Those critics who have lamented the absence of the “big bang" or “shock therapy" variety of reforms from the Bharatiya Janata Party-led government of Prime Minister Narendra Modi need look no further than government think tank Niti Aayog for an exemplary and bold reform proposal which truly would shake things up. A recent report by the body, authored by a committee chaired by its vice-chairperson, Arvind Panagariya, has proposed a sweeping overhaul of medical education in India.

The committee’s remit was to suggest an overhaul of the Indian Medical Council Act, which dates back to 1956. It is under the aegis of this Act, with subsequent amendments and ordinances, that the Medical Council of India (MCI) governs medical education in India.

The most arresting and important governance-related element of the proposed reform is the scrapping of the MCI, and its replacement by a new body, the National Medical Commission (NMC). At present, members of the MCI are elected. The NMC would have its members selected by a high-powered committee of unimpeachable integrity, to be chaired by the cabinet secretary. While the current system of election to the MCI was based on noble intentions, the effect has been to keep serious medical educationists out of the body.

Instead, the MCI has gotten captured by those it is supposed to regulate—a classic instance of regulatory capture as articulated by the Nobel Prize-winning economist George Stigler of the University of Chicago many years ago.

There are also important process reforms proposed under the new Bill that the Panagariya committee has drafted and appended to its report. In particular, the evaluation of medical colleges, which at present is conducted based on inputs, will switch over to an output-based evaluation.

This will eliminate the possibility of corruption, which has flourished under an opaque input-based system in which the MCI could threaten closure of a medical college on flimsy and non-verifiable grounds. Equally, the proposed new legislation will mandate both entrance and exit exams for medical professionals. Anyone practising medicine in India will have to pass the exit exam. This would bring India in line with the norms of medical certification in other major countries.

What has, predictably, aroused the most pushback from our left-leaning commenting class concerns the regulation of fees for medical education. Under the Panagariya committee’s proposal, private medical colleges will be free to set their own fees in a transparent manner. Further, all colleges will need to announce and post upfront their structure of fees.

What is more, for-profit medical colleges will be permitted. This has aroused the greatest angst of all among those nostalgic for our socialist past. But, except for those wearing ideological blinkers, this is clearly an important and necessary reform.

With a mandatory exit exam before anyone is allowed to practise medicine, medical colleges will have to perform. A college which charges exorbitant fees and whose students fail the exit exam will soon be out of business.

That is how the market economy functions: by imposing discipline, not through the diktats of a bureaucracy but through the forces of competition.

Further, to take note of the concerns of states, and to work towards a system characterized by equity, not just efficiency, states will be allowed to regulate the fees that up to 40% of students are charged, with colleges free to charge the tuition fees of their choice for the remaining 60%. This amounts to what economists would call a cross-subsidy from the latter to the former group of students. But, importantly, all admissions are proposed to be merit-based and conducted through an entrance examination administered by the NMC.

Many commentators have been attacking the Panagariya committee’s proposal for for-profit colleges. But they are either unaware of, or wilfully blind to, the fact that our current system, which in theory is based on a system of non-profit medical colleges, is characterized by many so-called non-profit colleges which are profit-seeking in all but name. Thus, various capitation and other hidden fees charged by the colleges considerably jack up a student’s costs over and above the official, regulated tuition fees. This is a completely non-transparent system which has served no one well.

Indeed, all that our current status quo has allowed is for the feel-good crowd to claim virtue for the fact that India’s system of medical education features ostensibly non-profit medical colleges, while profiteering by unscrupulous colleges subject to opaque and capricious regulation has continued unabated.

Importantly, the Panagariya committee has courageously established the principle that, in medical education as in other sectors, profit is not a dirty word. It is far better for society to have well regulated for-profit medical colleges with transparent and upfront fees and with a scrupulous system of entrance and exit exams that will keep them honest, than our current system in which no one is genuinely accountable, standards are poor, and it is both medical professionals—and ultimately patients—who suffer.

Looking for a big bang reform in an important sector that remains unreformed? Look no further than the regulation of medical education in India, and to the Panagariya report on how to reform it.

Vivek Dehejia is a Mint columnist.

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