The Illusion of Economic Development: Part II

In the previous article, we explained how, under the current economic system, economic development and welfare is an illusion. Under the present conditions, people’s incomes are actually falling in real terms and they are becoming worse-off, as the costs of all goods and services go up and the quality deteriorates. By increasing deprivation, you are actually contributing to the GDP and measuring that as economic development. For instance, by succumbing to diseases, by eating out, or by buying drugs, you would be contributing to the growth of these sectors and increasing the overall national income. But this does not lead to a rise in happiness or welfare. For, GDP not only indiscriminately measures deprivation or rise in spending on harmful services, but, more importantly, due to a rise in psychological corruption and the spirit of pure selfish utilitarianism, the falling and manipulated quality of products and services ensures that you are losing more income down the drain, without any increase in welfare whatsoever.

We substantiated this issue by taking the case of the higher education sector, wherein the student is subjected from all sides to intellectual and moral corruption, the illusion of actually doing work or research and the heavy amount of money he/she has to spend on education, even as graduate unemployment is on the rise world-over. Instead of welfare, we actually have cases of students falling prey to suicides and depression by being a part of the higher education sector, irrespective of how elite and glorified the university looks from the outside.

Education is just one of the many services in which we can see the solid proof of how the real welfare and incomes are falling, even as expenditures rise and quality is on the decline. Besides education, there are many other sectors in which this is becoming evident.

The corruption in healthcare

Healthcare is one of the key services with high government expenditure and private investment, around the world. It is also not simply one of those services that simply affects our income when we spend on it, but also determines questions of life and death, immediate psychology and overall well-being of a person. And yet, today, healthcare has become such a complex business industry that it caters to everything to promote its own selfish ends but to the service of its patients.

While, till about a few years back, the information on corrupt practices in the health sector used to be gleaned from the word of the mouth and experiences of people close to us, today, it has become the obvious subject of headlines and investigative research. Indian private hospitals recently made headlines due to their refusal to treat poor dengue-afflicted children who succumbed to death and led their parents to commit suicide. However, these are the most obvious cases of greed in the medical sector. The starker reality is that corruption pervades at every level right from getting referred to a doctor to the aftermath of the treatment.

A recent study in India by the British Medical Journal found that, “The private healthcare system largely treats patients as revenue generators, without rationality or medical logic.”1 Due to lack of accountability of private healthcare and inefficiency of public healthcare, there are several features of this corruption at every level, besides inequality and lack of access:

• Kickbacks and referrals: Doctors indiscriminately make money through referrals and kickbacks. The practice is so common that it has become an open system. They earn wads of cash as commission that should be due to the patients as part of referrals.2
• Prescriptions: The nexus between the pharmaceutical industry and the doctors is also an open secret, wherein doctors are bribed by pharmaceutical companies to prescribe expensive medicines to their patients. Doctors also frequently prescribe surgeries and tests that are not needed and may worsen the patients’ condition.3
• Excessive testing: There is often a nexus between testing labs and hospitals, or the doctors have their own testing labs. It one of the foremost ways to earn money, since the worse the disease, the more expensive the tests, like the dengue test in India.
• Meeting targets: Much like in the United States, in India as well, the medical ‘industry’ has become just like the financial sector. The doctors, like salesmen, have to meet certain ‘targets’ set by the hospital, and for the same purposes, ‘agents’ are deployed to lure medical tourists from abroad with lucrative packages.4 While this leads to severe competition and may sometimes reduce prices, it also leads to severe compromise of the quality. The result is that you end up paying more for the health service that is badly rendered and deleterious to your health.

Besides these, various people have documented their own traumatic experiences in public5, describing how massive consultation charges are charged by the same doctor and the number of visits deliberately increased even for minor consultations. There are also descriptions of how the medical bills are inflated even when all that the doctors do is to poke their head in the patient’s room and smile, and even the doctors accept this, so lot of bills in top hospital chains are inflated by design.6

Given these layers, it is no surprise that the healthcare system in India was ranked as the second most corrupt sector after the police, by the Transparency International, in 2005.7 It is estimated that about 39 million additional people fall into poverty every year as a result of healthcare expenditure.8

A Global Story

Beyond India, the healthcare systems of most other major countries – with high GDP growth – reflect the deep discontent of the people. According to a study, the total global spending on healthcare is more than $7 trillion every year, out of which between 10% and 25% of global spending on public procurement of health is lost through corruption.9

In United States, in 2011, between $82 billion and $272 billion was lost to medical embezzlement due to flaws in the health insurance system.10 In US, the healthcare is mainly private insurance-based, with most providers owned locally by private companies.11 The level of private hold is such that, in 2013, it was revealed that medical bills are the biggest cause of bankruptcy in the US.12 In 2014, the Veterans Health Administration programme was hit by a scandal with the revelations that at least 40 US military veterans had died while waiting for medical care.13

In China, the healthcare system is much worse than in India. It is not just ‘privatised’ – a flaw which is pointed out as the malady of Indian healthcare – but is also corrupt, hierarchical and under-invested. Violence has become a common feature, with ‘patient-on-doctor’ attacks rising 23% a year on average since 2002, with a typical hospital suffering one such incident every two weeks.14 This is one of the world’s fastest growing economies.

