By Mayank Arora
In 2014, the Indian government spent merely 1.8% of the GDP as health expenditure. What is concerning is that 75% of healthcare expenditure was by way of out of pocket (OOP) expenditure.
This is one of the main reasons why close to 7% of the households have fallen below the poverty line. It also explains why 60 to 90 million people are found below the poverty line every year. Besides, Indian households incur more than two-thirds of their OOP expenses on outpatient care primarily for accessing medicines.
National Pharmaceutical Pricing Authority In India regulates the price of around 400 medicines | Photo Courtesy: Business LineWhy is our healthcare expenditure spiralling?
India has been following a system of private and public health insurance schemes. Yet, private insurance is restricted to the rich urban strata of society as per the last available NSSO data for 2014. Besides, the data shows that the public health insurance schemes such as Rashtriya Swasthya Bima Yojana, Central Government Health Scheme and Employers State Insurance Scheme, covering 370 million people, increased hospitalisation but, it also shows that these could not reduce their health burden. The coverage for health insurance varies significantly across states with merely 0.3% and 1.7% of people covered in Uttaranchal and Madhya Pradesh, respectively. This can be compared to 62.8% and 39.5% people insured in Andhra Pradesh and Kerala, respectively.
[su_pullquote]One should be careful to avoid nexus between private health insurers and the health care providers that exist in the US. That is the major cause of spiralling health care spending to 18% of its GDP.[/su_pullquote]
There would be a requirement of a more coordinated effort at a national level as well as among states. This step would further need to be supplemented with a broader private and community-based insurance coverage.
However, one should be careful to avoid nexus between private health insurers and the health care providers that exist in the US. That is the major cause of spiralling health care spending to 18% of its GDP.
Examples that may help India
Here, the broader models of Germany, Japan and the Netherlands providing financial protection may benefit India-
1. Through mandated income-based insurance cover.
2. Bringing a wider group into a common risk pool to restrain existing high OOP expenditure.
3. Giving wider access by relying on demographic dividends of a largely young population.
However, the long-term impact of such a policy remains untested for its people. The examples of China and Singapore are important in understanding the mixed model of public and private health insurance. This model relies on the use of medical savings account (MSAs) to enhance efficiency in transmission and ensuring flexibility in administration. In recent times, economists have pointed out about the use of tax-deductible MSAs similar to provident funds that may be implemented in India. This can, in turn, reduce the concerns of information asymmetry and higher costs, otherwise concerned with health care financing through insurances.
Maintaining the right balance
[su_pullquote]Due to information asymmetries, the possibility of excessive pricing by pharma companies over and above the costs for research and clinical trials need restriction.[/su_pullquote]
70% of OOP expenditure in rural areas and 60% in urban areas is incurred on medicines. The aspect of drug pricing is key to controlling health care costs in India. Due to information asymmetries, the possibility of excessive pricing by pharma companies over and above the costs for research and clinical trials need restriction. This has been exemplified n a book titled The truth about the drug companies by the author, Marcia Angell. It showed that the US drug companies spend higher amounts of funds on marketing than on research.
In India, to ensure affordability as well as transparency, a practice has been followed similar to what is followed in other developing countries. The price for more than 400 essential drugs is controlled by National Pharmaceutical Pricing Authority In India. The government needs to make judicious use of existing regulations. This is meant to ensure that the interests of healthcare providers, health insurance providers as well as of those insured are addressed. This would make sure that it is done without putting the fair pharma companies at any disadvantage.
Adopting a holistic approach
Finally, one must remember that the role of minimum health care for all is key for its complementary benefits in terms of – 1. Raising education levels.
2. Reducing discrimination against women.
3. But, more essentially, it serves as a basic human right.
Hence, the demands of health care market need treating it as an investment rather than cost. As it can be inferred, that requires a collective responsibility of the state as well as the private parties involved.