The economics of public and private roles in health care : insights from institutional economics and organizational theory

Abstract

This report presents a strong argument for a continued and even an enhanced role for the state in providing strong sectoral stewardship and securing equitable and sustainable financing for the health sector. But it challenges the principles and nature of public intervention pursued by many governments, especially in the area of the public production of health services. A three-step process can be used to move gradually from one balance to another in the public-private mix in service delivery. First, when there is already a large private sector, the public sector can begin by recognizing its existence and slowly increase use of these resources through better coordination, contracts, and a positive regulatory environment. Once some learning has taken place in coordinating and contracting with existing providers, the positive lessons from this experience can be transferred to other priority areas where nongovernmental providers may not yet be active. Finally in some cases where the public sector is clearly engaged in inefficient activities such as public production of many inputs, these can be converted through outright privatization and subsequently brought from the private sector. A more integrated approach and greater public sector involvement in health care financing, sectoral coordination, regulation, monitoring, and evaluation is suggested.

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