Managing Markets for Health: Breaking the Ice and Tearing Down Myths on the Role of Markets in Healthcare

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This is the first post in our series on Managing Markets for Health. 

Last week, we helped launch the first ever in person course on Managing Markets for Health, created by the World Bank in partnership with the University of Edinburgh. Over twenty state health policymakers, eight international participants from four Asian and African countries, and key development partners in India assembled in New Delhi for the course. The course brought together participants with different expectations, different perceptions, and different frameworks of understanding to a five day workshop to explore how policymakers can steer markets to support public health outcomes.

India is a classic case of a mixed health system in which public and private health systems coexist. Over sixty percent of health services are provided by the private sector, with varying degrees in primary care and hospital based care. India also has very high out of pocket expenditures on healthcare services, drugs, and diagnostics. In a mixed system market like this one, governments need to think creatively to engage, manage, and regulate the private sector so as to support public health outcomes. This course aimed to help participants understand and characterize mixed markets in the healthcare sector. The course introduced key policy levers and tools that policymakers can use to steer markets toward desired health outcomes.

The course was introduced by CK Mishra, a top government leader from the Indian Ministry of Health and Family Welfare. In his opening remarks, Mr. Mishra explained that courses like this one are valuable opportunities for two way interaction. The government brings its practical experiences and challenges while experts from the health sector bring reform ideas and experiences from different parts of the world. Mr. Mishra urged all of the policymakers in attendance to step away from their usual work routines for five days of learning and innovative ideas to improve the functioning of health systems.

Do we really need more frameworks?

There are many frameworks out there to help us understand health systems. These frameworks often originate from different schools of thought. April Harding, the lead economist and pioneer for the Managing Markets for Health course, made a compelling case for the need for a new framework, particularly to understand and analyze mixed markets. Most existing frameworks are either “market romantic” or “market oblivious,” Ms. Harding explained. Market romantics tend to believe that the market has the potential to ease out all inequities and improve health for the population. Market oblivious frameworks do not consider the influences of market and advocate investing in purely public health systems. Both of these frameworks are inadequate.

The market forces framework is an analytical approach that integrates markets into assessments of the health sector and into policymaking. This framework defines the healthcare market as a place where buyers and sellers interact for the purchase of healthcare goods and services. Even public health providers form a part of this market, since buyers consider public providers as a potential option to choose when making their healthcare choice. The framework focuses on the buyer/seller relationship to analyze a particular health market or submarket. This template helps practitioners to analyze markets and decide to take necessary actions through various economic, financial, and regulatory policy tools to steer markets for necessary outcomes.

Rohini Blog TemplateThrough intense discussion with health policy practitioners, we identified six key domains for the framework. The domains were selected to ensure that the template was as useful a generic tool as possible across the different health markets and submarkets. The spectrum across each indicator defines how influenced the sector or subsector will be by market forces or structured governance features. The optimal mix varies based on the context within which each of these countries works and the health market or submarket in question. Within India, the submarket of primary healthcare may be very different from the submarket of the hospital care.

The first domain in the framework is ownership. Ownership determines how much operational autonomy the seller has to organize himself according to changing needs. The public structures have less autonomy compared to privately owned organizations. This spectrum includes both the magnitude of the constraint and the number of sellers that come under such a constraint. For example, we would place the Swedish primary healthcare market closer to the left end of the spectrum in the ownership domain, considering the number of public providers.

The second domain is customer competition, which indicates the extent to which sellers of services or products are influenced by customer competition. For example, public healthcare providers in India are paid a fixed monthly salary that is not pegged to any performance indicators. Since pay does not depend on whether the customer chooses their services or not, it will be marked on the extreme left at zero percent market forces.

The third domain of price influence refers to the underlying forces that determine the prices of the products or services. For example, the prices of drugs in the public health system in India are “administered.” This means that they are determined by the government without any explicit costing analysis or taking market forces of operations into consideration. Prices in the private drug market are completely governed by cost, supply, and demand forces.

The fourth domain of entry barriers determines the ease with which an operator can enter a market. The regulation of these entry barriers is one of the common levers of the government to control markets.

The fifth domain about social funding refers to the source of social subsidy for a particular service or product. The Indian primary healthcare market is paid out of pocket, for the most part. We peg the market at about the far right corner on social funding.

The last domain, and this is particularly important to capture the nature of submarkets in health systems, is “pressure from contract conditionality.” This factor influences the behavior of sellers and is, again, a common tool used by policymakers. For example, hospitals that want to be empaneled under the National Health Insurance Scheme in India must abide by certain empanelment criteria.

Participants grappled with understanding this conceptual framework. A case study to map the French primary healthcare system helped participants put the framework into action. Participants then applied the framework to understand the private drug market and the public drug market in Nigeria. The public drug market is extremely structured, with all six indicators plotted to the left, while the private drug market is subject to full market forces with all the indicators plotted at the right. The contrast in the way the markets function highlighted the inherent challenges and how markets must be steered to make them function more efficiently.

During the post session lunch break, participants reflected on the framework. Participants felt that what they were learning was not entirely new. The participants understand how their health sectors and subsectors work. However, the framework gave the participants an opportunity to characterize and to understand how the performance of the sectors impacted health outcomes. “This course gives us the courage to think differently and think beyond existing practices to new approaches to health policy planning,” explained a participant from Kenya.

We are off to a good start. Stay tuned for blog posts on the four days of simulating workshops that followed.