AIDS Treatment in South Asia: Equity and Efficiency Arguments for Shouldering the Fiscal Burden When Prevalence Rates are Low

The slower spread of AIDS in South Asian countries, combined with the fact that most South Asian countries have higher per capita incomes than the most severely affected countries of other regions imply that the various impacts of the disease will be smaller in South Asia than in the worst affected countries in other regions. While justified with respect to the impact of the disease on economic output, on poverty, or on orphanhood, this conclusion does not follow with respect to the health sector, where the relatively minor public role in health care delivery and the entrepreneurial and heterogeneous private health and pharmaceutical sectors combine to magnify the potential impact of the epidemic. This paper uses recent epidemiological data on the extent and rate of spread of HIV/AIDS in South Asian countries and alternative scenarios regarding future government efforts to expand access to AIDS treatment in order to estimate the future need for antiretroviral treatment in South Asian countries and the fiscal burden that their governments will shoulder if they decide to provide or finance all of the needed care. Since AIDS treatment cannot be presumed to slow HIV transmission and may speed it, the usual argument for paying for such treatment with public funds is on equity grounds—that it will prevent poverty and orphanhood. Indeed this paper estimates that public financing of AIDS treatment might avert poverty for about three percent of the Indian population, for example. However, data on the quality of private health care in India suggests that another effect of publicly produced AIDS treatment would be to crowd out lower-quality private AIDS treatment, thereby preventing some of the negative spillovers of poor quality private treatment. The paper closes by arguing on efficiency grounds that the government role in AIDS treatment should encompass both regulation of the private sector and support for quality “structured” AIDS treatment in the public sector.