Low public spending and consequently high burden of out of
pocket expenses
Public Spending on health in India is among the lowest in the
world - when compared in terms of share of GDP and per capita
spending. There were only few countries in the world which spent
lesser proportion of GDP on health in 2014 (WHO 2016).
Governments in neighbouring countries like Sri Lanka, China, and Nepal
could mobilise more resources towards health than what is done in
India. Per capita public investment on health in India, is almost at the
same level with the average of the low income countries (LICs) and
much lower than the average for low middle income countries (LMICs).
Countries like Brazil, Thailand, and South Africa which have recently
attempted to universalise have stepped up public spending on health to
3-5 % of GDP over the period of a decade or so, while it languishes
at around 1% of GDP in India.
Box II: Health care Financing
Public spending on health as a percentage of GDP is among
the lowest in the world (1.1%)
India is among the most privatized health systems -- out of 100 rupees spend on health more than 70 comes from people’s out-of-pocket expenses (OOPs). Every year some 55 million people are pushed below poverty line - this is more than the population of 177 countries in the world Expenses on medicine alone lead to impoverishment of some 34 million people. During 2004 (latest data available), nearly 30 percent in rural India and 20 percent in urban India who were ill but did not seek care because of financial barrier. Socio-economically deprived groups tend to suffer greater impoverishment due to OOP spending on health care. In the absence of adequate public spending households are forced to buy healthcare services from the market – either in private facilities or through expenses they incur even in public facilities. What people pay directly while accessing care is called ‘Out of Pocket’(OoP) expense. In India the share of OoP in total healthcare spending is around 73% - which is one of the highest in the world. Thus in India, out of every 100 rupee spent on healthcare, the government spends only 27 rupees. Such a subsystem where access to care depends on ability to pay leads to inequality in access, untreated ailments and preventable deaths; and pushes people towards poverty and indebtedness. Numerous studies indicate that the poor in India are often required to borrow and sell off household assets to finance their health-care needs. The burden on OoP is largely on account of outpatient expenses but recently we also see a steep rise in hospitalisation expenses that are borne by patients. Recent National Health Accounts estimates show that the share of OoP has increased to 72.9% of total health expenditure, and public spending .
Growing private sector and expansion of public funded insurance Over the years, as economic policies have slashed expenditure on public services like health and education, dependence on private
sector for healthcare has progressively grown. Dependence of people on private facilities for short duration treatment was higher compared to public services, even in the mid 1980s. By the mid 1990s more than 80% of short duration illnesses were being treated in the private sector. The public sector used to be the main source of care requiring hospitalisation in the mid 1980s. By the mid 1990s there was a reversal in the situation and the private sector became the main source of treatment for hospitalized cases as well. In the next decade or so the spread of private sector got reflected in even greater utilization of private facilities for hospitalisation. By 2004-05 almost 60 per cent of total in-patient care (hospital care) was covered by the private sector
In the past decade a new trend has emerged, led by changes in the government’s overall economic policies and priorities. The involvement of the private sector in providing services while using public funds is being promoted under the guise of improving efficiency in the delivery of health services. This can be seen in the outsourcing of health facilities in states such as Arunachal Pradesh and Karnataka; and outsourcing of various critical services in public hospitals like diagnostics in Bihar and West Bengal. Insurance schemes like the Rashtriya Swasthya Bima Yojana and Arogyasri are another mechanism to pump public funds into the private sector. However, the dreadful implications of this strategy on the public health system, quality of services and access of the poor to health care services is slowly becoming apparent.
