TOPIC: APPRAISAL OF INDIAN PUBLIC HEALTHCARE SYSTEM

TITLE: MITIGATING THE MATSANYAYA

IN THE MEDICO-LEGAL LANDSCAPE

LAW, POVERTY AND DEVELOPMENT (LPD)

ANCHAL BHATHEJA
ID: 2449
III YEAR, B.A. LLB. (HONS.)
VIII TRIMESTER
SUBMITTED ON: 4TH JANUARY, 2021
Introduction

The constituent assembly made a conscious choice of relegating the right to health to an
unenforceable directive principle of state policy.1 The underlying realisation was that a
universal right to health for all (around 39 crore people in 1950) was unworkable due to
scarce public resources.2 But over the years, the Supreme Court has read the right to health
into article 21.3

This right would have translated into reality, if the state took up the baton of disposing off the
corresponding duty to deliver it to all. But it continues to be a paper tiger till date because the
public resources are still scarce and they have to cater to a magnified population of 135 crore
people.

Owing to the heuristic habit of operating in binaries, policy makers generally opt for
privatisation, if nationalisation does not yield results and that has also been the response of
the government post-2014.4 However, the results in many middle and low income countries
have shown that privatisation is unable to cater to the uncertainties of the healthcare market.5

As the enjoyment of all the rights enshrined in constitutions, conventions and charters across
the world hinges on an individual’s health and wellbeing, the right to health and its realisation
ought to have central position in the political and constitutional debates of any welfare
economy, like ours.

In this backdrop, the author seeks to address the question as to why these binaries of
privatisation and nationalisation are unable to recuperate our healthcare sector?

It is intuitive that privatisation can only yield results when the market is capable of self-
regulation. To address this, the author will first look at whether this assumption applies to

1
Constitution of India 1950 Art.37
2
By Neglecting Public Health, Govts in India Have Abandoned Their Responsibility (The Wire, 19 August 2020)
< https://science.thewire.in/health/public-health-neglect-india-coronavirus-government-responsibility/>
accessed 30 December 2020
3
Paschim Bangal Khet Mazdoor Samity vs State of West Bengal (1996) 1996 SCC (4) 37, JT 1996 (6) 43
4
What Indian Healthcare Has Looked Like Under Five Years of the Modi Govt (The Wire, 7 may 2019)
<https://thewire.in/health/india-healthcare-narendra-modi> accessed 30 December 2020
5
Healthcare: Privatize or Nationalize? (Berkeley Economic Review, 2 November 2017)
https://econreview.berkeley.edu/healthcare-privatize-or-nationalize/ accessed on 30 December 2020
Indian Healthcare market or not. Further, it is also intuitive that state nationalisation can only
succeed when there is requisite political commitment and broad consensus. In this regard, the
author will assess, as to whether these pre-conditions exist in the Indian healthcare market.
Lastly, the author will propose a normative framework to remedy the negative externalities of
the state’s failure in regulating the healthcare market, which actually in dire need of
regulation and disciplining.
The Idiosyncrasies of the Medical Market:

There are no two ways about the fact that the Indian Healthcare system is rotten. The public
spending on healthcare is around 1% of the budget 6, public hospitals have a mere 0.53 beds
per 1000 people7, and the doctor-patient ratio in India is 1:1456.8

In the light of these facts, it is natural to see private sector as the panacea for the government-
driven model and that has also been the response of the present political dispensation as well.
This is clear from the government’s concerted attempts to privatise primary health services in
the district hospitals, privatise Integrated Child Development Scheme9 and medical colleges.

However, even the private sector has not been able to deliver. For instance, in the pandemic it
has been able to handle only 10% of the patients, even when it has 62% hospital beds. 10 They
have been reportedly denying treatment to the poor and some have shut completely during the
crisis.11

6
India’s economy needs big dose of health spending (Live Mint, 08 April 2020) <
https://www.livemint.com/news/india/india-s-economy-needs-big-dose-of-health-spending-
11586365603651.html> accessed on 30 December 2020

