Public or Private? In Defense of the Public Sector Wendy Johnson, MD, MPH With acknowledgements to Amy Hagopian, James Pfe...
Thesis <ul><li>The recent phenomenon of the erosion of the public sector and the increased focus on privatization are link...
A quiz
Disclosure: Conflicts of Interest <ul><li>All of my education (Elementary School, High School, BA, MD) was granted through...
<ul><li>Oxfam video </li></ul>
Dimensions of public and private health delivery and financing Public financing Private financing Public provision Ministr...
A Taxonomy of terms <ul><li>Public facilities or health systems are those owned by a government entity, directly or indire...
In theory. . . .  <ul><li>Public Sector is controlled by and responsible to: </li></ul><ul><li>Private Sector is controlle...
What is privatization? <ul><li>DIVESTMENT: Transfer of enterprise or asset ownership from state to private hands or indepe...
Investment in the public sector is in decline. 1. Public Investment in Developing Countries, 1970-2000 as a % of GDP  (con...
Why has public investment spending declined ?   <ul><li>IMF “structural adjustment” put limits on public-sector spending i...
What’s driving privatization? <ul><li>International financial institutions (WTO/IMF…) </li></ul><ul><li>Private sector int...
IMF and G20 to the rescue? <ul><li>The Pittsburg summit of the 20 richest countries reaffirmed the London Summit. </li></u...
WTO’s special role <ul><li>“ High up on the agenda of the WTO is the privatisation of education, health, welfare, social h...
Context <ul><li>Early to mid 1990s collapse of USSR and transition to capitalism </li></ul><ul><li>Shock doctrine “solutio...
What Really Happened? Private sector did not compensate for the drop in public investment <ul><li>Recent research IMF rese...
Effects on Public Health Care Systems <ul><li>Health services </li></ul><ul><li>Decreased quality of services </li></ul><u...
Arguments for the Public Sector <ul><li>Equity </li></ul><ul><li>Universal Access </li></ul><ul><li>Scalability </li></ul>...
Where’s the difference? In public or private provision? Use of public and private inpatient services by income quintiles
Where do we have evidence? <ul><li>Health care access is a right; civilized countries have universal coverage </li></ul><u...
Arguments for Private Investing <ul><li>The private sector delivers a majority of health care </li></ul><ul><li>They aren’...
From the WHO Report on the Commission on the Social Determinants of Health
Who are the players? <ul><li>World Bank’s Int. Finance Corp--finances private sector investment </li></ul><ul><li>USAID </...
World Bank’s Special Role “ When the state is weak or not interested, civil society and the social capital it engenders ca...
USAID’s Special Role
Gates Foundation special role <ul><li>Gates: </li></ul><ul><li>“ Foundations are unusual because they don’t have to worry ...
New Private Equity Fund
Affordable Medicines Facility for Malaria (AMFm)
Public private partnerships <ul><li>UN & WHO interests in public-private partnerships: </li></ul><ul><ul><li>Leverage fina...
Is the invisible hand all thumbs?
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Public, Private Partnerships

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Wendy Johnson, MD, MPH
Clinical Assistant Professor, Global Health

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  • How many people went to public school for high school, elementary school? How many people have worked for the public sector? In government? Generally, in the US, we have a much dimmer view of the public sector and government than European countries. We tend to forget all the roles the public sector plays in our life and have more knee-jerk skepticism of government.
  • There are two important dimensions in health systems--financing and delivery. We can conceptualize these dimensions in a two-by-two table, with four different scenarios: public sector services entirely financed by tax revenues, public financing for private sector services, or private financing for private services. In rare circumstances, private finances could go to support public sector delivery.
  • An important characteristic of public entities is that they are governed by boards of directors that are directly or indirectly accountable to the public through voting mechanisms. This accountability, ideally, but not always, ensures public health systems will uphold the interests of the local communities from which they draw patients or clients. In non-profit organizations, a governing board acts as owners on behalf of the community being served. While this pro-public set of values is secured by various tax arrangements with the government, there is no ability of the public to dissolve dysfunctional non-profits or change out their governing boards. In the case of for-profit organizations, accountability is limited to shareholders, the individuals who own a portion of the firm based on the amount of money they have invested in the firm. Their voting power varies by the size of their investment. Privatization can move from government to non-profits and/or to for-profits. With privatization of both delivery and financing, either non-profit or for-profit firms, the concern is that the goals of universality and equity are replaced by the characterization of citizens as mere customers, rather than collective owners of their health delivery systems.
  • The taxonomy of privatization offers three broad categories for moving ownership or control of public goods to the private sector. These include divestment , where government sells or transfers assets to the private sector or other independent authority. The second is delegation , where government retains ownership and responsibility, but uses the private sector for service delivery, for example, by contracting or outsourcing. The third is displacement , where government simply abandons its role and the private sector rushes in to fill the void, in hopes of meeting the market demand. It’s important to distinguish between goods and services, however. Public sector health systems can buy their latex gloves from the private sector, without divesting, delegating or displacing.
  • Overall investment in public infrastructure in poor countries is in decline. As a matter of fact, as a share of GDP, it’s been declining for at least 2 decades. Rich country development aid to to low-income countries has also moved away from the public sector and towards private organizations. We argue that the starving of the public sector in low-income countries is retarding development and hurting health, especially in those countries with a historically low stock of public and infrastructure assets. There are various reasons this has occurred, and while we believe the trend is highly concerning, there are others--and many of those others are very powerful--who support the decline of the public sector.
  • Over the last 20-plus years, poor countries were offered development aid in the form of credit, which landed many of them in a great deal of debt. The terms of the loans were onerous, including putting strict spending caps on public sector spending. These limits, which hit education and health care the hardest, were referred to as “structural adjustment,” as if it were just a little remodel on the house. In addition to loans, aid came in the form of direct grants to private sector organizations, many of them headquartered in the rich world. The United States PEPFAR program for aids relief focused heavily on the private sector, and proudly states on its website that it focuses on private sector partners, including multinational corporations, small and medium-sized private enterprises, business and trade associations, foundations, and venture capitalists.
