Equity and health sector reforms

Margaret Whitehead, Göran Dahlgren, Timothy Evans

Equity and health sector reforms: can low-income countries escape the medical poverty trap?

Lancet 2001; 358: 833-36

Department of Public Health, University of Liverpool, Liverpool, UK (Prof M Whitehead PhD); Swedish National Institute of Public Health, Stockholm, Sweden (Prof Göran Dahlgren MA); and Health Equity Division, The Rockefeller Foundation, New York, NY, USA (Timothy Evans MD)

Correspondence to:

Prof Margaret Whitehead, Department of Public Health, University of Liverpool, Whelan Building, The Quadrangle, Liverpool L69 3GB, UK e-mail

In the past two decades, powerful international trends in market-oriented health-sector reforms have been sweeping around the world, generally spreading from the northern to the southern, and from the western to the eastern hemispheres. Global blueprints have been advocated by agencies such as the World Bank to promote privatisation of health-service providers, and to increase private financing--via user fees--of public providers. Furthermore, commercial interests are increasingly promoted by the World Trade Organisation, which has striven to open up public services to foreign investors and markets.1-3 This policy could pave the way for public funding of private operators in health and education sectors,2 especially in wealthy, industrial countries in the northern hemisphere.

Although such attempts to undermine public services pose an obvious threat to equity in the well established social-welfare systems of Europe and Canada, other developments pose more immediate threats to the fragile systems in middle-income and low-income countries. Two of these trends--the introduction of user fees for public services, and the growth of out-of-pocket expenses for private services--can, if combined, constitute a major poverty trap.
Private finance for public services

Introduction of user fees for public services has become entrenched in many developing countries since publication of the World Bank policy document of 1987.4 This strategy was part of a health-policy package, which in turn was one component of common macroeconomic structural-adjustment programmes for countries facing debt.5 The World Bank strategy has been powerfully reinforced by the practice of making user fees a condition of loans and aid from international donors, for example, in Kenya and Uganda.

Private financing of public health services has also increased in countries with high and stable economic growth rates, such as China and Vietnam. Privatisation is claimed to increase the public's appreciation of health services and prevent overuse.4 Fees are assumed to offer financial possibilities to health providers for improvement of quality of services.6

Such privatisation policies in health care, however, are highly regressive, because pooling of risk is reduced and care costs fall more directly on the sick (who are most likely to be poor, children, or elderly), than on healthy individuals. The World Bank's counter-argument was that revenues from user fees could be used to subsidise those least able to afford care.7 Exemption schemes were proposed to get round the difficulty of poor people not being able to afford essential services. During the 1990s, the World Bank predicted that in one sweep, this user-fee policy would improve poorer groups' access to and use of essential health services.7 Why then is there widespread dissatisfaction with this policy in developing countries? The answer lies in the actual, rather than the predicted, effects experienced by families and communities.

Out-of-pocket expenses for private services

A second trend reinforcing the effect of user charges in the public sector, is the increase in private medical practices, and an explosive growth in private pharmacies.8 In developing countries, pharmaceutical drugs now account for 30 to 50% of total health-care expenditure, compared with less than 15% in established market economies.9 Private drug vendors, especially in Asia and parts of Africa, tend to cater for poor people who cannot afford to use professional services. These vendors, who are often unqualified, frequently do not follow prescribing regulations. In parts of China and India, drug vendors can be found on nearly every street corner.10 Limited access to professional health services, and aggressive marketing of drugs on an unregulated market have not only generated an unhealthy and irrational use of medicines, but also wasted scarce financial resources--especially, among poor people.

Medical poverty trap

The positive assumptions on which these strategies have been based are not borne out by the evidence. Results of empirical studies on the effects of these policies point to severe negative consequences.11,12 Rises in out-of-pocket costs for public and private health-care services are driving many families into poverty, and are increasing the poverty of those who are already poor. The magnitude of this situation--known as "the medical poverty trap"--has been shown by national household surveys and participatory poverty alleviation studies.11,13-16 The main effects fall into four categories.

Untreated morbidity

The most severe effects are felt by those who are denied services because they cannot afford them and whose sickness goes untreated. Such people are at risk of further suffering and deterioration in health. In the Caribbean, between 14 and 20% of people who reported illness indicated that they did not seek care because of lack of funds for treatment or transport.17 In the Kyrgyz Republic, more than half the patients referred to hospital were not admitted, because they could not afford hospital costs.15 In some Indian rural areas, 17% of people who reported illness did not seek care, of whom more than a quarter cited financial reasons.18

Untreated sickness among poor people is recorded not only in countries with serious economic difficulties, but also in those with high and stable economic growth. For example, access to essential health services in rural China was renowned, but has been drastically reduced despite a yearly economic growth rate of almost 10% in the past two decades. In household surveys in rural China, 35-40% of people who reported that they had had an illness did not seek health care, with financial difficulties cited by poor people as the main reason.13,19 Additionally, 60% of those referred to hospital by a doctor never contacted the hospital because they knew they could not afford to pay the high user charges.13 Costs to individuals and society from untreated morbidity are potentially devastating.

Reduced access to care

Introduction of high user fees has typically caused an indiscriminate reduction in access to care. The United Nations Research Institute for Social Development has recently summarised the experiences of user fees: "Of all measures proposed for raising revenue from local people this