Financing healthcare in India

One of the three most important planks on which Barack Obama won the U.S. presidential election was the country’s healthcare system, which he promised to fix. Indeed, the most important legislative measure initiated by Mr. Obama so far is the health reform legislation, titled the Patient Protection and Affordable Care Act. It was reported that the U.S. pharmaceutical lobby has spent an average of $600,000 a day over the last six months lobbying against the Bill, mostly seeking to curry favour with Congressmen and Senators. The main reason for healthcare in the U.S. receiving so much attention is its political and economic costs. The new U.S. legislation involves nearly $1 trillion over a 10-year period.

In India, meanwhile, problems related to the financing of healthcare continue to be politically insignificant and publicly invisible. Healthcare has not been an important election campaign issue except in 2004 when the United Progressive Alliance promised to raise expenditure on healthcare to 2 to 3 per cent of the Gross Domestic Product. According to recently released National Health Accounts (NHA) statistics, public health expenditure as a share of GDP increased from 0.96 per cent in 2004-05 to just 1.01 per cent in 2008-09.

Broadly, there are three patterns of healthcare financing across the world. The National Health Service (NHS) of the U.K. is a stark example of a state-run and publicly-funded system. As in the case of the Scandinavian countries, the U.K. uses tax finances to pay for 80 per cent of its healthcare spending. Elsewhere in Europe, social insurance schemes bear most of the financial burden. The U.S. relies on private insurance, paid for mostly by employers: almost half of the supersized health spending (16 per cent of GDP) is financed by tax money for the care of the old and the very poor.

The NHS is relatively inexpensive, accounting for 8 per cent of GDP, even below the OECD (Organisation for Economic Co-operation and Development) average of 9 per cent. The U.K. and other OECD countries have better health indicators than the U.S., although they spend less on it. The contrast between the health indicators of Cuba vis-À-vis the U.S. health expenditure is even more striking. Cuba, with a per capita income that is less than a fifth of that of the U.S., has a publicly funded system that yields better health outcomes than the U.S.

The William Beveridge Committee report (1944) formed the basis of the NHS. Beveridge designed the NHS when Winston Churchill was in power, and there was little hope in hell of his government ever implementing a National Health Service fully funded by tax money. But after the War, the Labour Party headed by Clement Attlee came to power, and one of the first major welfare schemes his government took up was the NHS. In the 1980s, the Conservative government of Margaret Thatcher stripped the NHS of much of the funds and manpower. The ‘New Labour’ government of Tony Blair, however, restored the finances and infused new life into it. The NHS today remains one of the world’s best healthcare models.

Parallel to the developments in the U.K., India had the Joseph Bhore Committee report which came up with somewhat similar recommendations. The Government of India’s acceptance of its major recommendations resulted in a nationwide healthcare machinery with reasonable norms in terms of coverage, availability of personnel and institutional linkages. The Indian public health system never reached NHS standards in terms of universality and access. But following the Alma Ata Declaration and the first National Health Policy in the 1980s, an attempt was made to strengthen it. This enthusiasm, however, was short-lived. Since the start of the economic reforms in the early-1990s, systematic efforts have been made to weaken India’s public healthcare system.

The share of health expenditure in total public expenditure peaked in the Indian States in 1987, but it has been more or less secularly declining thereafter. According to the constitutional division of expenditure responsibilities, the principal burden of health expenditure has to be borne by the States. In recent years, the Centre has stepped up healthcare expenditure through various schemes. Nevertheless, the States’ share in health expenditure remains above 70 per cent.

The Central theme of the Eleventh Five-Year Plan is to deepen the role of the market in healthcare. The principal instrument suggested is Public-Private Partnership (PPP). Though the professed objective of the National Rural Health Mission (NRHM) is to strengthen primary healthcare infrastructure, in practice it has been pandering to the private sector. Reviews of the NRHM indicate that its intended objectives are not being achieved.

An admired aspect of the U.K.’s NHS and European healthcare models is the presence of the General Practitioner (GP), who acts as a gatekeeper for more expensive hospital treatment. Though one of the main recommendations of Bhore Committee was the creation of a ‘Basic Doctor’, Indian policy-planners did not carry it forward. The basic weakness of the Indian system is the absence of an accessible basic doctor. Even today, 70 per cent of primary healthcare is provided by unqualified practitioners.

Over 80 per cent of the health expenditure in India is in the private sector, while in most developed societies more than 80 per cent of health expenditure is borne by the exchequer. Our public sector share is around one per cent of GDP: in this respect India’s peers are Burundi, Myanmar and Sudan. Among the countries of the South Asian Association for Regional Cooperation (SAARC), all except Pakistan have a higher proportion of health expenditure in the public domain. India does not shine among its neighbours in terms of health outcomes. India’s infant mortality rate at 56 per 1,000 live births in 2005 is better than that of only Pakistan. It is a far cry from 12 in Sri Lanka. Similarly, life expectancy at birth of 64 years in India compares favourably only with that of 63 in Nepal. Again, it is a far cry from Sri Lanka’s 75.

One of the reasons for cost escalation in the U.S. system is the nexus between private health insurance companies and healthcare providers. The performance incentives in the private sector boosts the expenditure in a commercialised context. Invariably expensive drugs and procedures are prescribed. Insurance companies provide health cover to the young, the employed and the rich, and avoid those who are elderly, unemployed and poor. There is a cozy relationship between the insured, the insurance company and the healthcare provider.

In India, the share of healthcare expenditure borne by insurance companies is now less than 3 per cent. But there is a build-up for a significant expansion of the health insurance business. Those think-tanks and economists who support this, forget certain facts. Most important, insurance covers only the cost of hospitalisation and not expenditure on outpatient care. NHA statistics show that close to 70 per cent of the out-of-pocket expenditure of the household is for outpatient care, which will not be covered by insurance. Secondly, even in the U.S. about 50 million persons (over 15 per cent of the population) do not have any health insurance cover as they do not have employers to pay their premium. In the Indian situation where a majority of the people are self-employed, universal coverage will remain a mirage. Thirdly, many villages in India do not have a hospital worth the name within accessible distance. What use would insurance cover be for people living there?

For the same reason, even the publicly funded Rashtriya Swasthya Bima Yojana (RSBY) meant for the poor is unlikely to serve its purpose. Further, the present level of funding is sufficient to provide insurance to only a small proportion of those who need it.

After 60 years of planned development, there is a serious mismatch in India between the declared objective of universal healthcare through the public health system on the one hand, and the actual level of public health expenditure on the other. This mismatch between objectives and resources is at the heart of the inadequacies and inequities of the health system.

(Dr. Kurian is Visiting Professor at Council for Social Development, New Delhi and the Institute of Public Enterprise, Hyderabad. He is at njkurian@yahoo.com)

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Printable version | Apr 14, 2021 5:52:08 PM | https://www.thehindu.com/opinion/lead/Financing-healthcare-in-India/article16838112.ece

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