Economics and finance, Government and governance, Health | Asia, Southeast Asia

21 January 2019

The ruling Communist Party of Vietnam increasingly sees public health as a financial burden and is now weaning the country’s healthcare system off of its subsidies, Minh Vo writes.

According to the recent Vietnam Public Expenditure Review, 2.5 per cent of households in Vietnam – about two million people – are pushed into poverty each year as a consequence of catastrophic expenditure on healthcare. The government’s decision to autonomise public hospitals may well be the root cause.

Vietnam’s ‘autonomisation’ forces public hospitals to generate alternative non-budgetary revenue. They now have greater independence in areas conducive to revenue generation, including more flexibility in capital mobilisation, the use of revenue for service-related activities, and the allocation of net revenue.

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This change has come about because, in the face of constant fiscal deficits, the Communist Party of Vietnam has started to see healthcare services as a social and economic burden rather than a significant component of economic development. Communist elites have thus instituted autonomisation as a strategy to reduce – and progressively remove – the state subsidy for healthcare services.

Different from similar initiatives in most other countries, Vietnam’s medical reform is primarily about commercialising and monetising public healthcare. The underpinning of this policy approach is the persistent shortfall in resources largely due to the high ratio of public debt that the country has been experiencing since 2008.

The economy’s flawed socialist structure is to blame for the serious circumstances in which it finds itself. It prioritises the state economic sector at the expense of its underdeveloped private counterpart. Vietnam’s economic development model has led to much poor management, wastefulness, and corruption in the state economic sector, also leading to huge losses for a number of state-owned enterprises in recent times.

In the course of my research with public hospitals in Vietnam, I discovered that such changes have also induced a number of unethical revenue-maximising practices among public hospitals that disproportionately benefit healthcare staff. These include the provision of ‘patient-requested’ services within public wards for higher-paying patients, unnecessary provider-induced services, the excessive use of high-tech diagnostic equipment, the inappropriate prescription of drugs, an increase in lengths of stay, and the receipt and solicitation of informal payments.

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Arguably, these practices are a manifestation of the distortion and abuse in the healthcare industry. It sees some rent-seeking health professionals trying to squeeze as many out-of-pocket payments from service users as possible. As a consequence, public healthcare services in Vietnam have been commercialised and monetised at an increasingly rapid and aggressive rate, resulting in substantial financial burdens being put on service users.

In the absence of an effective social security system, it is understandable – as the review shows – that millions of Vietnamese people are impoverished due to the catastrophic expenditure on healthcare services.

Ultimately, Vietnam’s medical reform is a political rhetoric that the ruling communists have rolled out to put the financial onus on society instead of themselves. This transition, which is often labelled in policy statements as an adherence to market rules, actually represents a radical change in the role played by the socialist government.

The state will no longer guarantee universal and equal access to healthcare services. Instead, it shows a strong determination to engage deeper in the market economy for them to be marketised.

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Seldom does the state relinquish its control with the aim of maximising market efficiency or proving its devotion to economic rationality. It isn’t particularly fond of deregulation and decentralisation either. Rather, this kind of behaviour denotes its socialist intent on borrowing capitalist ideals for political and financial survival. Nowhere is unfettered neoliberal ideology stronger than in the government’s imposition of autonomy on Vietnam’s medical industry.

The consequences of this reform indicate the importance of increased state financing for healthcare services. Public hospitals cannot and must not be held at the mercy of successful commercialisation.

The state must change the way it thinks of healthcare services and their contributions to economic growth – they must be regarded as an investment for greater development, not as an economic burden. Being a welfare state, it is crucial – now, more than ever – for Vietnam to continue funding the medical industry and focus on improving its health outcomes.

This piece is based on the author’s article in the Asia & the Pacific Policy Studies journal. All papers in the journal are free to read and download.

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2 Responses

  1. Chris Harrington says:

    Thanks Minh Vo for a political analysis of Vietnam’s response to increasing wealth and fear of unsustainable health costs. After living in Vietnam, it became clear that doctors in public hospitals are very poorly paid and their clinical practices are a mixture of traditional medicine, a south east asian style of prescription dispensing and contemporary medicine that is highly variable in terms of quality.

    Greater marketisation is not the answer but I’m not sure the wealthy West with its open ended financing systems are much better in terms of constraining demand driven interventions and putting the emphasis on primary care and prevention.

    I also wonder whether this is Government led or the IMF? Certainly Việt Nam to date has resisted most of the extreme ideology of the IMF, which now iitself is presenting a less market driven suite of options than in previous decades.

    • Minh says:

      Thanks Chris. After living a couple of years in New Zealand, I also have seen the shortcoming of a open-ended financing healthcare system but apparently it is much better than a highly commercialised one. In the education and healthcare areas, the Vietnamse reform is government-led. The Vietnamese government have resisted some of the IMF ideology primary in the reform of stat-owned enterprises of which the state desires to retain tigh control.

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