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Price controls are a terrible idea to tackle private-public healthcare gap in India

There is an environment of mutual distrust among government, hospitals and patients, that existed much before the Covid-19 crisis.

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Even before the advent of the Covid-19 pandemic, sticker shock with respect to private hospital charges was commonplace in India. The perception and fear of being overcharged by private hospitals, especially through ‘unnecessary’ diagnostic tests and treatments, is widespread. Adverse health outcomes are frequently attributed to negligence or malpractice, and violent attacks on medical personnel by distraught relatives were common enough to warrant special legislation. In India, there is an environment of mutual distrust among the government, hospitals, and patients.

The novel coronavirus has entered the scene in this backdrop. No wonder that it has sharpened the sense of distrust to a breaking point. Last week, the Supreme Court heard a PIL filed by advocate Sachin Jain who argued that private hospitals, which have been given land free of cost, should not charge for Covid-19 treatment. In response to the petition demanding price regulations on private hospitals, the Court asked if private hospitals “were ready to charge Covid patients the rates fixed under the Narendra Modi government’s Ayushman Bharat scheme for their treatment.” Lawyers then submitted that private hospitals are in a poor financial position as a result of the Covid-crisis and that there was “no business left” as there was a drop in people visiting hospitals for treatments and this could lead to closure of hospitals. The Court’s retort to this was surreal. “That is good,” the Bench said “You are doing it for a good cause.” It is yet to rule on the matter, but this exchange exemplifies the problem we have with the governance of our healthcare sector.

Also read: Fixing price cap for Covid treatment in Delhi, drive-thru tests on L-G’s meeting agenda


Too many regulations, too little governance

Despite the existence of numerous laws, regulations, judgments and administrative orders, our healthcare sector lacks any coherent governance framework. In a paper published in 2013, Madhav Madhusudan Singh and his co-authors list at least 18 laws that concern the commissioning of a hospital, 10 covering medical professionals, 10 pertaining to drugs, 12 regarding patient management, 11 concerning environmental safety, 24 regulating manpower, four on medico-legal aspects, 14 on safety, five for teaching and research and 10 concerning business aspects. In addition, there are 20 licenses to obtain and 16 periodic returns to be filed by hospitals. A new Clinical Establishments Act was enacted by Parliament in 2010 that is applicable in ten states and certain Union Territories.

Paradoxically, despite there being a patchwork of regulatory tripwires that hospitals, clinics and laboratories have to nimbly hop around, for the most part the healthcare sector is unregulated. Given the importance of the sector in managing the Covid-19 pandemic, as well as for India’s long term economic prospects, we need a wholesale rethink on how it is governed. For that, we must discard old mindsets that see the problem from a particular moral prism and believe that the solution is more administrative diktat. Instead, we need a fresh mindset that understands and accepts the legitimate motivations of all the stakeholders: the patient seeks reliable and affordable care, hospital investors desire profits and the government, better health and economic outcomes for society. Contrary to popular belief, these motivations are not mutually exclusive. The objective of a new national healthcare governance framework ought to be to achieve all three.

Also read: Arvind Kejriwal has run out of excuses over his Covid failures in Delhi


Healthcare needs greater competition

Let’s take the question of “overcharging” and a “fair price” for healthcare services. Why is a particular private hospital able to charge a certain price for a certain treatment? Would it still be able to do so if there was another hospital nearby offering similar treatment at a lower price? Certain well-regarded specialists are not easily substitutable and command premium fees. But for a wide range of procedures competition will set the market price. If a hospital can get away with “overcharging”, it means that it does not have adequate competition. This is consistent with the fact that India has fewer doctors and hospitals than it requires — leading us to conclude that government policy must strive to increase the number of doctors and hospitals and inject more competition. Only very brave and well-connected investors will be willing to put money into a sector that requires compliance with 120 laws and scores of licensing and reporting requirements. If the government tops all this with a growing number of price controls and delays payments under its own schemes, you’ll find people getting out of the hospital business, as we’ve seen in the past couple of years.

Price controls are a terrible idea. As soothing as they may be to the consciences of politicians, judges and activists, they create shortages. Shortages, in turn, lead to profiteering and corruption. During the pandemic, we need to maximise the supply of hospital beds, ICUs and diagnostic tests. Instead of counterproductive price caps, state governments must insist on price transparency and no “hidden charges”.

How does the government then ensure private hospitals don’t overcharge patients? By running good public hospitals that provide decent medical care, treat patients with respect and effectively set the market price. Advocates of price controls and “nationalisation” of private hospitals must stop to think about why people vote with their feet and choose private healthcare, despite anxieties over fees and malpractice.
Would they still choose expensive private hospitals if they thought government hospitals were an acceptable option? The answer to the problem of expensive private hospitals is high-quality government hospitals. Who is stopping state governments from building and running public hospitals that their own ministers, judges and bureaucrats can go to? Who is stopping them from allocating more funds to the healthcare sector?

Although far from perfect, India does a fairly good job of governing banks, insurance, telecom and airline operators. Healthcare differs from these industries in many ways, not least because of the need for federal coordination where states are the primary players. Yet, the underlying governance philosophy between them is not vastly different. The new national healthcare governance framework should focus on ensuring competition, safety and quality of service rather than on registration, licensing, compliance and grievance redressal, like the current regulations do.

The author is the director of the Takshashila Institution, an independent centre for research and education in public policy. Views are personal.

Also read: Why bureaucratic control over Covid-19 testing is counterproductive as India ‘unlocks’


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  1. This is just one way of looking at it. Your argument is that doctors and hospitals are charging more because they do not have competition. But know that even in country like US, where they have ample number of government and private hospitals, still the pr icings are sky high. There are cases when people are met with an accident and they tell the rescuers not to call ambulance because they know they’ll be burdened with such a huge bill. We should learn from Japanese Healthcare system. Where All the practitioners fees are same and decided by the govt. .All the medicines, test, procedures etc.are decided every two years collectively by Doctors and Government. After that no one can charge above it. So, this emopowers the citizen to visit hospital more often and take better care of their health. While Americans pray they never have to visit a hospital beacause despite of Mediaid & Mediccare thier bill will skyrocket. So, definitely by bringing the prices down and increasing the inflow of patients will do more good for the business. Another issue that is hampering our healthcare system is the Drug Mafia. Those Pharma kingpins that are promoting their super expensive medicines via MRs & Physicians. When anything comes from physicians we the common people are bound to buy it. That is just plain robbery. People fear the costly medicine prescription more than doctor’s fee. because of such most people refrain to visit hospital. Also if one manages to pay for certain operation but that’s just half of the story, medicine course still follows. So, costly medicines are only benefiting the pharmas and only harming everyone and everything else. Doctors, hospitals, Investors, govt, No one benefits from costly medicine but only lose major customers. Just Imagine if like Japan, only generic medicines are allowed then so many people will freely visit hospital.

  2. Hi All!

    The corona virus pandemic has only exposed the rampant negligence, corruption and inadequacy present in Indian healthcare system that has always been present even prior to COVID – 19.

    My family is also a victim of medical negligence. I’ve started a petition “Medical Council of India, Lilavati Hospital: Cancel License, expel Corrupt Nephrologist Hemant Mehta, Prashant Rajput who killed my Mom” on

    Request you to go through the petition and please sign the petition, it will only take you 30 seconds to sign it. Here’s the link:


  3. But, the doctors in private hospitals do overcharge and prescribe unnecessary tests. Though I believe, quality health care is expensive and the doctors and hospitals should make profits. Only profits can motivate them to spread their network. Also, rich people can open more charitable hospitals or can run some government hospitals too.

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