Set healthcare free from bureaucracy

The pressure group Oxfam does not like the growing trend of international donors using the private sector to deliver healthcare efficiently to the poorest parts of the world. According to its new report Blind Optimism, state-provided healthcare is more efficient, more equitable and less corrupt than private healthcare. The blind optimism, however, is Oxfam's: Governments are responsible for providing healthcare in much of Asia, many have been showered with aid and the quality is still atrocious.

The current system in which rich Governments hand over large sums of money to poor Governments in the hope they will spend the money on health (rather than limousines or warfare) has run its course. Aid for health has ballooned from $2.5 billion in 2000 to $14 billion in 2006.

Access to even basic medicines in India remains unacceptably low. Children go without routine vaccinations. Simple anti-infective drugs are out of reach of the majority of the rural poor. Despite the Government's claims to offer 'universal' healthcare, 65 per cent of Indians have no access to essential medicines.

As former World Bank official Professor William Easterly put it in The White Man's Burden: 'The status quo ó large international bureaucracies giving aid to large national Government bureaucracies ó is not getting money to the poor.' If anything was ever based on the report, it is the current aid model.

This is especially true of health. Quality healthcare relies on specialised personnel, complicated technology and good logistics. Even a rich country like Britain fails to manage state health services efficiently. Most poor countries' Health Ministries, meanwhile, struggle to provide enough PCs for their staff.

Once the donor money comes in, Health Ministries have trouble with the basics. According to the World Health Organisation, most ministries lack even rudimentary data about how this money is spent, making management impossible.

This breeds corruption, from ministerial embezzlement to officials selling free drugs. In December, The Lancet medical journal reported how dozens of less-developed countries lied about their vaccination rates to extract more funds from the UN. The kids did not get their shots but someone was getting rich.

A study by the World Bank's Maureen Lewis shows how corruption in the health sector of poor countries is so bad that it is severely undermining the effectiveness of aid.

Although India receives far less foreign aid than in the past, its health sector currently receives support of Rs 48,000 crore from Germany and Rs 10,477 crore from Britain. Over the past decades, India has received many billions of dollars for health sector, with little to show for this vast expenditure.

For the time being, wealthy Governments have committed themselves to keeping the aid spigots open but the financial crisis means aid is unlikely to continue at these levels. We, therefore, need to rethink completely how this money is spent if we hope to help millions of people improve their lives.

The private sector in India, meanwhile, has a reach far beyond the crumbling Government infrastructure. It has a presence in almost every village and town. Donors should be exploring ways to harness this massive capacity, such as through offering competitive contracts for health services. Non-profit groups, Government and, crucially, the private sector should all be competing. This competitive stimulus would give a powerful incentive to improve standards ó as it has in a host of other vital sectors, from clothes to food.

This has already happened in Cambodia, where NGOs have competed since 1999 to provide health services to the rural poor. Coverage and standards improved so rapidly the Government widened the programme to cover one in 10 Cambodians. In 2005, The Lancet compared 10 different contracting programmes around the world and found the majority out-performed the Government in cost, quality and coverage, finding 'improvements can be rapid' in countries as diverse as Bangladesh, Guatemala, Haiti, India, Bolivia, Madagascar and Senegal.

This process works particularly well for the rural poor, who are frequently neglected by Governments. Where they were once a headache for bureaucrats in Health Ministries, they can suddenly become a business opportunity.

These are times of great financial uncertainty. It is no longer an option for wealthier countries to chuck ever-increasing amounts of money at dysfunctional developing-country Health Ministries, in the hope that some of it will eventually end up in rural clinics and surgeries. We need to abandon Oxfam's outdated ideology and do what works.