The demand-supply gap in medical education

The return of Indian medical students fleeing the war in Ukraine has reignited the debate on the need for more medical colleges and increase in medical seats in India. 

The demand supply gap is stark. About 1.6 million students appeared for the National Eligibility cum Entrance Test (NEET) in 2021, of which only 88,120 make it to the 562 public and private medical colleges. That's 19 applicants for every seat. Those numbers are now 89,875 and 596. 

How do you analyse this market? What will be the impact on seat prices due to supply changes of medical seats? How will the supply side react to this situation of large numbers of Ukraine returned students? What will be the profile of supply side?

As usual, in the search for solutions, the mainstream commentary argues for the private sector stepping in to fill the gap. I'm not sure for multiple reasons. 

The biggest constraint to setting up medical colleges is not so much capital, but the acute shortage of good quality teaching personnel. And if you want them outside the main cities, it's an almost insurmountable challenge. But you need strong supply of good quality personnel to support more medical colleges. And more good quality personnel require more medical colleges. So we have a chicken-and-egg situation.

Given the demand-supply gap, unless they come in massive numbers, incremental addition of private medical colleges, while much welcome, will be little more than a blip on the gap and encourage only profit maximisation. And, given that the demand-supply gap was already well-known for years, we know that private interest in medical education will not come in massive numbers just because of the Ukraine returnees. 

In an acutely supply deficient market, the limited marginal supply is likely to bid up the medical seat prices even more. This is a situation reminiscent of the urban housing market, where the limited marginal supply goes at ever higher rates. In both cases, any meaningful dent on the prices can be achieved only through substantial additions. 

Further, we may end up with a lemon problem in such markets. The demand-supply gap has been well-known, and it has over the years attracted several very credible and committed individuals and institutions into medical education. Any concerted policy push for establishment of medical colleges, especially based on a distress supply (from Ukraine), is likely to self-select less than desirable entrepreneurs and promoters. 

There is a precedent here. We have already seen the consequences of rapid pace of colleges and seats in engineering education during the 2000s in the private sector. The very bad toll on quality is now widely acknowledged. So much so that large numbers of colleges have either shut down or their recognition withdrawn. 

Then there is the problem with the belief that the private sector can provide a major share of affordable professional education seats. This belief has its roots in the experience of US, where unique historical evolution trajectories helped the emergence of private colleges. But there too public colleges form a very large share. In Europe, higher education remains largely in the public realm. 

Attempts to scale up using the private sector through Public Private Partnerships (PPPs) are most certain to fail. In a recent oped, Anand Krishnan was spot on in his assessment of the likely problems with such PPPs,

There are many who propose a rapid scale-up of seats by converting district hospitals into medical colleges using a private-public partnership model. The NITI Aayog seems to be moving in this direction. This is a dangerous idea without the government putting in place two things — a functional regulatory framework, and a good public-private model that serves the needs of the private sector as well as the country. We have so far failed miserably in both, largely due to the political-private sector nexus.

If we are to make a significant dent on the problem, the best bet are existing government facilities. Many government District hospitals and certain Area hospitals (300-500 bed hospitals) are well placed to be converted as medical colleges. With some infrastructure augmentation and recruitment of teaching faculty, these facilities can gradually be converted into full-fledged medical colleges. Being government institutions, there will always be some basic minimum assured quality. In order to raise resources to augment infrastructure and finance these institutions, a third to a half of seats can be converted to payment seats and charged the full cost-recovery fees. 

Krishnan in the article quoted above also makes important points about the way forward for medical education,

Recent efforts by the National Medical Council (NMC) to regulate college fees are being resisted by medical colleges. The government should seriously consider subsidising medical education, even in the private sector, or look at alternative ways of financing medical education for disadvantaged students. Quality assessments of medical colleges should be regularly conducted, and reports should be available in the public domain. The NMC is proposing a common exit exam for all medical undergraduates as a quality control measure. 

Finally, this is a teachable example on the reality that though many problems have no immediate solutions, we try to solve them. Part of it is about wanting to do something and also be seen doing something. This is a human reflex and a political economy compulsion. Bridging the demand-supply gap in medical education is one such problem. Given our context and constraints, it's very unlikely that we can bridge this gap in the foreseeable future. Like with other similar problems like affordable housing, agricultural productivity, or traffic congestion, we can only create the conditions required for its mitigation and gradual easing.