  • The World Bank has described public services as a barrier to the abolition of world poverty. (1993 World Bank development report, Investing in Health). It seeks to ensure that health system reforms are market-based. However, they are very pro-public financing of the private sector. It’s obvious why private sector interests would want to divert public resources to their sector. Even public sector advocates can be proponents of various forms of privatization, however, when the public sector starved of resources and looks hungrily at those available in the private sector. Private philanthropy is another actor on the scene, offering seemingly “free” resources for care delivery. Weak public sector services and persistently inadequate public sector funding of health services have led donors and governments to try a number of financial reform initiatives over the years, including cost recovery (user fees), health insurance, community financing, linkages with an expanding but largely unregulated private sector and a range of other quasi-private set-ups (Huff- Rouselle and Pickering, 2001; Hill, 2002).
  • When US economic institutions collapsed of their own incompetence and corruption late last year, it took lots of people around the world down with it. Amazingly, the solution seems to be to channel huge levels of public wealth--one trillion dollars--into the private sector, with little or no change in the rules. The elite powers that control the private firms will not need to re-arrange the way their control is exercised in any way. G-20 Backs Sustained Crisis Response, Shift in IMF Representation September 25, 2009 G-20 says process of crisis recovery, repair is incomplete Backs a shift in IMF representation of at least 5 percent Agrees to launch framework for strong, sustainable, balanced growth Leaders of the Group of Twenty (G-20) industrialized and emerging market economies at a summit in Pittsburgh pledged to sustain the strong policy response to counter the global economic crisis and provided political support for a shift in country representation at the IMF of at least 5 percent toward dynamic emerging market and developing countries. In a communiqué, the leaders said the forceful policy response to the crisis had helped stop a dangerous, sharp decline in global activity and stabilize financial markets. Industrial output is now rising in nearly all economies and international trade is starting to recover. The leaders quoted IMF analysis showing the global economy expected to grow at nearly 3 percent by the end of next year. The leaders, meeting on September 25 , said they decided to designate the G-20 as the “premier forum for our international economic cooperation.” The G-20 leaders also agreed to continue strengthening regulation of the international financial system; protect consumers, depositors, and investors from abusive market practices; and encourage the resumption of lending to households and businesses. They asked the IMF to help the G-20 with its analysis of how national or regional policy frameworks fit together. At the same time, they stressed their commitment to the world’s poorest countries, saying “steps to reduce the development gap can be a potent driver of global growth.” IMF Managing Director Dominique Strauss-Kahn welcomed the G-20’s continuing support of the IMF and noted the leaders’ reaffirmation of their London Summit initiative to reach agreement on IMF quotas by January 2011. “The April 2008 quota and voice reforms were a first step to enhance the voice and representation of the world’s emerging and developing countries. Today’s G-20’s commitment to a shift in quota share to dynamic emerging market and developing countries of at least five percent from over-represented to under-represented countries, and to protect the voting share of the poorest in the IMF, is a decisive move. This historic decision, and the emergence of the G-20 as a key forum for international economic cooperation, will lay the foundation for a deeper partnership in global economic policy between emerging and developing countries and the advanced economies,” Strauss-Kahn said. Delivering on commitments The G-20 leaders said they had delivered on their commitment to treble the resources available to the IMF to combat crises. “This commitment and the innovative steps the IMF has taken to create the facilities needed for its resources to be used efficiently and flexibly have reduced global risks. Capital again is flowing to emerging economies,” the communiqué said. U.S. President Barack Obama (c) greets IMF Managing Director Dominique Strauss-Kahn at G-20 summit in Pittsburgh, United States (photo: Win McNamee/CNP) The leaders said the collective response to the crisis has highlighted both the benefits of international cooperation and the need for a more legitimate and effective IMF. “The Fund must play a critical role in promoting global financial stability and rebalancing growth. We welcome the reform of IMF’s lending facilities, including the creation of the innovative Flexible Credit Line .” The IMF should continue to strengthen its capacity to help its members cope with financial volatility, reducing the economic disruption from sudden swings in capital flows and the perceived need for excessive reserve accumulation. “As recovery takes hold, we will work together to strengthen the Fund’s ability to provide even-handed, candid and independent surveillance of the risks facing the global economy and the international financial system.” They asked the IMF to support G-20 efforts under their new Framework for Strong, Sustainable and Balanced Growth through the Fund’s surveillance of countries’ policy frameworks and their collective implications for financial stability and the level and pattern of global growth. They welcomed moves to create a stronger resource base for the Fund, to improve global liquidity through allocations of Special Drawing Rights (SDRs), and the decision to boost assistance for low-income countries. • Stronger resource base. G-20 members are committing over $500 billion to a renewed New Arrangements to Borrow to support IMF emergency lending. • SDR allocations. The IMF has made SDR allocations of $283 billion in total , more than $100 billion of which will supplement emerging market and developing countries’ existing reserve assets. • Support for low-income countries. Resources from the agreed sale of IMF gold , consistent with the IMF’s new income model, and funds from internal and other sources will more than double the Fund’s medium-term concessional lending capacity. Landmark governance reform The G-20 said that modernizing the IMF’s governance is a core element of efforts to improve the IMF’s credibility, legitimacy, and effectiveness. “We recognize that the IMF should remain a quota-based organization and that the distribution of quotas should reflect the relative weights of its members in the world economy, which have changed substantially in view of the strong growth in dynamic emerging market and developing countries.” Who’s in the G-20? The G-20 comprises Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States, plus the European Union. To ensure global economic fora and institutions work together, the Managing Director of the International Monetary Fund and the President of the World Bank, plus the chairs of the International Monetary and Financial Committee and Development Committee of the IMF and World Bank, also participate in G-20 meetings on an ex-officio basis. Together, member countries represent around 90 percent of global gross national product as well as two-thirds of the world’s population. They said G-20 leaders backed “a shift in quota share to dynamic emerging market and developing countries of at least five percent from over-represented to under-represented countries using the current quota formula as the basis to work from.” The leaders also stressed their commitment to protect the