7
India needs to urgently step into the domain of healthcare
(Indian Express 09 June 2020) <https://indianexpress.com/article/opinion/columns/coronavirus-epidemic-
healthcare-system-public-hospitals-6449264/ > accessed on 30 December
8
India's doctor-patient ratio still behind WHO-prescribed 1:1,000: Govt (Business Standard, 19 November
2019) < https://www.business-standard.com/article/pti-stories/doctor-patient-ratio-in-india-less-than-who-
prescribed-norm-of-1-1000-govt-119111901421_1.html> accessed on 30 December 2020.
9
Anganwadi workers, helpers rise against privatization of ICDS (The Sentinel, 11 July 2018)
https://www.sentinelassam.com/north-east-india-news/cachar-news/anganwadi-workers-helpers-rise-
against-privatization-of-icds/?infinitescroll=1 accessed on 30 December 2020
10
India needs to urgently step into the domain of healthcare
(Indian Express, 09 June 2020) https://indianexpress.com/article/opinion/columns/coronavirus-epidemic-
healthcare-system-public-hospitals-6449264/ accessed on 30 December 2020
11
Fear of Covid-19 spread makes private hospitals turn away patients – or charge them higher bills (Scroll in, 23 April
2020) https://scroll.in/article/959727/fear-of-covid-19-spread-makes-private-hospitals-turn-away-patients-or-
charge-them-higher-bills accessed on 30 December 2020
Even beyond the pandemic, the data from middle and low income countries shows that
private hospitals are notorious for deviation from evidence based practice, delivering poor
patient outcomes and overbilling.12

Besides these empirically proved failures of the private sector, the author wishes to level a
deeper theoretical criticism of the neo-liberal idea of markets being sacrosanct and capable
of self-regulation in the context of the healthcare market.

It is submitted that the neo-liberal assumptions that might be applicable to a perfectly

competitive market inherently do not apply to the healthcare market because the pre-
conditions of the former are absent in the latter.13

The foundation of neo-liberalism is that free markets are fair and efficient because I. the
stronger is able to triumph and prosper due to their capabilities, II. The weaker are
automatically thrown out of the market due to the demand and supply checks. The self-
regulation of a perfect market hinges on the power of the consumers to switch to alternatives,
when one service-provider does not deliver quality. However, the patient’s do not have such a
power due to several market realities and psycho-social factors.14

Market realities:

Take the example of the apparel industry for comparison. Unlike the consumers in this
industry who still might have some idea about the clothes they are buying with little to no
information asymmetry, the information gap between the doctors and patients is immense due
to the hyper technical nature of the medical industry.15 This becomes even starker in the
Indian context because I. the illiteracy rate amongst the consumer base of hospitals is very
high,16 and II. There is a dearth of doctors, due to which, they practically cannot spend a lot

12
Rapid privatisation has worsened health care services in poor and middle-income nations: study (Down to
Earth, 04 July 2015) https://www.downtoearth.org.in/news/rapid-privatisation-has-worsened-health-care-
services-in-poor-and-middleincome-nations-study-38504 Accessed on 30 December 2020
13
Kenneth Arrow, 'Uncertainty and the Welfare Economics of Medical Care' The American Economic Review
(1963) Vol 53, Issue 5 pp 941-943
14
Kerry Rittich, ‘Recharacterizing Restructuring – Law, Distribution and gender’ (2002)
15
Asymmetric information in healthcare industry (Cornell University, 01 December 2016)
http://blogs.cornell.edu/info2040/2016/12/01/asymmetric-information-in-healthcare-industry/ accessed 30
December 2020
16
Even educated unaware about proper use of antibiotics: survey (The Hindu Business line, 04 June 2018 )
https://www.thehindubusinessline.com/news/science/even-educated-unaware-about-proper-use-of-
of time in bridging this information asymmetry.17 As a consequence, the patient cannot switch
doctors and hospitals, if the service is sub-optimal because most of the times, they do not
even know the nitty-gritties’ of their treatment plan.

Further, in the apparel industry, the consumers can always check out products, return them
and get a refund. That is absolutely impossible in the medical industry because the
deliverables are not returnable. Even though a post-infringement remedy is possible under
Indian penal Code18 and consumer protection act19, it is not possible to pre-assess the efficacy
of any medical procedure and choose the best of all the options available. This also closes the
option of refund because the doctors would have already incurred cost in providing the
treatment, even if it did not help the patient.

Fair bargaining can happen when the parties have enough of time to bargain. If a consumer
does not like a particular piece of clothing, they can look for alternatives and choose the
product that maximises their utility in terms of price and quality. The patients, especially in
the cases of medical emergencies are unable to incur any search cost in looking for the
medical service providers that fit their medical needs and budget because time is of the
essence.

