Unbiased Analysis of Today's Healthcare Issues

Healthcare Super Bowl: Public vs. Private Providers

Written By: Jason Shafrin - Feb• 01•08

Diarrheal disease is a leading cause of childhood mortality in many developing countries. The best treatment when diarrhea strikes is to give the patient Oral Rehydration Solution (ORS). Who provides better care for this disease, public or private providers?

A paper in Health Economics by Waters, Hatt and Black (2008) looks at data from the Living Standards Measurement Surveys (LSMS). This data set draw observations from Latin American and Caribbean countries.

The first item that Waters and co-authors note is that richer household are more likely to see the private physician. “Each additional quintile of household economic status is associated with an increase of 6.5 percentage points in the probability that a child with diarrhoea is taken to a private provider.”

But do these wealthier households receive better care? According to the authors, “treatments provided in the private sector are manifestly of worse quality than in the public sector. A total of 33.0% of children visiting a public provider received Oral Rehydration Solution, compared to 13.7% of those visiting a private provider. Conversely, children treated by a private provider are more likely to receive drugs, most commonly unnecessary antibiotics.”

Private physicians have an incentive to prescribe the more costly antibiotics because they make more money. The publicly financed providers do not have this incentive. The authors claim that prescribing antibiotics may also augment the provider’s reputation with patients. This would be analogous to an American physician preforming an MRI when it is not necessary. The physician makes money on the MRI, the patient believe they are getting high-tech care that is the best in the world, but the MRI may often be a waste of resources.

Winner: Public Providers

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