voting share of the poorest in the IMF. Currently, there is roughly a 60/40 percent split in the shares at the IMF between advanced countries and emerging market and developing countries. The G-20 leaders urged an acceleration of work toward bringing the IMF’s quota review to a successful conclusion. As part of that review, they agreed that a number of other critical issues will need to be addressed, including: • the size of any increase in IMF quotas, which will have a bearing on the ability to facilitate change in quota shares; • the size and composition of the Executive Board and ways of enhancing its effectiveness; and • the Fund Governors’ involvement in the strategic oversight of the IMF. • Staff diversity should also be enhanced. As part of a comprehensive reform package, they agreed that the heads and senior leadership of all international institutions should be appointed through an open, transparent, and merit-based process. IMF aid conditions risked deepening financial crisis in some countries, says CEPR study The International Monetary Fund has slapped such harsh conditions on the majority of countries it has lent money to during the crisis, risking pushing them further towards depression, a new study has claimed.   By Edmund Conway in Istanbul Published: 2:10PM BST 05 Oct 2009 The IMF, headed by managing director Dominique Strauss-Kahn, said the CEPR conclusions were &amp;quot;seriously misleading&amp;quot; In one of the first analyses of the IMF’s policies during the recent downturn, the Centre for Economic and Policy Research in Washington found that the Fund had imposed pro-cyclical economic policies on 31 of the 41 countries it has helped support. The accusation will exhume memories of the Asian crisis, when the Fund was widely seen to have exacerbated the recession for many struggling countries with the unnecessarily harsh conditions they attached to their loans.   Related Articles Stiglitz calls for Tobin tax on &apos;all financial transactions&apos; The report, by CEPR co-director Mark Weisbrot, said the conditions consisted of either pro-cyclical fiscal policy - cutting spending or raising taxes - or monetary policy - raising interest rates. In 15 cases, both monetary and fiscal policy were tightened at the same time, moves that “would be expected to exacerbate the downturn.” The findings are likely to come as something as a surprise. In the early stages of the crisis some had warned that the Fund was handing out money to struggling countries without attaching appropriately strict conditions. The Fund has handed out full support packages to 15 countries since the onset of the crisis, among them Iceland, Pakistan and Ukraine, and smaller amounts to a range of other nations. It invariably attaches specific tailored demands to the loans, largely in order to secure their safe repayment in due course. However, the CEPR study claims that the IMF both underestimated the degree of the downturn in the affected countries and imposed inappropriate conditions on those receiving the money. The report said: “Over the past year or two, the IMF has been a strong supporter of the use of government fiscal stimulus to counter-act the world recession, and it has long supported expansionary monetary policies, e.g. in the European Union, as well. “ It may then seem paradoxical that so many of the IMF’s agreements concluded during this recession have been pro-cyclical. But there has long been a double standard for low-and-middle income countries, in that Fund policy does not allow or encourage the same types of expansionary macroeconomic policies as it recommends for the high-income countries.” The Fund has acknowledged it imposed unnecessarily harsh conditions on countries during the Asian crisis in the late 1990s, and subsequently in South America, but has said repeatedly that it had adapted its lending programmes to account for this. However, the report said that its decision to support the fixed exchange rate in Latvia echoed similar efforts in Argentina between 1998 and 2002 “where a fixed, overvalued exchange rate was supported with tens of billions of dollars of loans until it inevitably collapsed”. It added: “In cases such as Argentina and Latvia, maintaining the peg means that adjustment must take place through shrinking the economy and real wage declines. Latvia’s GDP is projected to shrink by 18pc this year.” The Fund issued an unusually stern response to the study, saying: “The CEPR reaches seriously misleading conclusions about the pro-cyclicality of policies in IMF-supported programs, relying on faulty analysis and often inaccurate information. The main point of this report is that growth forecasts were too optimistic when programs were designed, leading to excessively tight fiscal and monetary policies. Reality is quite the opposite.” Max Lawson, senior policy advisor at Oxfam, said: “A couple of spots may have changed on the leopard but it’s the same old IMF.”
  • The WTO is be the primary player in rearranging the rules governing the financial interaction of the public and private sectors across the globe. David Price and colleagues wrote this piece in the Lancet in anticipation of the Seattle round of WTO talks in 1999. The General Agreement on Trade in Services (GATS) is a WTO treaty dating to 1995 as a result of the Uruguay Round negotiations. The treaty was created to gradually remove barriers to trade in the service sector, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade. Before the WTO&apos;s Uruguay Round negotiations began in 1986, public services such as healthcare, postal services, education and such were not included in international trade agreements. This treaty allows the entry of for-profit organizations into the arena of buying up public goods, such as water and health services, and trading them in the private sector. There is now organized opposition to the GATS treaty. The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), also negotiated in the 1986-94 Uruguay Round, introduced intellectual property rules into the multilateral trading system for the first time. It establishes minimum levels of protection that each government has to give to the intellectual property of fellow WTO members. This pertains to our discussion because TRIPS offers patent protection to important pharmaceuticals, keeping essential drugs in the private sector where their production and sale can generate private-sector profits. In the current round of negotiations on health care services and insurance, the threat is that if health care is not exempt from trade agreements, for-profit hospitals and insurance companies would have the right to set up anywhere (Canada, UK) and would have to be assured of an “equal playing field.” Could make all “public options” illegal.
  • UNICEF attributes more than 3 million premature deaths to the transition from communism to capitalism in the early to mid-1990s in Europe and central Asia. Life expectancy actually declined in several countries. Russia lost 5 years of life expectancy between 1991 and 1994. With the collapse of communist governments in eastern Europe, radical free-market advisers prescribed shock therapy, employing 3 elements: liberalization of prices, limitation of government spending to suppress inflation, and mass privatization of state-owned enterprises. Some countries did this more gradually, others more suddenly. An article in the January Lancet by Stuckler, King and McKee finds that mass privatization programs were associated with increases in adult male mortality by a mean of 13% between 1991 and 1994, largely through the mechanism of the poverty, instability and behaviors (such as alcoholism) created by unemployment, as well as by divestment in housing, education, childcare, and preventive health care. These neo-liberal policies held the day through the end of 2008, largely under the banners of both the Clinton and then, even more so, the Bush administrations.
