most of the private expenditure is out of pocket (nearly
97%), as there is neither health insurance coverage to the
bulk of the people, nor a viable risk pooling mechanism.
As a result, the economic consequences of illhealth to most
families are devastating. Surveys show that a single episode
of hospitalization costs a family about 60% of the annual
income on an average. This high average out-of-pocket expenditure
applies to all cases of hospitalization - whether in a public
hospital or private facility. This is because even in public
hospitals, costs are incurred for transport, accommodation
and board for the patient and attendants, bribes, and often
investigations in private facilities and purchase of drugs
unavailable in government hospitals. As a result, 40-60%
of hospitalized patients borrow heavily at high interests,
and upto 25-30% people fall below poverty line on account
of healthcare costs.
mounting cost of hospital care, increasing out-of-pocket
expenditure, and its catastrophic impart on personal and
family finances do demand an innovative and flexible risk-pooling
mechanism to provide a security net for the poor. But a
traditional private insurance scheme has several problems
in our conditions.
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
even 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. 300 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. 15,000 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. 25,000
crores, a 60% 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.
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!
Many 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.
Disease 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.
India needs to devise risk-pooling schemes primarily involving
public sector institutions. In a scheme where money follows
the patient and public hospitals are rewarded on the basis
of services delivered, the incentives will be dramatically
altered, and service will improve. Such risk-pooling will
strengthen public sector while providing relief for the