SUMMARY

Fixing Indias 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 been
eradicated, the spread of HIV/AIDS has been contained, and the World Health Organization has
declared India polio-free.
Yet for all of that, Indias healthcare system in many respects is on life support. The country trails behind
sub-Saharan Africa, Bangladesh and Nepal on numerous health fronts, despite higher per-capita income
and two decades of spectacular economic growth. Inequities in the availability and outcome of care
abound, determined in large part by gender, socioeconomic status and geographical location. And most
Indians seeking care are confronted by two unpalatable choicesa public health system that is almost
entirely free but of poor quality if it is accessible, and a largely unregulated private-sector system that
provides world-class service to some but too often charges ruinous prices, dispenses inappropriate or
unnecessary 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 are
borne by all. High rates of infectious diseases compete with a large and growing burden of chronic
illness. Cardiovascular disease has become a major cause of morbidity and mortality, more than a
million 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 healthcare
reform at centrestage, with the goal of pressing the next central government to achieve meaningful
universal 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 to
contributory or subsidized private insurance schemes. Second, it must incentivize preventive care by
setting up more robust primary-care facilities, especially in underserved rural areas. Third, it must
pursue substantive public-private partnerships with trustworthy private actors; this step should be
supported by a stronger regulatory framework from the central government. Fourth, it must encourage
state 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 healthcare
reform at center stage, with the goal of pressing the next central government to achieve meaningful
universal health coverage.
gross domestic product (GDP). Financed by general taxation, the additional resources should be used
to strengthen the delivery of primary healthcare, improve the quality of services, and promote more
equitable access, especially for poor and marginalized communities.
Ailing status quo
At the heart of Indias health care shortcomings is money. The Constitution makes the states
responsible for the provision and delivery of health services, with the cost shared by the states and the
central government (the central government contributes 36%). But with few exceptions, neither level of
government has assigned a high priority to spending in this area.
In per capita terms adjusted for purchasing power, Indias 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 spends
only 1.2%, a rate that hasnt budged in more than a decade and is one of the lowest in the world. The
comparable rates are 1.5% in Sri Lanka, 2.7% in China, and 3% in Thailand.
Indias low spending has put the financial burden on individuals. Out-of-pocket spending69% of total
health expenditureis 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 so
through the public assurance of comprehensive quality primary care for all. But though treatment in
public facilities in India is nearly free (except for a small user fee), it is often not available or is of poor
quality. Only 22% of the population in rural areas and 19% in urban areas use government facilities for
out-patient care. Even for in-patient care, only around 42% in the villages and 38% in the cities utilize
government facilities.
The facilities tend to be understaffed, underfunded and terribly managed. The better ones tend to be
overcrowded. A severe shortage of doctors, nurses and midwives is made that much worse by big
geographical gaps in availability. Rural areas are especially poorly served. Complaints are common
about distant locations, inconvenient hours, high staff absenteeism and the insensitivity of many health
workers.
The governments failure to deliver quality care has led to a rapid expansion of the private sector, which
today accounts for 93% of all hospitals (up from 8% in 1947), 64% of all beds, and 80% to 85% of all
doctors.
But that sector has major systemic shortcomings as well. For starters, it is unevenly distributed, highly
fragmented, 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 hospitals
that cater to both Indians and foreigners who can afford to pay for often expensive care. In between are
small 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 prescribing
unnecessary medicines or unwanted treatment) renders private markets in healthcare grossly
inefficient. While some private providers offer good quality services at affordable prices, costs in general
tend 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 as
assistants to pharmacists or real doctors.
Even within the formal private sector, overdiagnosis and overtreatment are common, as is faulty
treatment. Many private practitioners sell substandard and counterfeit medicines, prescribe
unnecessary drugs and tests, receive commissions for referrals, order unnecessary hospital
admissions 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 embrace
the concept of universal health coverage. The principal approach of the government so far has been to
provideas far as possible, however limited it may beuniversal access to free primary care; to rely on
insurance mechanisms to offer cashless secondary and tertiary care to the poor and to a small set of
privileged government employees; and to leave the rest of the population to buy healthcare in the private
market. This approach has perpetuated a fragmented, inefficient, iniquitous and expensive system of
care.
Policymakers have to recognize that neither private healthcare, even if properly subsidized, nor
commercial health insurance subsidized by the state can meet the challenge of universal coverage. The
interests of providers, consumers, and insurance companies are simply not aligned to maximize returns
to 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 care
and neglect primary and preventive care, especially when they cover only hospitalization costs. As a
result, it is also not clear whether improved health can be counted as one of the real benefits of
commercial insurance. High administrative costs tend to reduce considerably the amount that can be
devoted to health care per se out of the premiums paid. There is also overwhelming evidence to suggest
that 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 primarily
funded through taxes. Much more public discussion on specifics is required to build a national
consensus to push this through.
The second step that must now be taken is for both the central and state governments to give top
priority to ensuring the basics of government-provided primary care. These services, such as universal
immunization, can greatly reduce morbidity, lower the costs of curative care, and reduce the need for
tertiary care.
Third, recognizing the fiscal constraints that governments face, the central government and the states
need to find new ways to engage the private sector, especially with regard to tertiary care. At the same
time, the central government must put in place a regulatory and development framework for improving
the 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 portion
earmarked for primary care. Flexible new mechanisms for transferring funding from the central
government to the states are needed. With the additional money, the states should customize strategies
to meet the health needs of different groups and communities. They should also draw up blueprints for
universal coverage and begin experimenting with pilot programmes. Learning by doing is the only way
forward.
In the ultimate analysis, strong political commitment and effective stewardship are desperately needed
to help India rise from its sick bed.
A. K. Shiva Kumar is a member of Indias National Advisory Council.
This is adapted from a chapter in the upcoming book Getting India Back on Track edited by Bibek
Debroy, Ashley J. Tellis and Reece Trevor. It will be published in June by the Carnegie Endowment for
International Peace and Random House India.
This article was originally published by Mint.
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