  • Initiatives to privatize and separate the financing and service provision functions of health care were intended to expand access to services, but largely have not. The second generation of SWAps (e.g., in Ghana and Bangladesh) has included explicit linkages with the private sector in recognition of its importance as a service provider and to try to bring it within a national framework (Austen, 2001). In Ghana contraceptive social marketing accounts for 61% of the condom market with the Planned Parenthood Federation of Ghana (PPAG) accounting for a further 25%, leaving only 14% in the public sector. Similarly, STI treatment is mostly at private sector clinics and pharmacies (Mayhew et al., 2001; Austen, 2001; Wilkinson, 2001). A recent review of public-private partnerships for SRH indicates that there is little evidence of their benefits, although there is some evidence that condom promotion has increased where private sector or social marketing initiatives were prevalent (Peters et al., 2004). Private facilities are driven more by markets than by need and in Tanzania, for example, the private sector has not improved equity of access or coverage (Benson, 2001). Many issues of regulation have yet to be resolved and government regulation of the private sector is notoriously difficult. It must be tackled, however, in the face of reports of large variations in the quality of private sector services (Ranson and John, 2001; Nandraj et al., 2001). Finally, Ambegaokar and Lush (2004) warn that commercial sales of contraceptives and other health-related products, even if they increase coverage, do not provide a complete package of care. Privatising health care in China: a failed experiment From 1952 to 1982 the Chinese government-owned, funded, and operated health-care system achieved enormous improvements in health and health care. Infant mortality fell from 200 to 34 per 1,000 live births, and life expectancy almost doubled. Since the 1980s, cuts in government health spending and wide-scale privatisation have had devastatingly inequitable consequences for people’s lives. Services that were once free are now charged for by profit-driven hospitals. Insurance to cover costs has been introduced but 80 per cent of the rural poor are not covered. The numbers and quality of health-care facilities and personnel in rural areas are inadequate resulting in huge disparities in health outcomes. Infant mortality is now 3 times higher in rural than urban areas. Illness is now the leading cause of impoverishment in rural areas. In 2007 a government-endorsed report concluded that the success of China’s health system during the planned economy period was based on the dominant role played by the government.[2] Market-based reform has led to a decline in both the fairness of medical services and the efficiency of investment in the health sector. There is also a clear link to be made between high rates of household saving and high out-of-pocket payments. This is thought by many to have contributed to relatively low levels of domestic spending and demand in China, which in turn has helped to fuel global macroeconomic imbalances[3]. So what is good for the health of the Chinese is good for the economic health of the global economy, further underlining that public investment and public provision of health care is essential to underpin more equitable and sustainable growth. This is a mirror of the current debates in the US where at 16% of GDP and rising healthcare is both grossly unfair and increasingly unaffordable.   Significant Chinese investment planned in scaling up public provision. In April of this year the government unveiled reforms that have been much anticipated and intensely debated. Whilst much of the coverage of these plans has focused on reform of healthcare financing[4]there has been less coverage of the huge expansion in public provision of services that is also being planned. The plan for the first time in China defines basic health care as a ‘public service’ for all citizens with the government committed to spending $124 billion over a three-year period to 2011 to massively expand publicly provided care. Details of the massive expansion include: ·         at least one clinic to be established in every village before 2011 to improve health care at grass roots level. Township hospitals and clinics will be expanded over 2009 and a further 2,000 hospitals to be constructed at county level so that each county will have a hospital that meets national standards by 2011[5] ·         to build or renovate 3,700 community clinics and 11,000 health service centres in urban areas. While the central government will also build 2,400 health service centres in underdeveloped urban areas. [6] ·         train 1.37 million village doctors and 160,000 community doctors and extend systems of obligation and incentives for medical staff to serve in rural areas[7] ·         set up an essential medicine system including 307 different medicines to curb the rise in drug prices and quell public unrest at the poor accessibility.[8] This would represent a huge expansion of public provision of health care by any standards, and should be studied carefully over the coming years. [2] Cited in Huong,D., Phuong, N. et al.,(2007) ‘Rural health care in Vietnam and China: conflict between market reforms and social need’, International Journal of Health Services 37(3) [3] Financial Times: ‘ China facing health system funding crisis’ The Financial Times , 21 October 2008 [4] E.g. http://www.time.com/time/world/article/0,8599,1890306,00.html?xid=rss-world [5] http://english.gov.cn/2009-04/07/content_1279450.htm Tuesday, April 7, 2009 [6] Ibid. [7] http://english.gov.cn/2009-04/07/content_1279122.htm Tuesday, April 7, 2009 [8] http://english.gov.cn/2009-08/19/content_1395801.htm Wednesday, August 19, 2009
  • Comparing countries with near-universal or universal access with countries which have poor access, the difference is in the strength and ability of the public sector to provide for the poor.
