SUMMARY

Fixing India’s Healthcare System

A. K. Shiva Kumar

OP-ED

MAY 13, 2014 MINT

Life expectancy in India has more than doubled since independence, to 65 years, from just 32 in 1950.The infant mortality rate has been cut by two-thirds since 1971. Smallpox and guinea worm have beeneradicated, the spread of HIV/AIDS has been contained, and the World Health Organization hasdeclared India polio-free.

Yet for all of that, India’s healthcare system in many respects is on life support. The country trails behindsub-Saharan Africa, Bangladesh and Nepal on numerous health fronts, despite higher per-capita incomeand two decades of spectacular economic growth. Inequities in the availability and outcome of careabound, determined in large part by gender, socioeconomic status and geographical location. And mostIndians seeking care are confronted by two unpalatable choices—a public health system that is almostentirely free but of poor quality if it is accessible, and a largely unregulated private-sector system thatprovides world-class service to some but too often charges ruinous prices, dispenses inappropriate orunnecessary care, and is riddled with practitioners with little or no formal training.

The costs of these failings fall disproportionately on the poor, especially women and children, but areborne by all. High rates of infectious diseases compete with a large and growing burden of chronicillness. Cardiovascular disease has become a major cause of morbidity and mortality, more than amillion deaths a year are attributed to smoking, and nearly 65 million Indians are known to have diabetes.Mental illness and occupational health and safety suffer from neglect.

With India at a crossroads, with a new government expected soon, the time is ripe to put healthcarereform at centrestage, with the goal of pressing the next central government to achieve meaningfuluniversal health coverage. Four key steps are necessary to reach that goal.

First, the government must embrace the idea of tax-funded universal coverage, as opposed tocontributory or subsidized private insurance schemes. Second, it must incentivize preventive care bysetting up more robust primary-care facilities, especially in underserved rural areas. Third, it mustpursue substantive public-private partnerships with trustworthy private actors; this step should besupported by a stronger regulatory framework from the central government. Fourth, it must encouragestate governments to function as laboratories to produce better outcomes.

To take these steps, India will have to double its funding for public health programmes to at least 2.5% of

With India at a crossroads, with a new government expected soon, the time is ripe to put healthcarereform at center stage, with the goal of pressing the next central government to achieve meaningfuluniversal health coverage.

gross domestic product (GDP). Financed by general taxation, the additional resources should be usedto strengthen the delivery of primary healthcare, improve the quality of services, and promote moreequitable access, especially for poor and marginalized communities.

Ailing status quo

At the heart of India’s health care shortcomings is money. The Constitution makes the statesresponsible for the provision and delivery of health services, with the cost shared by the states and thecentral government (the central government contributes 36%). But with few exceptions, neither level ofgovernment has assigned a high priority to spending in this area.

In per capita terms adjusted for purchasing power, India’s public expenditure on health is $43 a year,compared with $85 in Sri Lanka, $240 in China, and $265 in Thailand. In terms of GDP, India spendsonly 1.2%, a rate that hasn’t budged in more than a decade and is one of the lowest in the world. Thecomparable rates are 1.5% in Sri Lanka, 2.7% in China, and 3% in Thailand.

India’s low spending has put the financial burden on individuals. Out-of-pocket spending—69% of totalhealth expenditure—is among the highest in the world and much more than in Thailand (25%), China(44%), and Sri Lanka (55%). Millions are driven into poverty every year by large medical expenses.

Almost every country that has achieved universal health coverage or is working towards it has done sothrough the public assurance of comprehensive quality primary care for all. But though treatment inpublic facilities in India is nearly free (except for a small user fee), it is often not available or is of poorquality. Only 22% of the population in rural areas and 19% in urban areas use government facilities forout-patient care. Even for in-patient care, only around 42% in the villages and 38% in the cities utilizegovernment facilities.

The facilities tend to be understaffed, underfunded and terribly managed. The better ones tend to beovercrowded. A severe shortage of doctors, nurses and midwives is made that much worse by biggeographical gaps in availability. Rural areas are especially poorly served. Complaints are commonabout distant locations, inconvenient hours, high staff absenteeism and the insensitivity of many healthworkers.

