India Transformed

by Rakesh Mohan

  Healthcare trends: A glimpse within India

  The twenty-five years post reforms have shown that there are wide state-level variations in health expenditures and outcomes. Increased financial resources, though useful, do not necessarily translate into improved health outcomes (see Figure 1). Since the reforms, states such as Bihar and UP have halved their IMR to 42 and 50 respectively (see Table 3), a notable achievement given their limited spending on healthcare. Whilst these states continue to have some of the poorest health indicators, they have shown a more rapid rate of change than other states, despite having lower health expenditure per capita (see Tables 3, 4). Conversely, Himachal Pradesh, despite having one of the largest per capita investments in health among all states, has not seen a proportional improvement in certain health outcomes. It spends almost ten times as much as Bihar, but its IMR has not reduced below 35 (see Figure 1).

  Understanding individual experiences of each state can provide important insights into healthcare models and design. For example, Kerala, often hailed as the ‘model state’ for healthcare,40 shows a trajectory that may not be ideal for other states to follow. Though it has achieved enormous progress in maternal, neonatal and child health, about 35 per cent of its adult population suffers from hypertension (see Table 4), nearly one-third of babies are born through caesarean section41 (well above the 10 per cent benchmark that is associated with reduced maternal and neonatal mortality),42 and there are higher mortality rates due to suicides43 and accidents.44 In addition, 83.7 per cent of health expenditure is OOP (Table 4).

  Figures 1 & 2: Health Expenditure and Hypertension Levels, and IMRs in States of India, 2012–13

  Source: SRS Health Bulletins, DLHS-4, AHS 2012–13; Reserve Bank of India State Health Expenditure.

  Note: The Per Capita Health Expenditure has been calculated from the Reserve Bank of India State Health Expenditures and 2011 Census.

  Tamil Nadu also finds itself in a challenging situation despite its many accomplishments. IMR has reduced by more than 60 per cent in the last twenty-five years (see Table 3) and there is near-universal institutional delivery (see Table 4) to the point that Tamil Nadu may no longer need resources and schemes such as JSY to incentivize institutional delivery. However, OOP remains above the national average at 77.6 per cent and more than one-fifth of its adult population suffers from hypertension (see Table 4). The current health system is clearly unable to cope with these emerging challenges.

  At the state level, health systems have evolved very differently with clear variations in achievement over the last twenty-five years, irrespective of financial resources. Whilst states such as UP and Bihar have demonstrated much progress, they have a considerable way to go in reducing even MMR and IMR, on which the government health system is almost exclusively focused. And, although the more advanced states, despite high levels of OOP payments (see Table 4), have achieved their IMR and MMR goals, they are doing poorly on several other critical health indicators. It is troubling to note that, over time, with the current laissez-faire design of the health system, in the best-case scenario, UP, Bihar and other poorer states will find themselves in the same position as Kerala and Tamil Nadu. It is important that poorer states learn from these challenges and consider purposeful health system designs that are responsive to the changing needs of their populations.

  Where Do We Go from Here?

  It is clear that we could have done more with our health systems over the twenty-five years since the post-reforms period. Though money is important, the answer is not to simply spend more. Government intervention, with specific health-system designs, needs to address market distortions and intervene in a meaningful way to overcome market failures and shocks that lead to health impoverishment and poor well-being.

  Thailand is a helpful case to study. Whilst it has increased its public health expenditure from around 2 per cent to 6 per cent of GDP,45 Thailand’s UHC programme demonstrates the value of deliberate policies to address specific healthcare challenges. For example, the provision of a comprehensive package of care resulted in a high level of financial risk protection,46 and the introduction of a provider-network gatekeeping function brought greater efficiency to the system.

  India is a diverse country in which there won’t necessarily be a ‘one-size-fits-all’ solution. Each state would need to evolve its own specific design to suit its needs. Nevertheless, there are some core design principles common to all high-performing health systems, which we discuss briefly below.

  Increased Level of Prepayment

  With tax-based allocations static at around 1 per cent of GDP during the post-1991 period, and government insurance schemes adding almost 0.02 per cent of GDP,47 about two-thirds of healthcare expenditure in India is at POS.48 This directly leads to low demand for primary care, high demand for hospital-based care, high rates of inflation in healthcare expenditures, and very poor population-level outcomes. The dominant healthcare financing structure in high-performing health systems is a combination of government finance and health insurance. In order to move in this direction, India could consider re-examining its spending priorities and allocating more resources to finance healthcare expenditure.

  Secondly, it could avoid further fragmentation of its limited tax resources by paying for the poor to access the private sector. Instead, India could consider a mandatory social-insurance scheme which the non-poor would also be required to purchase. A combination of these two measures has the potential to alter the structure of financing healthcare in India, as it has in other countries.