To take the example of another fast growing economy, let us consider South Africa. According to a report, “The government spent more than 8.5% of GDP* on healthcare in 2012, higher than the 5% recommended by the World Health Organisation (WHO) for a country of its socioeconomic status, yet performed worse than comparable nations.”15 Despite such huge spending on healthcare, welfare remains an elusive dream, as inherent corruption in the system breeds other ills like inequality, lack of access and inefficiency.

We have seen that the malaise in the health sector pervades all countries. However, if we derive some lessons from the comparison, one thing that becomes clear is that India, despite having the world’s lowest spending on healthcare at just 1.3% of the GDP, fares better than most other countries whose spending is very high. The main problems identified in Indian healthcare mainly relate to privatization and corruption arising out of it – something that is near universal elsewhere. It does not have the massive suffering that is prevalent in other high-spending countries.

This just goes on to show that advocating more spending to cure corruption will not achieve anything. The disaster of Obamacare is just one example of the futility of such an approach.

Is Reform Possible?

Despite the rampant corruption in the health sector, the prescriptions for reform that are currently doing the rounds have also failed to catch the real malaise. They think that the problem is with lack of proper governance17 which does not ensure accountability and leaves the vast resources of the health system in the hands of the private sector.

On the accountability side, data is quoted to show that, in India, the private sector in healthcare currently has 80% of all doctors, 26% of nurses, 49% of beds and 78% of ambulatory services and 60% of in-patient care.18 It is argued that such corporatization of healthcare should be curbed and government should become more pro-active in order to reduce the rampant greed and corruption.

On the governance side, it is argued that the weak reach of the medical insurance system, in India, should be addressed. According to a study, “only 243 million of India’s 1.2 billion citizens are covered under Govt health insurance schemes and a total of 300 million (25% of total population) don’t have health insurance at all.”19

Another suggested reform measure to improve health governance involves using technology. Technology has become a powerful instrument across service and goods sectors in order to ensure that the seller of the service does not charge too high. In the health sector too, something similar to US has been emerging in India, with online rating forums like Surgerica, Medypal and Lybrate, enabling patients to compare and rate doctors on all counts, as increasing number of people with internet access go online for health services and become aware of their rights in this sector.20 But does this mean that we can rely entirely on such technologies to re-build people’s trust?

This is a completely flawed argument. It is implausible that privatization of healthcare is the root cause of the corruption in the sector, and that government intervention, expanding the reach of insurance cover or leveraging technology can cure this. In the American healthcare system, the nexus between the insurance industry and healthcare is well-known. In China, despite the insurance coverage of the rural population being about 99%, the patients are paying as much for their medical services as they used to before being insured, due to the higher cost of medical services.21 Both healthcare and insurance try to suck the patients dry, both psychologically and in terms of money. Even government intervention and regulation has acted as a weak check at best, for, even the political sector is not free of corruption.

There is also no guarantee that the patients can get a better deal by using technology. Such technology has been common in the US for a long time, but the massive fraud at the heart of healthcare continues unabated. For, technology can cut both ways. It can be manipulated or limited by fallible human thinking and fail to do any good.

Thus, none of these institutional reform measures can truly bring about any lasting welfare or value-for-money in health services. For, the psychological incentive structure of our society is designed in such a way that people have no option but to engage in corrupt practices in order to survive a system whose rules and institutions are completely out of sync with the psychological reality of people.

The Root of the Problem

We have looked at a variety of countries and cross-cutting reform measures that have been put forward to reform the service of health. While it is clear that better technology, first-class infrastructure and ‘sophisticated doctors’ have created an illusion of luxurious healthcare facilities in top hospital chains, the reality of the massive global fraud is that rising costs and eroding quality is sending millions of people into bankruptcy, depression, disease and death every year. The issue of rising income and welfare is completely out of the question. Medical bills alone suck half the income of most people and don’t provide any welfare either.

Yet, the surprising part is that our social experts really believe that they are still capable of solving this problem through ‘good governance’. Is it too difficult to see that the heart of this system is driven only by sheer greed and corruption and unless that is rooted out, all ‘governance’ measures will always be manipulated?

All the measures suggested for reforms in this or any other field touch only the surface of things. The root of all our problems lies in our psychology. We contemplate changing everything except ourselves. Unless we recognise this and direct our efforts in this direction –  however difficult that may be or long it may take –  nothing substantial is likely to be achieved. A beginning has to be made sometime, somewhere. And why not now?

To be continued….