Ensor and...

Table of contents

• Cover 
• Title
• Copyright
• Contents 
• List of Illustrations
• Notes on Contributors
• Acknowledgements
• List of Abbreviations
• 1. Introduction
• 2. Transition in the Indian Healthcare Market
• 3. Lessons from an Intervention Programme to Make Informal Healthcare Providers Effective in a Rural Area of Bangladesh
• 4. Drug Detailers and the Pharmaceutical Market in Bangladesh
• 5. China’s rural Hospitals in the Transition to a Market Economy: A Case Study in Two Peri-Urban Counties in Guangxi Province
• 6. Informal Markets in Sexual and Reproductive Health Services and Commodities in Rural and Urban Bangladesh
• 7. Improving the Performance of Patent Medicine Vendors in Nigeria
• 8. Yes, They Can: Peer Educators for Diabetes in Cambodia
• 9. Evidence of the Effects of Market-Based Innovations and International Initiatives to Improve the Performance of Private Providers
• 10. A review of ICT Innovations by Private-Sector Providers in Developing Countries
• 11. The Economics of Social Franchising for Health in Low- and Middle-Income Countries
• 12. Conclusions: Making Health Markets Work Better for Poor People
• Index