Fixing India’s Healthcare System

A. K. Shiva Kumar

OP-ED 

MAY 13, 2014MINT 

SUMMARY

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.

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, India’s 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 choices—a 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 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 India’s 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, 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 spends only 1.2%, a rate that hasn’t 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. 

India’s low spending has put the financial burden on individuals. Out-of-pocket spending—69% of total health 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 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 government’s 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 provide—as far as possible, however limited it may be—universal 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 India’s National Advisory Council. 

This is adapted from a chapter in the upcoming book Getting India Back on Trackedited 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.