Experiences of outsourcing, like of diagnostics in Bihar, has shown that it has led to decreased access to services and even denial of services for the poor, increased out of pocket expenditure and decline in the quality of services. Despite its rapid growth and large size, the private medical sector in India suffers from a wide range of serious problems. It is widely acknowledged that these arise due to its commercial interest to maximize profits, along with an almost complete lack of effective regulation. This has led to a huge urban-rural divide, massive wastage, exploitation due to excessive/irrational medications, and frequent exploitation of patients by overcharging and unnecessary interventions, major variations in quality and overall substandard care, and violation of patients’ rights. This is compounded by the exploitation by the drug industry through manufacturing and sale of irrational medicines and irrational drug combinations, promotion of costly brands, and overpricing. In addition, during the last 20 years there has been proliferation of private medical colleges. Thus overall, barring some centres of excellence, private medical care in India is substandard and unnecessarily costly. There has been a complete failure of regulatory agencies like the Central Drug Standards Control Organisation (CDSCO) and the Medical Council of India, accompanied by a complete lack of self-regulation by professional bodies like the Indian Medical Association (IMA). Despite these known problems related to the private sector, public money is now being pumped into the sector in the name of providing financial protection to the people. There has been an increase in the number of publicly-financed insurance schemes floated by central and state governments, with the stated aim of protecting the poor and the informal sector workers from catastrophic expenditures on health. The Yeshasvini Health Insurance Scheme in Karnataka in 2003 and the Rajiv Aarogyasri Scheme in Andhra Pradesh in 2007 are the precursors to the Rashtriya Swasthya Bima Yojana (RSBY) launched by the Ministry of Labour, in 2007 as a Central scheme. The schemes (state and central)claimed to cover an estimated 302 million people in 2010 -- roughly one-fourth of the population (as we shall see later these claims are inflated). However, in terms of the benefit package available through these insurance schemes, only limited secondary and tertiary level hospitalisation cover is provided (with the exception of the much older Employees’ State Insurance Scheme (ESIS) and Central Government Health Services (CGHS))
Though these insurance schemes continue to remain popular among policy makers and politicians, evidences suggest that impact on financial protection has been minimal if not detrimental. As per the latest National Sample Survey Organisation Survey on Health and Morbidity (2014) only 13% population is covered under various government funded insurance schemes. Coverage among the poorest sections, in both rural (10.6%) and urban areas (8.6%) is even lowerleaving out huge sections of intended beneficiaries. But what happens to those who are covered and access hospitalisation services? In contrast to what is promised, free care is very rare - only 3 out of 100 hospitalisation cases with coverage receive free care. The actual benefits to those who do of facilities under these schemes is not very high. Data suggest that on an average those who are not covered under any insurance scheme spend around Rs.14,400 for one hospitalization episode compared to the government funded insurance schemes where average cost is Rs.10,900 -- a far cry from the promise that these schemes would provide free care. Thus the poor go to private hospitals, in the hope of free care and end up paying for care that of dubious quality and which may not even be necessary
Government funded insurance schemes cover only a select set of in-patient procedures and surgeries while households spend twothird health expenditure on outpatient care and particularly on medicines. In most states more private than public hospitals have been empanelled for providing services under such insurance schemes. These private facilities are concentrated mainly in cities, with very few in rural, tribal and remote areas. Beneficiaries thus are concentrated in the easier to reach villages and left out in the hard to reach villages or hamlets. Further, these insurance schemes focus on specific treatment procedures rather than on treatment of all illnesses, and therefore conditions treatable at primary level end up being hospitalised (for example, for uncomplicated anemia or diabetes) or transferred to secondary/tertiary levels. This also results in public funds being shifted from primary level care to secondary and tertiary level care, or to private providers. Patients also receive care of bad quality through the insurance schemes. Many unnecessary procedures like hysterectomies (removal of uterus) had been performed by the private sector hospitals in order to benefit from the insurance money; thousands of such instances have been documented in Bihar, Chhattisgarh and Andhra Pradesh. There is no real choice for the beneficiaries in terms of which hospital they can go to; as it is the hospitals that dictate what conditions and which patients they wanted to treat. Thus, while private hospitals ‘cherry pick’ the most profitable conditions/procedures to treat, public hospitals end up treating the more complicated and difficult cases. In rural areas, especially remote places, public facilities are the only ones available. The nest result of public funded insurance is that public money is being transferred to private facilities, thus further depleting the already meager resources available to strengthen public facilities. There is also a continuous demand from the private sector to increase the reimbursement they receive for providing care as part of the insurance schemes. Reports from Chhattisgarh and Andhra Pradesh have shown that RSBY and Arogyashri schemes were facing financial problems as demands from private providers for higher reimbursements had increased and some hospitals had even stopped providing services.
