few facts about health financing in India first.
already low public health investment has been decreasing
as a percentage of GDP, from 1.3 % in 1990 to 0.9% in 1999.
Our country's total health expenditure is about 5.2% of
GDP and public expenditure accounts for only 17% of the
aggregate expenditure on health, most of the balance being
The high reliance on private, out-of-pocket payments in
healthcare impose a disproportionate burden on the poor.
The poorest 20 percent of Indians, suffer from more than
double the mortality rates, malnutrition, and fertility
of the richest quintile. The only countries with lower public
health allocation are Georgia, Cambodia, Myanmar, Burundi,
Sudan and Afghanistan - countries that have undergone civil
conflict and collapse of the public sector.
Apart from a few high income persons, insurance coverage
in general is available to only organized sector employees.
The publicly managed CGHS and ESIS institutions covering
health risks are well-known for their sloth, incompetence,
inadequacy and corruption. The total number of persons covered
under all the different risk-pooling schemes would be of
the order of 100 million (21.1 million families).
The appallingly low public health expenditure in India is
having catastrophic consequences. Even minor illnesses have
the potential to become major crises. Hospitalized poor
are spending 58% of their total annual expenditure on health-care
alone. Over 40 percent of those hospitalized are forced
to sell their assets or borrow heavily to cover expenses.
At least a quarter of those hospitalized fall below poverty
line. Clearly, such a situation is unacceptable in a modern
society which has any claims to civilization.
is a national health insurance the solution? The National
Health Policy - 2002 (NHP) admits that the Union budgetary
allocation for health over the period 1990-99 has been stagnant
at 1.3% of the total budget. At the same time, the fiscal
pressures led to a reduction of states' public health expenditure
from 7% to 5.5%. Of the Rs 200 annual per capita public
health expenditure, 15% is contributed by the Union. To
meet the NHP goal of public health expenditure to 2% of
GDP by 2010, the state sector health spending should go
up to 8%, and the union expenditure should go up to 7% of
the total budget. This calls for enormous political will,
and significant reordering of priorities, given the present
fiscal pressure. The National Common Minimum Programme (NCMP)
goal is even more ambitious - increasing public health expenditure
to 2-3% GDP by 2009.
technology has skyrocketed hospital costs. With increased
private investments in expensive equipment and facilities,
there is ever increasing temptation to subject every patient
to a plethora of largely unnecessary and costly investigations.
Many hospitals are billing huge amounts for heroic interventions
in cases of terminal illness! A national health insurance
will merely transfer these costs to the public exchequer,
without commensurate improvement in health-care.
of many health insurance projects run by civil society initiatives
and non-profit foundations indicates that the average actuarial
costs even for a modest health insurance coverage will be
about Rs. 200 per capita per annum. A national scheme involves
coverage of about 300 million poor people with full government
subsidy, and another 400 million lower middle-class people
with 50% subsidy. The cost to the exchequer will be around
Rs. 10,000 crore per annum for any credible national insurance
programme, even with modest and limited risk coverage. When
the current public health expenditure is only Rs. 20,000
crores, a 50% escalation only for health insurance is unrealistic
and unsustainable. Such shift in expenditure will actually
result in subsidizing private hospitals and drive investment
into curative medicine.
What is worse, such diversion of expenditure will further
diminish resources for preventive and pubic health. Most
of the disease burden is a consequence of failure of primary
care. The need of the hour is clearly to strengthen preventive
and public health systems in order to give best value for
the money spent, reduce disease burden and promote the health
status of the community. Excessive reliance on health insurance
as a means of health-care delivery is neither prudent, nor
cost-effective. Health insurance will only address the symptoms
of failure of pubic health, without reducing the disease
burden. This failure of preventive health will only escalate
costs of curative medicine, in the fond hope that more hospitals
will ensure better health.
advanced countries witnessed spiraling health-care costs
on account of accent on hospital care and insurance-based
medicine. Insurance usually involves adverse selection of
beneficiaries, as those who are likely to benefit from hospital
care are more likely to join it. There is also the moral
hazard problem of two kinds - poor hospital care once the
population is enrolled in the risk-pooling mechanism, and
over consumption of medical services by the richer and better-informed
sections. As a result, in OECD countries, health-care costs
are growing much faster than GDP. The total health-care
costs in rich countries are estimated at an astronomical
$3 trillion. Let us not repeat the mistakes of other countries.
spectrum is indeed changing slowly even in India with enhanced
prosperity, better preventive care and longer life-spans.
India should therefore move towards risk-pooling options
to reduce the burden of hospital costs on individual patients.
But we need to hasten slowly. Our first priority should
be improvement of public health delivery system. That is
where the least investment yields the best returns. Meanwhile,
the government can encourage the innovative schemes taken
up by credible institutions like SEWA in Ahmedabad or Tribhuvandas
Foundation in Gujarat. Subsidies to such schemes are necessary,
and a national health insurance can be contemplated in the
coming decades based on a review of their experiences. Premature
steps towards national insurance will only strengthen private
sector hospital care and subsidize it at the cost of public
sector, which is already floundering.