  • From David McCoy: Often neglected are the broader functions of health systems such as promoting solidarity and equity; strengthening human rights and citizen entitlements; improving democratic governance more generally. Also often neglected are aspects of health care quality such as the experience of trust in health care provider etc. There is general consensus that public financing is needed to allow for cross-subsidisation and risk pooling + for equity etc; When public facilities or even insurance schemes are forced compete with private sector providers in the marketplace, adverse selection favors the fortunes of the private sector. Shared risk pools should include all comers to balance out the costs and benefits to all participants. The viability of public and even non-profit providers is threatened when they have to compete with commercial providers. Typically, the public sector is left providing care to the sickest and most vulnerable, while more profitable patients gravitate to the for-profit sector in a process likened to cream-skimming. The non-profit sector takes on aspects of public and for-profit sectors in varying levels, depending on the context in which its organizations operate. Initiatives to privatize and separate the financing and service provision functions of health care (e.g., contraceptive social marketing or contracting of maternal health services) were intended to expand access to SRH services. The second generation of SWAps (e.g., in Ghana and Priority setting for sexual and reproductive health In Ghana’s Sector-Wide Approach Ghana’s health sector reforms were driven primarily by donors (DFID, World Bank) whose focus was the Millennium Development Goals (MDGs). The MDGs do not address sexual and reproductive health per se but instead contribute to the separation of AIDS from maternal health and from the rest of sexual and reproductive health. In Ghana, this has resulted in little recognition of sexual and reproductive health needs in the national program of work and the sector wide goals, which focused primarily on the MDG targets. This was partly the result of key sexual and reproductive health donors and program specialists being reluctant to be involved in (or simply not properly aware of) the planning and development of sector-wide indicators, which meant that SRH priorities were not represented at priority setting negotiations. A further problem was the lack of suitable indicators for measuring preventive sexual and reproductive health needs. After SRH issues were neglected in early versions of the SWAp, donors in Ghana moved to be more inclusive in recognition that the sector plans can only improve health services if the technical needs of specific services are understood and taken into account. SRH donors are now invited to SWAp and other national planning meetings and have been more proactive in presenting their data and experiences. (Mayhew and Adjei 2004) 55 Bangladesh) has included explicit linkages with the private sector in recognition of its importance as a service provider and to try to bring it within a national framework (Austen, 2001). Private clinics and social franchises deliver contraceptives and related FP services in Latin America, Asia and parts of Africa (Berman and Rose, 1994; Montagu, 2002) and services such as maternity care in India, Cambodia and other parts of South and Southeast Asia (Bhatia and Cleland, 2001; Huff-Rouselle and Pickering, 2001). Contraceptives and some drugs (notably for STI treatments) are increasingly procured or accessed through the private sector. In Ghana contraceptive social marketing accounts for 61% of the condom market with the Planned Parenthood Federation of Ghana (PPAG) accounting for a further 25%, leaving only 14% in the public sector. Similarly, STI treatment is mostly at private sector clinics and pharmacies (Mayhew et al., 2001; Austen, 2001; Wilkinson, 2001). While FP or VCT for HIV have been successfully franchised, not all RH services (such as maternal health care or holistic youth services) are suitable for such commercial ‘branding’. A recent review of public-private partnerships for SRH indicates that there is little evidence of their benefits, although there is some evidence that condom promotion has increased where private sector or social marketing initiatives were prevalent (Peters et al., 2004). Despite these initiatives, there are a number of concerns over commercialization of health care. Private facilities are driven more by markets than by need and in Tanzania, for example, the private sector has not improved equity of access or coverage (Benson, 2001). Many issues of regulation have yet to be resolved and government regulation of the private sector is notoriously difficult. It must be tackled, however, in the face of reports of large variations in the quality of private sector SRH services (Ranson and John, 2001; Nandraj et al., 2001). Finally, Ambegaokar and Lush (2004) warn that commercial sales of contraceptives and other health-related products, even if they increase coverage, do not provide a complete package of care (which would include further information such as different types of contraceptives and side effects).
  • Blind optimism report by Oxfam responds to many of these points. Also in the opening video. May deliver the majority of care but often not accessible to the poor and often “small shops selling drugs of unknown quality.” No evidence that private sector is associated with lower costs. US has a very privatized system yet spends 2x as much as other countries with higher infant mortality rates, lower life expectancies. Another comparison is Lebanon and Sri Lanka. Lebanon is highly privatized, spends 2x as much on heatlh care, yet infant and maternal mortality rates are 2-3 times higher in Lebanon. Cherry-picking—example of condom sales and private STI treatment. If public sector lacks ability/capacity to regulate, quality will remain low. Higher inequity. Data from 44 countries show that higher levels of private-sector participation is associated with higher exclusion of poor from care (blind optimism). Oxfam notes on the basis of an unpublished study that in 44 middle and low income countries the higher the private sector participation in primary health care the higher the overall level of exclusion from treatment and care (M Koivusalo, M Mackintosh, UNRISD international conference on commercialisation of health care, 2004). An alternative interpretation is that poor government provision has led to higher rates of private sector provision. In other words, it is because governments do little that private services make up a larger percentage of all care. No evidence that private sector is less corrupt.
  • Here is a graph of data on the relationship between life expectancy and the proportion of a country’s health sector spending that is private, rather than public. Each dot is a country. The regression line illustrates that as the private sector proportion of health spending is higher, the life expectancy is lower.
  • The World Bank’s International Finance Corporation says its vision is that people should have the opportunity to escape poverty and improve their lives. Its purpose is to: 1) Promote open and competitive markets in developing countries 2) Support companies and other private sector partners, 3) Generate productive jobs and deliver basic services, and 4) Create opportunity for people to escape poverty. The Coalition of Service Industries is a private lobbying organization that exists to “ensure that US trade in services, once considered outside the scope of U.S. trade negotiations, would become a central goal of future trade liberalization initiatives.” Its board members come from Microsoft, AIG, Verizon and other multinationals. Donors are introducing private insurance schemes in low income countries, thus in essence privatizing health access to those who have insurance. The World Bank has published a book, “Private Voluntary Health Insurance in Development: Friend or Foe?”
  • The Health in Africa Fund will help implement key recommendations of IFC’s landmark report, The Business of Health in Africa: Partnering with the Private Sector to Improve People’s Lives , which found that the private sector already delivers about half of all health-related goods and services in Africa, and that greater investment in private health companies could have major health and economic benefits for low-income Africans IFC, a member of the World Bank Group creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. Our new investments totaled $16.2 billion in fiscal 2008, a 34 percent increase over the previous year. Even though the World Bank has endorsed improved social safety nets to protect the millions of workers who have lost their jobs due to the global economic crisis, the latest edition of the Bank’s highest circulation publication discourages countries from adopting social protection schemes by designating governments that do so as anti-business. Doing Business 2010, launched today by the World Bank, also recommends that countries should reduce severance pay for dismissed workers and reduce or eliminate requirements for prior notice about job cuts.   In April 2009, the Bank announced that the Doing Business labour market flexibility indicator, which encourages the reduction of workers’ protection, “does not constitute World Bank policy and should not be used as a basis for policy advice or in any country program documents”, and that the indicator would be removed from the Bank’s conditionality framework (known as CPIA: Country Policy and Institutional Assessment). The Bank also stated, “Doing Business 2010 will include a commentary explaining these steps”, but the new edition of the publication issued today ignores this commitment posted on the Bank’s web site in April.   “ If the president of the World Bank truly believes that countries should improve social protection in order to mitigate the impact of the global recession, as he has said on numerous occasions, then it is high time for the Bank’s highest circulation publication to stop promoting the elimination of social and workers’ protection,” said Guy Ryder, general secretary of the International Trade Union Confederation.   The ITUC called attention to the fact that Doing Business 2010 puts Cambodia in the category of countries that are “making it more difficult to do business” because it introduced a social security contribution. Conversely, Georgia is praised and given a better ranking by Doing Business because it abolished its social tax.   Doing Business 2010 criticizes the democratic government of Honduras, whose president was expelled after a coup d’état in June, because it increased severance pay and advance notice requirements in response to the economic crisis (Honduras has no unemployment insurance). Similarly, Doing Business downgrades Portugal for increasing the dismissal notice period by two weeks. IFC, Gates to invest in Africa healthcare firms WASHINGTON (Reuters) - The World Bank&apos;s investment arm said on Thursday it teamed up with Bill Gates&apos;s foundation and other groups to form a private equity fund to invest in African healthcare companies. The Health in Africa Fund, jointly funded by the World Bank&apos;s International Finance Corp, the African Development Bank, the Bill and Melinda Gates Foundation, and Deutsche Investitions-und Entwicklungsgesellschaft, aims to increase access to healthcare in Sub-Saharan Africa by investing in small- and medium-sized private healthcare companies. &amp;quot;This is a great opportunity to provide health services where it is needed most,&amp;quot; said Lars Thunell, IFC chief executive. &amp;quot;The Health in Africa Fund is a key component of IFC&apos;s $1 billion Africa health strategy, which includes improving the operating environment for companies in addition to providing financing” The fund, which is managed by Aureos Capital, has already secured $57 million and plans to finish with between $100 million and $120 million within a year.