The government’s failure to deliver quality care has led to a rapid expansion of the private sector, whichtoday accounts for 93% of all hospitals (up from 8% in 1947), 64% of all beds, and 80% to 85% of alldoctors.

But that sector has major systemic shortcomings as well. For starters, it is unevenly distributed, highlyfragmented, and mostly unregulated. It also fluctuates wildly in quality. At one end are quacks,practitioners with little medical knowledge or formal training. At the other end are world-class hospitalsthat cater to both Indians and foreigners who can afford to pay for often expensive care. In between aresmall private clinics and other hospitals, which can be for-profit or not-for-profit.

Informational asymmetry (allowing the profit-oriented doctor to cheat the patient by prescribingunnecessary medicines or unwanted treatment) renders private markets in healthcare grosslyinefficient. While some private providers offer good quality services at affordable prices, costs in generaltend to be unreasonably high. A majority of Indians, especially in rural areas, are at the mercy of self-declared doctors who have not completed their schooling and have picked up their skills by working asassistants to pharmacists or real doctors.

Even within the formal private sector, overdiagnosis and overtreatment are common, as is faultytreatment. Many private practitioners sell substandard and counterfeit medicines, prescribeunnecessary drugs and tests, receive commissions for referrals, order unnecessary hospitaladmissions and manipulate the length of stays.

Towards universal coverage

The central government, and some state governments, have taken a number of steps over the past

decade to improve the situation, but much more needs to be done.

First, the central government and the states, as well as the influential middle class, should fully embracethe concept of universal health coverage. The principal approach of the government so far has been toprovide—as far as possible, however limited it may be—universal access to free primary care; to rely oninsurance mechanisms to offer cashless secondary and tertiary care to the poor and to a small set ofprivileged government employees; and to leave the rest of the population to buy healthcare in the privatemarket. This approach has perpetuated a fragmented, inefficient, iniquitous and expensive system ofcare.

Policymakers have to recognize that neither private healthcare, even if properly subsidized, norcommercial health insurance subsidized by the state can meet the challenge of universal coverage. Theinterests of providers, consumers, and insurance companies are simply not aligned to maximize returnsto consumers. Serious incentive-incompatibility problems arise when insurance companies deny use,medical practitioners induce demand or encourage overuse, and patients themselves misuse services(commonly referred to as the moral hazard problem).

Available evidence from across the world points out that insurance schemes incentivize tertiary careand neglect primary and preventive care, especially when they cover only hospitalization costs. As aresult, it is also not clear whether improved health can be counted as one of the real benefits ofcommercial insurance. High administrative costs tend to reduce considerably the amount that can bedevoted to health care per se out of the premiums paid. There is also overwhelming evidence to suggestthat commercial insurance suffers from a lack of oversight to check medical malpractice.

For all of those reasons, a true system of universal coverage is needed and it ought to be primarilyfunded through taxes. Much more public discussion on specifics is required to build a nationalconsensus to push this through.

The second step that must now be taken is for both the central and state governments to give toppriority to ensuring the basics of government-provided primary care. These services, such as universalimmunization, can greatly reduce morbidity, lower the costs of curative care, and reduce the need fortertiary care.

Third, recognizing the fiscal constraints that governments face, the central government and the statesneed to find new ways to engage the private sector, especially with regard to tertiary care. At the sametime, the central government must put in place a regulatory and development framework for improvingthe quality, performance, equity, efficiency and accountability of healthcare delivery across the country.

Finally, the central and state governments must spend more on health, with a significant portionearmarked for primary care. Flexible new mechanisms for transferring funding from the centralgovernment to the states are needed. With the additional money, the states should customize strategiesto meet the health needs of different groups and communities. They should also draw up blueprints foruniversal coverage and begin experimenting with pilot programmes. Learning by doing is the only wayforward.

In the ultimate analysis, strong political commitment and effective stewardship are desperately neededto help India rise from its sick bed.

A. K. Shiva Kumar is a member of India’s National Advisory Council.

This is adapted from a chapter in the upcoming book Getting India Back on Track edited by BibekDebroy, Ashley J. Tellis and Reece Trevor. It will be published in June by the Carnegie Endowment forInternational Peace and Random House India.

This article was originally published by Mint.

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