The health sector reforms have resulted in substantial withdrawal of state investment in general health services, which has created unmet needs for large sections of the population in Third World nations. In order to bridge this gap between unmet needs and the shrinking provisions of services, both at the national and international level the policy that is being advocated is a public-private mix of services. However, while proposing such a strategy the proponents do not address the limitations of the public-private mix, of which there is considerable evidence.

There are several important issues that need to be addressed in the public-private mix for developing countries. The role of the private sector has to be defined relative to the public sector, specially in countries where a majority of the population lives below the poverty line. Therefore, the role of the State is important and central to ensure universality and equity.

Another issue of importance that needs to be recognised is that comprehensive care includes not only curative services but also preventive and promotive services. Historically, the private sector has provided mainly curative care where there is a potential for making profits. In the process of providing comprehensive health care therefore, the objective of private and public sectors are often irreconcilable. Inevitably, private sector is not inclined to share the burden of preventive care; the latter being time consuming and also demanding higher investment and coverage. In addition the results cannot immediately be quantified in monetary terms. Inclusion of the private sector in the provision of comprehensive health care therefore, inevitably tends to fragment planning into curative and preventive activities rather than comprehensive care. Any policy which advocates a public private mix therefore needs to keep these concerns in mind for issues of coverage and effectiveness of services.

Another dimension that needs to be underlined is the parasitical manner in which the private sector has grown over time and undermined the public sector in developing countries. This kind of growth of the private sector has resulted in its penetration of the State sector. The latter has become weak in defining its role and regulating the private sector. Global experience suggests that the unregulated growth of private sector dissipates public health programmes by disrupting the curative inputs and tends to fragment efforts to provide comprehensive care. In addition, deeply entrenched private interests in health services, pharmaceutical and medical equipment industries, tend to pressurise the State to protect their interests, thereby, reducing the State’s effectiveness in regulating and defining a role for the private sector in the health service system.

While the private sector may have a space in the health care system, it needs to be defined by the State where the principles of equity guide the policy formulation. The objective of this paper is to offer some policy options that help to rationalise and regulate the private sector in medical care. The paper discusses these options to ensure that private interests do not undermine public health services; a consequence that will be detrimental to the health of the majority. These options are based on a critical review of published and unpublished studies from both India and other countries. In the Indian context, it must be kept in mind that efforts at regulation are being considered after the private sector has grown considerably over the last fifty years without any control and is well entrenched in the health care system. The official need to regulate the private sector arises out of the ambiguous quality of care that it provides. This is due to the inadequacy of infrastructure and competence of some of its providers on the one hand and, on the other hand, excessive use, at times misuse, of technology and high costs. However, there are some additional problems that are associated with the private sector in health care. These broadly include the following: its primary motive of profit maximisation without a collective concern for maintaining minimum standards; it’s failure to address public health concerns; the lack of coordination with Government programmes and services; and its higher wages attracting professionals from the public sector (Bennett: 1994). In addition, the more modernised hi-tech medical establishments demand that those less equipped be accredited or closed. It is for these reasons that the State needs to take the lead in setting the guidelines for regulating the private sector through dialogue with professional bodies and consumer organisations.

Experience shows that setting up a regulatory system is often a long drawn process, specially in those countries where it has grown without controls and is bound to face resistance from professionals. Regulating a nascent private sector is qualitatively different from trying to regulate a well entrenched one and therefore, a variety of mechanisms and strategies need to be evolved based on available research on the structure, characteristics, and behaviour of providers. (Griffith et al: 1987; Bennett, S: 1994; Baru: 1998). Across countries it is seen that the State has always played the key role in regulating the private sector. The professional organisations may have taken initiatives at certain points in time but largely, it is the State that has played the role of a regulator through financing and setting up of regulatory bodies, as seen in the case of the United States. (Starr, P: 1982; Higgins: 1988).

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