Economic Highlights

New Delhi, 13 February 2010

Ailing Healthcare

NEEDS DIRECT RELIEF, NOT INSURANCE

By Shivaji Sarkar

Healthcare is ailing today. It has become extremely expensive. Not only is it making the poor poorer, even the cash-rich Indian companies are feeling the pinch, grappling with an average of 10 per cent rise in costs over the past three years.

While private spending on health in India is 4.2 per cent of the GDP, public expenditure is estimated at a mere 0.9 per cent, among the lowest in the world and ahead of only four countries – Pakistan, Burundi, Myanmar and Laos.

The International Labour Organisation (ILO) states that at just one per cent, the share of the GNP spent on health care remains very low in India. The country, it adds is giving low priority to developing human capital as poor health care leads to income, other losses and reduces GDP.

According to a Planning Commission paper, private spending on health is 4.2 per cent of GDP. More than 70 per cent of all health expenditure in the country is paid for by people from their own pocket. This expenditure has been rising, particularly for the poorest. The Plan panel estimates that it has pushed 3.9 crore people into poverty due to out-of-pocket medical expenses.

A corporate survey conducted by Watson Wyatt, a global consulting firm specialising in insurance, financial services, human consulting and employee benefits, has found that most Indian companies providing health care cover to their employees are grappling with an average of 10 per cent rise in premiums over the last three years. The main reasons for this are the emergence of new medical technologies and over-recommendation of services, the survey said.

In 45 per cent cases observed, major reasons for rise in the premium was advent of sophisticated medical technologies and malpractices like over-recommendation of services. This is a malaise imported from the US, where the Barack Obama administration is fighting a battle to rescue the health services from the clutches of organized but unethical medical practitioners and pharmaceutical industry.

Though it put pressure on individual incomes, the corporates have not expressed concern over the rising medical expenses as 41 per cent of the companies observed use health-care cover as a talent attraction and retention tool, while 11 per cent use it to minimise work loss, the Watson survey said.

Statistically, India has one of the best health systems spread across the country. As per the Health Ministry, there are 137,000 health sub-centres, 28,000 dispensaries, 23,000 PHCs, 3,000 CHCs, and about 12,000 secondary & tertiary hospitals.

The whole administrative set up may appear large but most of the health care facilities are under-staffed, and this is most prominent in the rural health care sector. It is also the worst administered and stated to be least honest. About 15 per cent of the Indian population does not have access to health care due to reasons of unavailability or due to economic reasons.

Expansion of health care in India has been mostly urban oriented, where major part of the population lives in rural or semi-urban locations. Mushrooming of private hospitals in India has been in the urban areas, and is highly profit oriented. Public health care systems are becoming extinct by the day.

Insurance system, often tried to be promoted by government officials does not suit Indian conditions since a very large section of the rural and urban population is not able to afford it, and the government does not have the budget to subsidise it. This apart, it promotes a nexus that encourages corrupt practices. However, despite all this, the Union government introduced National Health Insurance Scheme last year that aims at providing the poor families with a freedom of choosing a desired health care service from a list of public as well as private hospitals. It has been allotted an increase of 40 per cent budget amounting to Rs. 350 crore.

Sadly, this has been an ill-conceived system. It increases insurance industry profits but in the Indian conditions it hardly benefits the middle class or the poor. Even after taking a health insurance some of them find it difficult to make claims because of complicated procedures.

Of the total health care spent in India, less than 10 per cent-- from corporate beneficiaries and other super rich, comes from insurance while the remaining 90 per cent comes from the pocket of the common man. The ILO figures show that the total number of people insured for health are not more than 5 per cent of the population.

Many of the increases on this count shown in budgets are for political reasons and have more cosmetic effect. The Controller and Auditor General in its latest observation has noted that huge allocations in health, social sector and rural development remain unutilised over the years. Such amounts are over 10 per cent of the total budget – causing a saving of Rs 50,000 crore to Rs 1 lakh crore a year for the government. Government reduces fiscal deficit at the cost of the poor.

No wonder the National Sample Survey Organisation data for 2004-05 reveals that of the total medical expenditure per capita, medicines alone accounted for 74 per cent in the rural areas and 67 per cent in urban areas.

The World Congress of the International Health Economics Association held in Beijing in July last year stated that India figures at the bottom if one takes the government share in total health expenditure. It is less than 25 per cent in India as against 76 per cent in Europe and 34 per cent in South-East Asia.

The ILO has rightly called upon the UPA government to rectify this anomaly as poor health care leads to lost years of income due to the short and long-term disability family members, lower productivity, and the impaired education and social development of children. It states that poor health care conditions have given rise to micro-insurers, who “purchase” products from state-run hospitals and facilities to provide “service” to deprived poorer sections. The poor have to bear cost of transportation and loss of earnings as add-ons to illness.

Indeed, the solution in a country with such a vast expanse is not easy. Mere cosmetic increase in budgetary allocations would not solve the problem. The government has to initiate steps to resuscitate the system and delivery mechanism that it has built up and act ruthlessly so that the benefit reaches the people. It should desist from promoting insurance business and instead provide direct relief to the people so that the nation can have healthy and productive people, who could add to its GDP. --INFA

(Copyright, India News and Feature Alliance)