Indian healthcare needs finance, but where is the money?
The recent Union Budget made some serious commitments on improving health indicators and tackling disease in the country.
India will likely eliminate kala azar and filariasis by 2017, leprosy by 2018, measles by 2020 and tuberculosis by 2025. The IMR (infant mortality rate) will come down from 39 in 2014 to 28 per 1,000 live births in 2019 and MMR (maternal mortality rate) from 167 in 2011-13 to 100 per one lakh live births by 2018.
As already declared by PM Narendra Modi, maternity benefits of Rs 6,000 per institutional delivery will be given out and that constitutes the highest increase in allocations we have seen in the Budget.
The demonetisation drive has returned the focus on cashless, Aadhaar-based payment systems. The National Health Protection Scheme leverages technology to arrive at universal health coverage through the use of strategic pre-purchase, digital records and robust IT infrastructure.
If such a system could then improve the health insurance cover, we could take a giant leap towards providing universal health coverage (UHC). With an incentive system that rewards outcomes, and a monitoring mechanism that assures quality care, the new ethos in India could result in some significant systemic changes.
A Brookings report using NSSO data has shown that 15 per cent of Indians now have some form of health insurance compared to 1 per cent in 2004. Also, while nearly 62 per cent in Andhra Pradesh are covered, less than 5 per cent of people in UP have health insurance. The World Bank had estimated an all-India figure of 25 per cent for 2010.
In the absence of comprehensive data, this figure would understandably vary. What cannot be denied however is that with rising health costs, the lack of insurance cover can cause households to incur catastrophic expenditures, which in turn can push them into chronic poverty.
The poor incur extremely high out-of-pocket expenditures (OOP) on healthcare - that is the share of expenses that they pay to healthcare providers, in the absence of insurance or subsidy.
But, rather ominously, the finance minister’s Budget speech was silent on the National Health Protection Scheme that was announced as replacement of the Rashtriya Swasthya Bima Yojana in April 2017. What does this mean for financing healthcare costs?
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| Over the past few decades, social health insurance has emerged as an important mediating factor in providing succor to households hit by illnesses. [Photo: Indiatoday.in] |
The government seemed to be keen on the insurance-based model it had advocated for the last few years. However, the sense that emerges is that, with strong advocacy of universal basic income (UBI), the government might be thinking of subsuming all welfare into one single big cash transfer. Can the UBI however be a single alternative to all entitlements, and all government spending on health, education and jobs?
Universalising access to healthcare is one sustainable development goal that India is committed to, and must therefore include formulating policy measures to promote investment in infrastructure and workforce and in institutionalising regulatory mechanisms to address market failures.
A new financing mechanism must provide incentives for public-private partnerships (PPPs) in service delivery, education and training, insurance, research and development. PPPs will certainly expand infrastructure, enable better healthcare delivery mechanisms, improve service quality adherence and improve access.
Increasing tax exemptions on premiums and creating mass awareness can be the incentives for consumers to adopt health insurance. Beyond this, shifting away from fee-for-service reimbursement models will facilitate faster adoption of health insurance.
Over the past few decades, social health insurance has emerged as an important mediating factor in providing succor to households hit by illness requiring substantial health expenditures. When an individual falls sick and incurs “out-of-pocket” expenses for healthcare, the impact on household finances can be severe.
If social safety nets are inadequate, a family can become impoverished not only directly from the out-of-pocket payments for medical care, but also indirectly from missing work, disability, or premature death, thereby leading to lowered income.
Insurance reduces the price of treatment faced by a household, and hence may lower the burden of out-of-pocket health expenditures on the household and the risk of impoverishment associated with illness. Yet, having access to insurance coverage may increase utilisation of healthcare and under some circumstances, even increase out-of-pocket health expenditures.
While insurance need not always lead to reduction in OOP health expenditures, it will lead to improvement in health service use and in the health and economic outlook of households that have access to it.
In India, however, the insurance system has developed two kinds of problems - the government subsidies system has resulted in a high level of leakages, while the private sector model is prone to both market risks of adverse selection and moral hazards.
As a result of the former, the insurance firm seeks to reduce exposure by screening out high-risk cases. The patients who do get cover then would tend to collude with providers to artificially raise costs. This results in a system that only looks after in-patient hospital treatments and leaves out outpatients and those who must pay for prescription drugs.
The health system itself is in poor shape and is poorly financed by both the Centre and the states. While there is high quality tertiary care available in the metros and urban areas, public hospitals are poorly staffed, with inadequate infrastructure and a shortage of drugs and health professionals. This is especially so in hospitals in rural areas and small towns.
The general perception is that publicly provided healthcare is inadequate and of low quality. With more and more people leaning on the private sector for access to healthcare, a well-funded digitised, cashless insurance system that works across platforms and providers is essential. With patient records either not maintained or kept only in paper form, the development of e-medical records is essential for UHC.
The focus in our country remains on primary health and on maternal and child healthcare. While we make great strides in lowering maternal mortality rates and in reducing infant mortality there is so much more to be done.
This requires the Union government to spend much more than the one per cent of GDP it does now on healthcare. New funding strategies, higher taxes on certain demerit goods, new forms of pooling of resources and targeted outlays for new interventions will go a long way in improving access to health for the poor.