This is particularly a problem in India where patients avoid hospitals till the push comes to
shove.20 It happens due to various practical difficulties like lack of financial resources and
time to go to the hospital and other deeper psychological reasons like obsession with home
remedies, the fear of a grim news and the belief that body can heal on its own. 21 So, when the
patients finally decide to visit to hospital, it is already too late, thereby leaving them with
little to no time to choose suitable hospitals and doctors.
antibiotics-survey/article24079885.ece accessed 30 December 2020
17
Doctors in India see patients for barely 2 minutes: Study (The Times of India, 09 November 2017)
https://timesofindia.indiatimes.com/india/doctors-in-india-see-patients-for-barely-2-minutes-
study/articleshow/61570077.cms accessed 30 December 2020
18
Indian Penal Code 1860, s 304 (B)
19
Consumer Protection Act, 2019 S 21,
20
Here is why more men avoid going to the doctor (Times of India,19 September 2019)
https://timesofindia.indiatimes.com/life-style/health-fitness/health-news/here-is-why-more-men-avoid-going-
to-the-doctor/photostory/71203271.cms accessed 30 December 2020
21
Major Medical Mystery: Why People Avoid Doctors (The New York Times, 31 October 2000)
https://www.nytimes.com/2000/10/31/health/major-medical-mystery-why-people-avoid-doctors.html
accessed 30 December 2020
Since the medical market lacks the condition precedents of a perfect market, price fixation
becomes another challenge. There is a huge gap between the asking price of private and
public hospitals. For instance a private hospital in Telangana charges around Rs. 19,080 for a
CT scan of the lungs, which can be availed for Rs. 2500 under the Aroogyashri scheme
launched by the Telangana government.22 The arbitrariness and lack of transparency around
pricing is a result of the existence of multiple players and oligopolistic market conditions. In
such a situation, the private players particularly are able to engage in distortionary practices
and charge exorbitant fees. They include innumerable items in the bills, without any
transparency.23

Consequently, the patient with little time, resources and opportunities to negotiate for
clarifications, is coerced to pay, whatever it takes too save their life because the doctors have
immense power to withhold their treatment.24

Psycho-social and moral factors:

The element of trust is very prominent in the medical industry. Here, the patient vests their
life in trust in the doctor. So it is not necessary that all patients are rational consumers in the
sense that even if they get the requisite time, resources and information, they will choose the
most pocket-friendly and qualitatively compatible doctor or treatment procedure. They might
still choose the doctor who enjoys a lot of popularity and reputation, even if they are not that
proficient ant pocket friendly in reality.

22
Why India’s private hospitals can get away with overcharging patients (Quartz India, 26 March 2018)
https://qz.com/india/1237169/why-indias-private-hospitals-can-get-away-with-overcharging-patients/
accessed on 30 December 2020
23
Interview: How should India regulate private healthcare to avoid pitfalls exposed by the pandemic? (Scroll in, 21
September 2020) https://scroll.in/article/973153/interview-how-should-india-regulate-private-healthcare-to-
avoid-pitfalls-exposed-by-the-pandemic accessed on 30 December 2020
24
Samuels, W. J. (1972).’ The economy as a system of power and its legal bases: the legal economics of Robert
Lee Hale’. University of Miami Law Review, 27, 276 – 302].--
Sincere Regards,
Anchal Bhatheja
III year, B. A. L. L. B. (Hons.)
National Law School of India University, Bengaluru.
+91 7338575606
anchalbhatheja2000@yahoo.com
Something akin to the reverse of god complex operates in the psyche of the Indian patients
wherein, they thrust godliness upon the doctors and they see them as the guarantor’s of
recovery. In the time of crisis, it becomes extremely difficult to ask questions and think
rationally. Thus, the realities of the healthcare market assail the ideas of rational consumer
and free market.

The Modus Vivendi in the Medical Industry:

Since there are compelling reasons to not leave the healthcare market free, the next question
would be, if the state has ever attempted to regulate the market and if yes, how effective have
those attempts been?

The central government had passed the Clinical Establishments (Registration and Regulation)
Act (CEA) in 2010. The act covers all public and private establishments in all the streams of
healthcare. The object was to streamline health services whilst, ensuring that hospitals did not
engage in unethical practices. Pursuant to this, the act prescribes for mandatory registration of
all clinical establishments, standardised services, price caps on facilities being provided and
the requirement of making the billing process transparent, by displaying the rates of OPD
services, diagnosis and surgical procedures in templatised format.25

Since health is a state subject, all states were supposed to adopt the CEA under article 252 (1)
of the constitution.26 However, it has not been notified in 18 states. 27 This implimentational
gap has occurred due to two reasons.