  • Proliferation of NGOs, emphasis on “private-public partnerships” Dependence on NGOs for delivery 16% to governments, 84% to NGOs and other private institutions (US universities) In 2007 $84 million to all PEPFAR country governments = total grant to Colombia U. Tied aid and Buy US policies Require purchase of FDA approved (branded) drugs. Difficult to fund salaries, recurrent costs, other needs within the public system. “ In many cases, governments have not fully established national systems or the institutional capacity to implement HIV/AIDs programs of sufficient quality and scope. Through public-private partnerships, host governments gain access to varied networks, resources, and knowledge. . . . to fortify the systems and institutions they do not have in place. “—USAID website Some promising signals: Eric Goosby, New Global AIDS Coordinator recently stated that NGOs should get out of the implementer role and more into the role of technical advisors.
  • It’s worth mentioning the special role of the Bill &amp; Melinda Gates Foundation, an organization that has a larger budget than the WHO ( is that true?). In Bill Gates’ first annual letter on the foundation’s goals earlier this year, he reiterated his organization’s commitment to focusing on vaccines and other technical solutions to global health problems, while pulling away from initiatives that invest in building health systems. There seems to be no acknowledgment that vaccine delivery requires primary health care systems--vaccines don’t inject themselves. Bill Gates says health system strengthening should be left to government, but governments are weak because the private sector--including foundations like Gates--are usurping their role, authority and resources. He also said, “Foundations are unusual because they don’t have to worry about being voted out at the next election,” without any insight into how this fact makes foundations entirely non-accountable to the public, while diverting resources away from the tax rolls.
  • The fund will target commitments between $100 to 120 million over two closings. Today’s first closing of $57 million includes investments from IFC ($20 million), the African Development Bank ($20 million), the Gates Foundation ($7 million), and DEG ($10 million). The Health in Africa Fund, managed by Aureos Capital, will invest in small- and medium-sized companies in sub-Saharan Africa, such as health clinics and diagnostic centers, with the goal of helping low-income Africans gain access to affordable, high-quality health services. The fund will be measured not only by fiscal performance but also by its ability to cultivate businesses serving the poor. IFC, Gates to invest in Africa healthcare firms WASHINGTON (Reuters) - The World Bank&apos;s investment arm said on Thursday it teamed up with Bill Gates&apos;s foundation and other groups to form a private equity fund to invest in African healthcare companies. The Health in Africa Fund, jointly funded by the World Bank&apos;s International Finance Corp, the African Development Bank, the Bill and Melinda Gates Foundation, and Deutsche Investitions-und Entwicklungsgesellschaft, aims to increase access to healthcare in Sub-Saharan Africa by investing in small- and medium-sized private healthcare companies&amp;quot;This is a great opportunity to provide health services where it is needed most,&amp;quot; said Lars Thunell, IFC chief executive. &amp;quot;The Health in Africa Fund is a key component of IFC&apos;s $1 billion Africa health strategy, which includes improving the operating environment for companies in addition to providing financingThe fund, which is managed by Aureos Capital, has already secured $57 million and plans to finish with between $100 million and $120 million within a year.
  • The Affordable Medicines Facility – malaria is a new line of business hosted and managed by the Global Fund. Financial support for the initiative will come from UNITAID, the UK Department for International Development (DFID), and potentially other donors. The Roll Back Malaria Partnership will continue in its important role as a partner to the Affordable Medicines Facility – malaria. $225 MILLION As part of Oxfam’s work collecting evidence on the role of the public and private sector in scaling up access to health care in poor countries we have been closely following the developments of the recently launched Affordable Medicines Facility for Malaria (AMFm) ( http://www.theglobalfund.org/en/amfm/ ). Backed by the UK government, the World Bank and the Bill and Melinda Gates Foundation, AMFm will subsidize the cost of malaria treatment.      Oxfam applauds the overall goal of the AMFm to reduce prices of Artemisinin Combination Therapies (ACTs). However, we have expressed serious concerns about the initiative because of its objective to use largely unregulated shops to deliver the last effective treatment available for malaria. The sale of drugs through shops risks misdiagnosis and mistreatment. This means that lives could be put at risk, and it means that families could go without food to pay for malaria treatment for a child who is actually dying of pneumonia.   Not only does misdiagnosis risk lives, it also increases the threat of drug resistance.   The AMFm aims to target poor people but charging poor people for drugs also risks drug resistant strains of malaria developing and spreading. The world has already lost chloroquine, which was a very effective and cheap drug, partly because poor people could not buy a full course of treatment from shops. We now risk repeating the same story through the AMFm. Already there is worrying evidence of resistance to ACTs in Cambodia and large-scale distribution of ACTs through unqualified shopkeepers has been blamed ( http://news.bbc.co.uk/1/hi/world/asia-pacific/8072742.stm ).     Charging for drugs also runs counter to the AMFm’s objective to expand overall access to effective malaria treatment. Poor people cannot afford treatment, subsidized or not. Recent research by Médecins Sans Frontiéres in Africa found that numbers of people diagnosed and treated for malaria significantly increase only when services are provided free of charge ( http://www.msf.org/source/medical/malaria/2008/MSF_malaria_2008.pdf ).   Without treatment cerebral malaria can kill a child in just 24 hours. Urgently expanding access to effective malaria treatment to all children is a global responsibility. Given this urgency Oxfam questions why more is not being done to learn from and invest in the proven large scale successes of expanding access to effective prevention and ACTs through the public sector. This includes recruiting and training large numbers of community based health workers to distribute bed nets and to safely diagnose and treat patients free of charge, in addition to indoor spraying. For instance, this approach has reduced malaria deaths by a staggering 66% in Zambia over the last 6 years and halved malaria deaths in Ethiopia in just 3 years ( http://www.who.int/mediacentre/news/releases/2009/malaria_deaths_zambia_20090423/en/index.html http://www.theglobalfund.org/en/savinglives/ethiopia/ma1/ ).   Unfortunately although the AMFm initiative is open to supporting pubic sector distribution, it remains weighted in favour of commercial sales of ACTs. A requirement for successful country applicants to the AMFm is a focus on increasing accessibility to ACTs through the private sector. Does this mean that malaria endemic countries, who lack the capacity to safeguard ACT delivered by shops, and who choose instead to focus on scaling up to universal access through the public sector, will be denied support from the AMFm?   