Clearly, commercial and profit motives guide healthcare provision, leading to unnecessary procedures, wastage of resources and no improvement in health outcomes. Their goal clearly is to profit from ill-health. Only a strong public sector can function as an effective check on the vast unregulated private sector, where it is forced to compete for quality of services with the public sector.
India is among the most privatized health systems -- out of 100 rupees spend on health more than 70 comes from people’s out-of-pocket expenses (OOPs). Every year some 55 million people are pushed below poverty line - this is more than the population of 177 countries in the world Expenses on medicine alone lead to impoverishment of some 34 million people. During 2004 (latest data available), nearly 30 percent in rural India and 20 percent in urban India who were ill but did not seek care because of financial barrier. Socio-economically deprived groups tend to suffer greater impoverishment due to OOP spending on health care. In the absence of adequate public spending households are forced to buy healthcare services from the market – either in private facilities or through expenses they incur even in public facilities. What people pay directly while accessing care is called ‘Out of Pocket’(OoP) expense. In India the share of OoP in total healthcare spending is around 73% - which is one of the highest in the world. Thus in India, out of every 100 rupee spent on healthcare, the government spends only 27 rupees. Such a subsystem where access to care depends on ability to pay leads to inequality in access, untreated ailments and preventable deaths; and pushes people towards poverty and indebtedness. Numerous studies indicate that the poor in India are often required to borrow and sell off household assets to finance their health-care needs. The burden on OoP is largely on account of outpatient expenses but recently we also see a steep rise in hospitalisation expenses that are borne by patients. Recent National Health Accounts estimates show that the share of OoP has increased to 72.9% of total health expenditure, and public spending .
Growing private sector and expansion of public funded insurance Over the years, as economic policies have slashed expenditure on public services like health and education, dependence on private
sector for healthcare has progressively grown. Dependence of people on private facilities for short duration treatment was higher compared to public services, even in the mid 1980s. By the mid 1990s more than 80% of short duration illnesses were being treated in the private sector. The public sector used to be the main source of care requiring hospitalisation in the mid 1980s. By the mid 1990s there was a reversal in the situation and the private sector became the main source of treatment for hospitalized cases as well. In the next decade or so the spread of private sector got reflected in even greater utilization of private facilities for hospitalisation. By 2004-05 almost 60 per cent of total in-patient care (hospital care) was covered by the private sector
In the past decade a new trend has emerged, led by changes in the government’s overall economic policies and priorities. The involvement of the private sector in providing services while using public funds is being promoted under the guise of improving efficiency in the delivery of health services. This can be seen in the outsourcing of health facilities in states such as Arunachal Pradesh and Karnataka; and outsourcing of various critical services in public hospitals like diagnostics in Bihar and West Bengal. Insurance schemes like the Rashtriya Swasthya Bima Yojana and Arogyasri are another mechanism to pump public funds into the private sector. However, the dreadful implications of this strategy on the public health system, quality of services and access of the poor to health care services is slowly becoming apparent.
