there is no incentive to modernize those hospitals that much, when its free after all, and you pay for it anyway

While that may be true to some extent, our "third-world country" healthcare is great once you get through the door. We have competent doctors (some of whom I personally know) who got a great education from our public universities. We also occasionally get modern equipment like the new state-of-the-art sample processing robotics lab that's the size of an apartment. And while one of my relatives has been waiting on an affordable CT scan for some time, it's only because they're literally constructing the building. The system may be limping along, but it's honestly not that bad.