The AMFm is still going ahead without evidence to support the approach it will take, and despite the fact that this approach is in some respects contrary to the evidence.   Oxfam agrees with Dr. Bernard Nahlen, the deputy co-ordinator of the US President’s Malaria Initiative, that the AFMm constitutes ‘the biggest faith-based initiative in the world of malaria’ ( http://www.nytimes.com/2009/04/18/world/18malaria.html ).   We’d like to see more interventions based on the evidence of what works.   The debate continues within the Centre for Global Development - you may recall April Harding&apos;s critique of Oxfam&apos;s paper http://blogs.cgdev.org/globalhealth/2009/02/oxfam-this-is-not-how-to-help.php . More recently Dr Mead Over, a senior economist at the CGD, published a paper on anti-retroviral therapy in India. In his own blog about the paper Dr Over states that for some health services low quality treatment may actually be worse than no treatment at all. This is when low quality care not only provides fewer benefits for the patient, but also generates substantial negative effects for the entire population, such as the development of resistant strains of infectious diseases including tuberculosis, malaria and HIV/AIDS.   Dr Over goes on to say “public sector delivery of ART can be justified not only because it protects poor AIDS patients from catastrophic health expenditures, but also because it might differentially “crowd out” the cheapest (and therefore perhaps the worst) of the private sector AIDS treatment. If this crowding out slows or postpones the development and spread of drug resistant HIV, this is an important reason for preferring public to private sector delivery.” http://blogs.cgdev.org/globalhealth/2009/03/public-delivery-of-aids-treatment-in-south-asia-a-timidly-heroic-assumption.php#more-694
  • The latter half of the 1990s saw a large proliferation of public-private partnerships for health development, including the International AIDS Vaccine Initiative, the Global Alliance for Improved Nutrition, and others. There was growing disillusionment with the UN, and large member nations--the US in particular-- withheld the dues they owed. As these public sector agencies were starved of capital, donor investments were increasingly channeled through the private non-profit sector in what were called “public private partnerships.” It will be interesting to see if the increasingly negative public attitudes towards the for-profit sector over the last year will change these arrangements going forward. There is no expectation that these public/private partnerships between donors and aid agencies include a voice for recipient country partners. BACKGROUND notes: WHO partnership definition: “bring together a set of actors for the common goal of improving the health of populations based on mutually agreed roles and principles.” Partnership principles: Balance of power, Lead to public health gain, Partners maintain autonomy, Equity (benefits flow to those most in need), Shared risks and benefits to parties Source: Buse &amp; Walt, WHO Bulletin 2000: Global public-private partnerships (2 paper series)
  • Sometimes it’s hard to find competence in any sector--public, private, or the netherlands in between. But at least in the public sector we can vote the bums out, rather than expressing our rage through mere futile gestures like this.
  • Public, Private Partnerships

    1. 1. Public or Private? In Defense of the Public Sector Wendy Johnson, MD, MPH With acknowledgements to Amy Hagopian, James Pfeiffer, Steve Gloyd, David McCoy, Rick Rowden and Anna Marriott/Oxfam.
    2. 2. Thesis <ul><li>The recent phenomenon of the erosion of the public sector and the increased focus on privatization are linked. </li></ul><ul><li>Without a strong public sector, provision of health care is doomed to be inequitable; excluding the poor, those in rural communities and marginalized populations. Public health measures also risk neglect. </li></ul>
    3. 3. A quiz
    4. 4. Disclosure: Conflicts of Interest <ul><li>All of my education (Elementary School, High School, BA, MD) was granted through the public sector except my MPH (and I still harbor some resentment about how much that cost.) </li></ul><ul><li>Except for 2 years working in Africa for HAI, all my paychecks in adulthood have come from public sector institutions. Twice, I have worked directly for government: the Ohio Legislature and the City of Cleveland. </li></ul>
    5. 5. <ul><li>Oxfam video </li></ul>
    6. 6. Dimensions of public and private health delivery and financing Public financing Private financing Public provision Ministry of health facilities; clinicians are public service employees Private donations to public sector Private provision Public insurance schemes that pay for private care Self-pay at private facilities
    7. 7. A Taxonomy of terms <ul><li>Public facilities or health systems are those owned by a government entity, directly or indirectly accountable to voters. </li></ul><ul><li>Private non-profit facilities are run by governing boards that ideally represent the interests of the community, but are not directly accountable through a vote. </li></ul><ul><li>For-profit facilities are accountable to shareholders, whose interests are represented by the size of their financial investment. </li></ul>
    8. 8. In theory. . . . <ul><li>Public Sector is controlled by and responsible to: </li></ul><ul><li>Private Sector is controlled by responsible to: </li></ul>
    9. 9. What is privatization? <ul><li>DIVESTMENT: Transfer of enterprise or asset ownership from state to private hands or independent authority </li></ul><ul><li>DELEGATION: Contracting for </li></ul><ul><li>public services (outsourcing) </li></ul><ul><li>Competitive sourcing </li></ul><ul><li>Public-private partnership </li></ul><ul><li>DISPACEMENT: deregulation, withdrawal, abandonment of role </li></ul>Source: Privatization and Public-Private Partnerships, ES Savas, CQ Press, 2005 Photo: Madrid protests of health system privatization
    10. 10. Investment in the public sector is in decline. 1. Public Investment in Developing Countries, 1970-2000 as a % of GDP (constant 1995 prices) Source: Everhart and Sumlinski Public Investment in Developing Countries, 1970-2000 From: Fiscal Space for Public Investment, UNDP, Sept 2006
    11. 11. Why has public investment spending declined ? <ul><li>IMF “structural adjustment” put limits on public-sector spending in low-income debtor countries </li></ul><ul><li>Ideological support for the private sector </li></ul><ul><li>Macroeconomic policy focused on inflation </li></ul><ul><li>Theories about “the Predatory State” </li></ul><ul><ul><li>Private sector would compensate for drop in public investment </li></ul></ul><ul><ul><li>Crowding-out (fear that public system would “crowd-out” private enterprise) </li></ul></ul>
    12. 12. What’s driving privatization? <ul><li>International financial institutions (WTO/IMF…) </li></ul><ul><li>Private sector interests </li></ul><ul><li>Weak public sector actors seeking new resources </li></ul><ul><li>Foundations </li></ul>
    13. 13. IMF and G20 to the rescue? <ul><li>The Pittsburg summit of the 20 richest countries reaffirmed the London Summit. </li></ul><ul><li>More money for the IMF, very little policy change. </li></ul>CEPR study showed 31/41 countries had imposed fiscal or monetary policy which could make the economic crisis worse.