One, these big shot private hospitals have significant power to coerce the government into
either not notifying CEA or relaxing its rigours. A classic example of this was seen in
Haryana where the government had to exempt hospitals having less than 50 beds from rigours
of CEA after the Indian Medical Association protested against the government’s move by

25
The Clinical establishments act 2000, s 17
26
Constitution of India 1950, article 252 (1)
27
11 states, all UTs except Delhi have adopted Clinical Establishment Act: Government (Economic Times, 28
December 2020) https://health.economictimes.indiatimes.com/news/policy/11-states-all-uts-except-delhi-
have-adopted-clinical-establishment-act-government/67287028 accessed on 30 December 2020
suspending the OPD services in all the private hospitals. 28 Similar protests were also seen in
Uttarakhand and Andhra Pradesh in opposition to CEA.29

Even in the covid-19 context, the industry lobbies are making concerted efforts to subvert the
government’s attempts to impose any disciplining. These lobbies are successful not only due
to the economic capital held by corporate chain owners and hospital entrepreneurs but also
due to the political capital that flows from it. Many corporate owners are associated with
organisations like Federal Indian Chambers for Commerce and Industry and High Level
Committee for the Health Sector under 15th finance commission which are also vested with
responsibility of framing guidelines for the regulation of the private sector. 30 Owing to the
theory of the economic man, it is absurd to expect these corporates to shoot in their own foot
by compromising with their profits, in the patient’s interest.31

Two, the government is also trying to facilitate a modus Vivendi, wherein it is aiming for
universal healthcare, but not at the cost of antagonising the private players. Although it has
the withholding power to force the corporates into complying with the CEA, but it is still
reluctant to exert much of pressure on the corporates.

This approach of the government was also reflected in the national health policy of 2017
which is absolutely silent on aspects like price fixation, quality, rationality and strict
enforcement of patient’s rights.32 Yet another manifestation of this trend was seen when the
government passed the National Medical Commission bill. This bill facilitated the

28
Why is private healthcare opposing the Clinical Establishments Act? (Down to Earth, 26 February 2018)
https://www.downtoearth.org.in/news/health/why-is-private-healthcare-opposing-the-clinical-establishments-
act-59766 accessed on 30 December 2020
29
Draft regulations on medical labs opposed (The Hindu, 23 October 2020)
https://www.thehindu.com/news/cities/Kochi/draft-regulations-on-medical-labs-
opposed/article32933244.ece accessed on 30 December
30
High level group constituted by 15th Finance Commission, for enabling balanced expansion of health
sector (SCC Online, 2 July 2018) https://www.scconline.com/blog/post/2018/07/02/high-level-group-
constituted-by-15th-finance-commission-to-examine-the-strengths-and-weaknesses-for-enabling-balanced-
expansion-of-health-sector/ accessed on 30 December 2020
31
William D. Grampp , 'Adam Smith and the Economic Man'' Journal of Political Economy, [1948] Vol. 56, 316
32
National Health Policy Reflects Conflict Between Public Health and Neoliberalism (The Wire, 29 March
2017)
https://thewire.in/health/national-health-policy-reflects-conflict-between-public-health-and-neoliberalism
accessed on 30 December 2020
privatisation of medical colleges and allowed the college authorities to charge exorbitant fees
for 60% of the total seats33.

This leads to two noteworthy conclusions,

Firstly, Something akin to the passive revolution of 1950s is unfolding in 2021 in a different
context altogether. Back then the government wanted to foster industrial modernisation and
legitimisation at the same time34 and today the government wishes to realise article 47 and yet
is constrained by ideas of neo-liberal fiscal conservatism and the temptation to be in the good
books of the corporate chain owners. This shows that the conflict between the state and
market is not a one off incident and it is rather a recurring theme. The government’ interest in
avoiding any social conflict, while fostering social transformation and the backlash from the
corporates, led to dilution of Industrial Development and Regulation Act and the planning
Commission in 195035 and it is leading to the dilution of the CEA and finance commission in
2021.

Secondly, the failures of the public sector in delivering health services due to underspending,
inefficiency, corruption and rent seeking behaviour are definitely important causes but not
the sole causes for the poor healthcare services in the country. A major part of the blame
should fairly fall on the private players, who are averse to government regulation, which is
eventually leading to malpractices like overbilling and patient’s exploitation.