Experiences of outsourcing, like of diagnostics in Bihar, has shown that it has led to decreased access to services and even denial of services for the poor, increased out of pocket expenditure and decline in the quality of services. Despite its rapid growth and large size, the private medical sector in India suffers from a wide range of serious problems. It is widely acknowledged that these arise due to its commercial interest to maximize profits, along with an almost complete lack of effective regulation. This has led to a huge urban-rural divide, massive wastage, exploitation due to excessive/irrational medications, and frequent exploitation of patients by overcharging and unnecessary interventions, major variations in quality and overall substandard care, and violation of patients’ rights. This is compounded by the exploitation by the drug industry through manufacturing and sale of irrational medicines and irrational drug combinations, promotion of costly brands, and overpricing. In addition, during the last 20 years there has been proliferation of private medical colleges. Thus overall, barring some centres of excellence, private medical care in India is substandard and unnecessarily costly. There has been a complete failure of regulatory agencies like the Central Drug Standards Control Organisation (CDSCO) and the Medical Council of India, accompanied by a complete lack of self-regulation by professional bodies like the Indian Medical Association (IMA). Despite these known problems related to the private sector, public money is now being pumped into the sector in the name of providing financial protection to the people. There has been an increase in the number of publicly-financed insurance schemes floated by central and state governments, with the stated aim of protecting the poor and the informal sector workers from catastrophic expenditures on health. The Yeshasvini Health Insurance Scheme in Karnataka in 2003 and the Rajiv Aarogyasri Scheme in Andhra Pradesh in 2007 are the precursors to the Rashtriya Swasthya Bima Yojana (RSBY) launched by the Ministry of Labour, in 2007 as a Central scheme. The schemes (state and central)claimed to cover an estimated 302 million people in 2010 -- roughly one-fourth of the population (as we shall see later these claims are inflated). However, in terms of the benefit package available through these insurance schemes, only limited secondary and tertiary level hospitalisation cover is provided (with the exception of the much older Employees’ State Insurance Scheme (ESIS) and Central Government Health Services (CGHS))
Though these insurance schemes continue to remain popular among policy makers and politicians, evidences suggest that impact on financial protection has been minimal if not detrimental. As per the latest National Sample Survey Organisation Survey on Health and Morbidity (2014) only 13% population is covered under various government funded insurance schemes. Coverage among the poorest sections, in both rural (10.6%) and urban areas (8.6%) is even lowerleaving out huge sections of intended beneficiaries. But what happens to those who are covered and access hospitalisation services? In contrast to what is promised, free care is very rare - only 3 out of 100 hospitalisation cases with coverage receive free care. The actual benefits to those who do of facilities under these schemes is not very high. Data suggest that on an average those who are not covered under any insurance scheme spend around Rs.14,400 for one hospitalization episode compared to the government funded insurance schemes where average cost is Rs.10,900 -- a far cry from the promise that these schemes would provide free care. Thus the poor go to private hospitals, in the hope of free care and end up paying for care that of dubious quality and which may not even be necessary
Government funded insurance schemes cover only a select set of in-patient procedures and surgeries while households spend twothird health expenditure on outpatient care and particularly on medicines. In most states more private than public hospitals have been empanelled for providing services under such insurance schemes. These private facilities are concentrated mainly in cities, with very few in rural, tribal and remote areas. Beneficiaries thus are concentrated in the easier to reach villages and left out in the hard to reach villages or hamlets. Further, these insurance schemes focus on specific treatment procedures rather than on treatment of all illnesses, and therefore conditions treatable at primary level end up being hospitalised (for example, for uncomplicated anemia or diabetes) or transferred to secondary/tertiary levels. This also results in public funds being shifted from primary level care to secondary and tertiary level care, or to private providers. Patients also receive care of bad quality through the insurance schemes. Many unnecessary procedures like hysterectomies (removal of uterus) had been performed by the private sector hospitals in order to benefit from the insurance money; thousands of such instances have been documented in Bihar, Chhattisgarh and Andhra Pradesh. There is no real choice for the beneficiaries in terms of which hospital they can go to; as it is the hospitals that dictate what conditions and which patients they wanted to treat. Thus, while private hospitals ‘cherry pick’ the most profitable conditions/procedures to treat, public hospitals end up treating the more complicated and difficult cases. In rural areas, especially remote places, public facilities are the only ones available. The nest result of public funded insurance is that public money is being transferred to private facilities, thus further depleting the already meager resources available to strengthen public facilities. There is also a continuous demand from the private sector to increase the reimbursement they receive for providing care as part of the insurance schemes. Reports from Chhattisgarh and Andhra Pradesh have shown that RSBY and Arogyashri schemes were facing financial problems as demands from private providers for higher reimbursements had increased and some hospitals had even stopped providing services.
Clearly, commercial and profit motives guide healthcare provision, leading to unnecessary procedures, wastage of resources and no improvement in health outcomes. Their goal clearly is to profit from ill-health. Only a strong public sector can function as an effective check on the vast unregulated private sector, where it is forced to compete for quality of services with the public sector.
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