    14. 14. WTO’s special role <ul><li>“ High up on the agenda of the WTO is the privatisation of education, health, welfare, social housing and transport…” </li></ul>Lancet 27NOV99
    15. 15. Context <ul><li>Early to mid 1990s collapse of USSR and transition to capitalism </li></ul><ul><li>Shock doctrine “solutions” </li></ul><ul><li>Rise of neo-liberal economic policy in the 2000’s </li></ul><ul><li>Economic collapse 2008 </li></ul><ul><ul><li>20 million people are pushed into poverty for every 1% decline in economic growth </li></ul></ul>
    16. 16. What Really Happened? Private sector did not compensate for the drop in public investment <ul><li>Recent research IMF research (2005): shows that “the private sector did not compensate for the drop in public investment as it was hoped” </li></ul><ul><li>In Tanzania, the private sector did not improve equity of access or coverage (Benson, 2001) </li></ul><ul><li>A review of public-private partnerships for SRH shows only evidence of their benefit was increased condom promotion. </li></ul><ul><li>China recently acknowledged the failure of their privatization efforts which lead to increased infant mortality rates in rural areas and among the poor. </li></ul>
    17. 17. Effects on Public Health Care Systems <ul><li>Health services </li></ul><ul><li>Decreased quality of services </li></ul><ul><li>Less money for drugs, fuel, supervision </li></ul><ul><li>Service fees/ User fees </li></ul><ul><li>Decreased utilization </li></ul><ul><li>Inadequate workforce—eroding salaries, low morale and exodus </li></ul><ul><li>Health Impact – difficult to measure, but leveling off of mortality rates </li></ul>
    18. 18. Arguments for the Public Sector <ul><li>Equity </li></ul><ul><li>Universal Access </li></ul><ul><li>Scalability </li></ul><ul><li>Less expensive </li></ul>
    19. 19. Where’s the difference? In public or private provision? Use of public and private inpatient services by income quintiles
    20. 20.
    21. 21. Where do we have evidence? <ul><li>Health care access is a right; civilized countries have universal coverage </li></ul><ul><li>User fees decrease utilization to unacceptable levels </li></ul><ul><li>Private insurance adds significant overhead costs </li></ul><ul><li>Public sector is the responsible entity in the end </li></ul><ul><li>Health system functions are not just commodity exchanges </li></ul>
    22. 22. Arguments for Private Investing <ul><li>The private sector delivers a majority of health care </li></ul><ul><li>They aren’t going away </li></ul><ul><li>Investment will improve quality </li></ul><ul><li>More efficient delivery, better results, low cost </li></ul><ul><li>Take the burden off the public sector </li></ul><ul><li>Public sector is corrupt, private sector not so much. </li></ul>
    23. 23. From the WHO Report on the Commission on the Social Determinants of Health
    24. 24. Who are the players? <ul><li>World Bank’s Int. Finance Corp--finances private sector investment </li></ul><ul><li>USAID </li></ul><ul><li>Donors, UN institutions </li></ul><ul><li>NGOs </li></ul><ul><li>Coalition of Service Industries--lobbies WTO to privatize health services internationally </li></ul><ul><li>Health insurance schemes </li></ul>
    25. 25. World Bank’s Special Role “ When the state is weak or not interested, civil society and the social capital it engenders can be a crucial provider of informal social insurance and can facilitate economic development” World Bank, 2002
    26. 26. USAID’s Special Role
    27. 27. Gates Foundation special role <ul><li>Gates: </li></ul><ul><li>“ Foundations are unusual because they don’t have to worry about being voted out at the next election.” </li></ul><ul><li>… 2009 annual letter, page 16. </li></ul>
    28. 28. New Private Equity Fund
    29. 29. Affordable Medicines Facility for Malaria (AMFm)
    30. 30. Public private partnerships <ul><li>UN & WHO interests in public-private partnerships: </li></ul><ul><ul><li>Leverage financing & talent from private sector </li></ul></ul><ul><ul><li>Bestow legitimacy & authority on the UN </li></ul></ul><ul><ul><li>Enable the UN to fulfill its functions & mandates in a context of its own financial weakness </li></ul></ul><ul><li>Corporate interests: </li></ul><ul><ul><li>Green-wash tarnished reputations </li></ul></ul><ul><ul><li>Expand market opportunities </li></ul></ul><ul><ul><li>Expand influence on public policy </li></ul></ul><ul><ul><li>Expand image and branding </li></ul></ul>Source: Buse & Walt, WHO Bulletin 2000: Global public-private partnerships (2 paper series)
    31. 31. Is the invisible hand all thumbs?

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