A vaccine for the Market:

33
Bill aiming to reform India’s medical education regulator will also boost privatisation of colleges ( Scroll in, 26
December 2017) https://scroll.in/pulse/862648/bill-aiming-reform-indias-medical-education-regulator-will-also-
boost-privatisate-colleges
34
Chatterjee, P. (2000).’Development planning and the Indian state’. In Hasan, Z. (Ed.). Politics and the State in
India. SAGE Publications India.
35
Chibber, V. (2003). ‘Locked in place: State-building and late industrialization in India’. Princeton University
Press
The medical market requires regulation. And yet, it is unregulated and cruel to the lesser
affluent patients, with problems like overbilling up to 1700% 36 and opaqueness in billing
systems which plunges 55 million people below the poverty line on an annual basis.37

The government has passed the drug price control order 2013 to regulate prices of medicines.
However NPPA data shows that 45% of the patient’s expenditure goes towards treatment
procedures. Thus even when NPPA imposes price caps on medicines, hospitals charge
skyrocketing prices for the treatment procedures and the benefit of the price control does not
trickle down to the patient. Thus, there is need to impose price control on medical procedures.

In this backdrop, the central government ought to use article 243 of the Indian constitution 38
to notify CEA, which provides for price caps for medical procedures and greater transparency
in the billing system.

The corporates resist the implementation of this act by citing I. costs involved in giving effect
to its provisions pertaining to standardised prices and II. Differential capacities of smaller and
bigger hospitals.

The answer to the first concern is rooted in the preamble and constitution itself. We are a
socialist nation which aims to provide quality healthcare to all. Given the immense potential
of private hospitals, shunning them off or letting them adopt a deferential approach towards
serving both the rich and the poor is constitutionally untenable and impractical. Thus, the
private hospitals ought to be made partners in the project of universalisation of healthcare.

And in fact, it is in the political interest of the government itself to regulate the private sector
to deliver better health services, because patient’s definitely form a larger voter base than the
corporates. Thus, contrary to the public choice theory, the government’s action in its self-
interest can lead to more efficiency and fairness in terms of healthier and more productive
population, whilst politically benefitting the government in terms of votes.39

36
Delhi private hospitals earn over 1,700% profit by inflating medical bills: Drug regulator (Times Now, 21
February 2018) https://www.timesnownews.com/health/article/delhi-private-hospitals-earn-profits-of-up-to-
1737-by-inflating-medical-bills-drug-regulator/201087 accessed on 30 December 2020
37
Out-of-pocket health expenses plunge 55 mn Indians into poverty in 2017 (Business Standards, 19 July
2018) https://www.business-standard.com/article/current-affairs/out-of-pocket-health-expenses-plunge-55-
mn-indians-into-poverty-in-2017-118071900115_1.html accessed on 30 December 2020
38
Constitution of India, 1950 Article 243
39
Steven Pressman 'What Is Wrong with Public Choice' Taylor & Francis, 4-7
The second concern can be addressed by tweaking the CEA to account for the capacity
constraints of big and small hospitals to allow for flexibility in pricing for the smaller
hospitals and independent physicians, whilst holding the bigger corporate hospital chains
accountable for their charges. Further, the CEA also mandates the displaying of prices in a
conspicuous place for the purposes of clarity and transparency. This does not include any cost
and irrespective of the economic concerns of the corporates, this provision should be
immediately enforced.

Conclusion:

The Indian healthcare market is too sick to recover on its own. This ailment partly stems from
the inherent uncertainties characterised by various practical and psycho-social factors and
partly from the constraints on the healthcare sector.

The government had planned to increase its spending on the health sector from 1% to 2.5%
by 2025.40 But, it does not seem to be getting anywhere close to that figure because the
public health sector has been paralysed due to the pandemic and economists suggest that
there will in fact, be a spur in the privatisation of the health sector after the pandemic is
gone.41

This makes a strong case for making the private sector, a partner in the process of providing
healthcare to all. This can only happen if it is regulated by the government and the first step
towards that regulation is price fixation. It can help in preventing healthcare from becoming
a luxury, instead of a public good.

Lastly, it is submitted that the binaries of nationalisation and privatisation cannot remedy the
ailing health sector. There is a need to harness the potential of the private sector, whilst
letting the state regulate it, so as to mitigate the present Matsanyaya in the market wherein
the private hospitals (big fish) are eating up the patients (small fish)

40
Govt aims to raise health services expenditure to 2.5% of GDP by 2025 (Business Standard, 2 July 2019)
https://www.business-standard.com/article/current-affairs/govt-aims-to-raise-health-services-expenditure-to-
2-5-of-gdp-by-2025-119070200962_1.html accessed on 30 December 2020
41
Will Covid lead to a more privatised healthcare in India? (The New Indian Express, 29 May 2020)
https://www.newindianexpress.com/opinions/2020/may/29/will-covid-lead-to-a-more-privatised-healthcare-
in-india-2149375.html accessed on 30 December 2020