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SECTION 1 2 3 WHAT CAN BE DONE CASE STUDY HEALTH CARE COSTS BANKRUPT THE POOREST IN ARMENIA The Hovhannisyan family in rural community of Verin Getak, Armenia (2013). Photo: Oxfam in Armenia In 2010, total spending on healthcare represented 1.62 percent of Armenia’s budget. This under-investment has left people with no choice but to make substantial out-of-pocket payments to meet their healthcare needs. The high cost of healthcare in Armenia has forced Karo and his wife Anahit into a dire financial situation. Anahit suffers from arterial hypertension and a prolapsed uterus requiring surgical intervention, while Karo has had to live through a myocardial infarction and continues to suffer from complications caused by his diabetes. They do not qualify for subsidized care, and, as a result of their health conditions, they have been forced to take out expensive loans, and to sell off jewellery and livestock. With each health problem that arises, the family has been pushed further and further into debt and poverty. Dangerous distractions Significant amounts of money are being diverted from the public purse to bolster the for-profit private sector through cash subsidies and tax breaks. In India, numerous private hospitals contracted and subsidized by the state to provide free treatment to poor patients are failing to do so. 427 In Morocco, a recent rapid increase in private schools, supported through government funds and tax breaks, has gone hand-in-hand with widening disparities in educational outcomes. In 2011, the poorest rural children were 2.7 times less likely to learn basic reading skills than the richest children in urban areas; since 2006, this gap has increased by 20 percent. 428 Developing country governments are also increasingly entering into expensive and risky public-private partnerships. Lesotho is a striking example of how this strategy can divert scarce public resources away from where they are needed most, driving up inequality in a country that is already one of the most unequal in the world. 429 92
SECTION 1 2 3 WHAT CAN BE DONE CASE STUDY HEALTH PUBLIC-PRIVATE PARTNERSHIP THREATENS TO BANKRUPT THE LESOTHO MINISTRY OF HEALTH The Queen Mamohato Memorial Hospital, in Lesotho’s capital Maseru, was designed, built, financed and now operates under a public–private partnership (PPP) that includes delivery of all clinical services. The PPP was developed under the advice of the International Finance Corporation, the private sector investment arm of the World Bank Group. The promise was that the PPP would provide vastly improved, high-quality healthcare services for the same annual cost as the old public hospital. Three years on, the PPP hospital and its three filter clinics: • Cost $67m per year – at least three times what the old public hospital would have cost today – and consume 51 percent of the total government health budget; • Are diverting urgently needed resources from health services in rural areas where three-quarters of the population live and mortality rates are rising; • Are expecting to generate a 25 percent rate of return on equity for the shareholders and a total projected cash income 7.6 times higher than their original investment. Meanwhile, the Government of Lesotho is locked into an 18-year contract. The cost escalation has necessitated a projected 64 percent increase in government health spending over the next three years. Eighty-three percent of this increase can be accounted for by the budget line that covers the PPP. This is a dangerous diversion of scarce public funds from nurses, rural health clinics and other proven ways to get healthcare to the poorest and reduce inequality. For more information see: A. Marriott (2014) ‘A Dangerous Diversion: will the IFC’s flagship health PPP bankrupt Lesotho’s Ministry of Health’, Oxfam, http://oxf.am/5QA Rich-country governments and donor agencies – including the World Bank Group, USAID, the UK Department for International Development, and the European Union – are also pushing for greater private sector involvement in service delivery. 430 This can only lead to one thing: greater economic inequality. In fact, high levels of private-sector participation in the health sector have been associated with higher overall levels of exclusion of poor people from treatment and care. In three of the best performing Asian countries that have met or are close to meeting Universal Health Coverage – Sri Lanka, Malaysia and Hong Kong – the private sector is of negligible value to the poorest fifth of the population. 431 Recent and more detailed evidence from India has shown that among the poorest 60 percent of women, the majority turn to public sector facilities to give birth, while the private sector serves those in the top 40 percent. 432 Private services benefit the richest most, rather than those most in need, and have the impact of increasing economic inequality. 93
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