  Purchaser–Provider Split

  In the last thirty years, many countries have introduced a purchaser–provider split (PPS), separating third-party payers from providers of services. The application of PPS differs between countries. Some have opted for a principal national purchaser of services, whilst others, such as Finland, purchase services at a municipality level. As part of Turkey’s Health Transformation Programme, introduced in 2003, the adoption of PPS as well as other reforms such as universal general health insurance and a focus on primary care helped improve access, efficiency and the quality of what was previously a very fragmented service.49

  Currently in India, the state acts as purchaser, provider and regulator of a very small fraction of healthcare services. Within a UHC scheme using a PPS model, this would entail public trusts or other designated organizations receiving resources from mandatory social-health insurance and general taxation, and taking on the role of purchaser. Providers could be a mix of public and private accredited providers that compete for contracts and are paid based on a full capitation or a capitation plus Diagnosis-Related Group (DRG) basis. The current set of tax-financed insurance schemes offer an opportunity for state governments to begin the process of creating autonomous purchasing agencies. These would not use insurance companies; instead, states would seek to build internal capabilities, much as Andhra Pradesh has done in the past for its Arogyasri programme. As the capabilities of an autonomous purchaser builds, a higher proportion of the health budget of the state could be channelled through these agencies to purchase healthcare from private and public providers. They could also then be well placed to offer health-insurance contracts that would become mandatory for the non-poor to purchase.

  The PPS model has a number of advantages. For example, it can address market imperfections due to information asymmetry in India, where the system does not enable patients to fully understand and properly evaluate the quality of advice and treatment that they receive, to determine if it is priced in a fair manner. Further, it can promote accountability and quality improvement as the purchaser has the responsibility of agreeing to certain quality-enhancing conditions through the negotiation, monitoring and review of the contract with the provider.50 A condition of obtaining and retaining a provider contract can be a ‘quality threshold’.51 Licensing (healthcare workers and facilities), certification (healthcare workers) and accreditation (healthcare facilities) can all be used by the purchaser to promote
quality.52 So too can financial incentives. For example, meeting certain standards can be a prerequisite to payment (as is the case with payment to private providers from government Medicare and Medicaid in the US).53

  Development of Integrated Provider Networks

  Currently, patient care is highly fragmented and providers have few, if any, incentives to focus on patient well-being. Integrated networks of primary-care providers, paid on a per-patient (capitation) basis, can utilize the benefits of primary care to reduce hospitalization expenditures and offer every patient a continuum of care throughout their life. Several high-performing health systems, such as those in Thailand, the UK, Turkey and Brazil, have such features built into them.

  The government-owned health system in India operates in a fragmented manner and lacks the ability and autonomy to respond to financial incentives, such as capitated payments. Converting health departments into autonomous public-sector enterprises is worth exploring. In the private sector, although larger tertiary hospitals and several smaller secondary hospitals exist, no integrated provider has emerged. Instead of offering incentives for the creation of stand-alone private hospitals, the government could consider encouraging them to move to being integrated healthcare providers by providing them with preferential treatment when bidding for empanelment as providers. The insurance regulator could be persuaded to allow such integrated providers to combine financial protection and offer managed care contracts to individual and formal-sector clients.

  Increased Use of Technology and Information

  The use of technology in health in India is fragmented and inconsistent, often resulting in redundancies and unnecessary extra costs. A potential polio case is almost immediately identified using a complex information system, yet a large number of births and deaths still remain unregistered. Given India’s strong technological manpower, capacity to innovate, and the government’s current focus on technology, India is well placed to develop a nationwide information management system for healthcare.

  Thailand’s UHC scheme employs technology that links the unique identification number of each citizen to track entitlements, the utilization of services, and to ensure consistency of healthcare procedures across the country. The Taiwanese health system tracks each citizen’s healthcare status and consumption, with automatic alerts to patients and providers.

  Recognizing the importance of a comprehensive approach involving technology, the central government is now putting in place plans to create a National Electronic Health Management System—an interoperable patient-health record system accessible nationwide. Additionally, a National e-Health Authority is planned, to develop and regulate standards and compatibility for e-health systems. These are welcome initial steps, but there is a long journey ahead to achieve the desired level of maturity in the use of technology in the healthcare sector.

  Optimal Use of Human Resources for Health

  India requires the right mix of workforce expertise to tackle absenteeism of doctors and medical-service providers, which can be nearly 40 per cent,54 and address the gaps in the provision of qualified healthcare staff, particularly in rural areas. The growing disease burden arising from NCDs, and advancements in medicine have also meant an increased need for surgeons and other specialists at the district level.

  Several solutions exist. The rapid ‘upskilling’ of district-level doctors through a training and certification programme at accredited local hospitals would improve the supply of specialist services at the district level.55 Maintaining live registries on the supply and mix of health workers, and separating this data at the district level would make a big difference to workforce planning and management.56 Technology has proven to be an effective instrument to better employ human resources and introduce workforce accountability.

  Conclusion

  India has made notable progress in health outcomes since 1991. Today, a child is almost three times less likely to die before completing five years of life, and a mother is half as likely to die while giving birth, than in 1990.57 Despite these improvements, the achievements of other countries show us that India could have done more with its available resources. The interstate analysis in this chapter further presents a cautionary tale of health systems, which lack intentional design.

  The experience of the twenty-five years since reforms demonstrates that leaving the provision of healthcare to the invisible hand of the market is not the solution to achieving better health outcomes. The current system has been unable to resolve a number of distortions in healthcare, such as high price elasticity at the primary-care level and the unpredictability of healthcare costs. This makes an idealized view of the market difficult, and makes a strong case for active government intervention in this sector.

  In all high-performing healthcare systems, governments act purposefully to finance, plan and deliver the required services. In comparing India’s progress with other countries, particularly those who have achieved or are on their way to UHC, we find that there is more India could have done with its finances. The solution is not one of simply spending more. If India is to achieve the Sustainable Development Goal of UHC, the government must strategically consider some basic, yet transformative, design reforms to improve how it finances, plans, delivers and regulates healthcare services.

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