Health care financing in India

DR SUBRAHAMPANY
DEPARTMENT OF COMMUNITY MEDICINE.
INSTITUTE OF MEDICAL SCIENCES & SUM HOSPITAL.
MENTORED BY:
DR. LIPILEKHA PATNAIK.

Good health is universally acknowledged to be of intrinsic value & therefore
constitutes an integral element of development.
One can be rich but sick enough to not enjoy any opportunities that wealth opens
up, and poor health may translate into worsening economic opportunities as well.
In fact, one can also be healthy but too poor to pursue valued objectives.

DEFINITION OF HEALTH CARE
FINANCING
WHO:
“Function of a health system concerned with the
accumulation, mobilization and allocation of money
to cover the health needs of the people, individually
and collectively, in the health system.”

PURPOSE
 Make funding available
 Set the right financial incentives for providers
 To ensure that all individuals have access to
effective public health and personal health care.
Health is a human right.
India is at an exciting and challenging period in
its history.
Key focus area : making healthcare affordable and
accessible for all.

THE CHALLENGES:
• Nearly 73% of the country’s population lives in
rural areas and 26.1% is below poverty line.
• India lacks strong healthcare infrastructure,
• Several inherent weaknesses in its healthcare
system
• Dominant private sector in India, with 70%
catered by it.
• Epidemiological transition
• Demographic transition

HEALTH SERVICE FINANCING SOURCE
By government.
Health services financed broadly through private
expenditure or public expenditure or external aid.
Voluntary payments by individuals or employers.
External sources refer to the external aid which comes
through bilateral aid Programme or international
NGO’s.

BACKGROUND:
India continues to be among the lowest public
health budgets in the world at just over 1% of gross
domestic product (GDP).
And it gets reflected in the performance of the
public healthcare delivery system –decaying
infrastructure, severe staff shortages or
unavailability of medicines.

BACKGROUND (CONTD…):
The ineffectiveness of the Indian health system &
characteristically high health-related out-of-pocket
hospital payments have pushed around 60 million
people below poverty line.
Increased spending through National rural health
mission (NRHM) and the focused attention to rural
healthcare are slowly yielding results.

BACKGROUND (CONTD…):
Most deliveries across urban and rural areas are now
taking place in government hospitals as pointed to
by data from 2013 sample registration system (SRS).
Given that there are schemes across the country that
offer incentives deliveries in private sector facilities,
this is a remarkable result

IS INCREASED FUNDING NEEDED ?
YES…..!!
YES…..!!
YES…..!!
YES…..!!
YES…..!!
YES…..!!

THE CURRENT NEED.
 The current government to meet fiscal deficit targets
are a major cause of worry.
Government should be the primary provider of
healthcare.
A clear roadmap to enhance budgetary spending on
healthcare to 3%-5% of GDP should be drawn.
Regulation of the private sector must be a priority.

THE CURRENT NEED(CONTD…).
Establishment of standard treatment protocols and
empowerment of communities to hold the healthcare
system accountable will be critical to ensure quality
of healthcare.
A comprehensive review of currently fragmented
government funded healthcare schemes should be
conducted with the aim of future consolidation for a

THE HEART-RENDING SCENARIO
India accounts for the highest number of maternal
deaths in the world, and together with Nigeria (14%),
accounted for one-third of all global maternal deaths.
As a recent review shows, public financing of health is
among the lowest in the world at just over 1% of GDP,
and out-of-pocket (OOP) spending is very high at
around 3% of GDP.

Health care financing in India

• Despite poor health indicators, Govt. spending on
health care is well below what is needed
• Reason being:
• Low revenue collection
• Competing demand for revenue
• Relatively low spending priority
• Consequently, limited access to public health care
facilities forces people to go to Pvt. Provider,
resulting in substantial out of pocket (OOP)
spending, specially for the poor.

REASONS OF RISING OOP EXP.
• A major expenditure item is drugs:
• Irrational use of drugs
• Prices of new drugs and
• Drugs for many NCDs - unaffordable to majority of the poor
• Non availability of drugs to outpatient & inpatient in the
public sector.
• Doctor’s fee was another critical component.
• Non availability of investigation facility in public sector
8/5/2016 16

The National Rural Health Mission aimed to reduce
IMR to 28/1000 live births, the MMR to 100/
100000 live births and the TFR to 2.1 by 2012.
With IMR at 40 and MMR at 167 in 2013, only TFR
seems anywhere near the goal set with 24 of the 29
states and 9 UTS achieving replacement levels of
fertility.
This achievement however is often resulting in
tragic human rights violations in mass sterilisation
THE HEART-RENDING
SCENARIO(CONTD…)

HEALTHCARE FINANCING IN INDIA
Over the past few decades, India has made significant
gains in health outcomes.
The crude birth rate, reflecting the huge mortality load,
stood at 39.9 in 1941-51, declining to 21.4 in 2013.
The Crude Death Rate declined from 27.4 in 1941-51 to
7.0 in 2013.
India’s achievements in health care have not been
comparable to its economic gains and it has worse health
indices than most developing countries in the world.

Life expectancy, which was around 30 at the time
of independence, is now in the mid-sixties.

THE CONSTRAINT CONTINUES.
In spite of the stated objective of raising the outlays
for public health from 0.9 % to 3 % of GDP by 2012
through NRHM and expanding public health
infrastructure substantially, the public health
spending remains just above 1 % of GDP
This resulted in continuing poor quality of
preventative care and poor health status of the
population and forced people to seek private care,

THE PLAGUED INDIAN HEALTH
SYSTEM
Indian health system is plagued with serious problems
such as sharp inequalities in health outcomes,
deficient coverage, unequal access, poor quality and
high costs.
These serious deficiencies are not accidental. They
have been primarily caused by the patterns of
financing for healthcare in India.
Per capita public health spending is an extremely
significant variable affecting life expectancy at birth

DEOLIKAR ET AL (2008)
Deolikar et al (2008) observed that public spending
on health in India peaked at about 1.6 % of GDP and 4
% of the government budget in the mid 1980s.
During the 1990s, government health spending
failed to keep up with the expanding economy, and,
by 2001, it constituted 0.9 % of GDP and 2.7 % of the
government budget.
These numbers fell to 0.8% and 2.4%, respectively, by
2005.

SRS 2013.
Given that there are schemes across the country that
offer incentives deliveries in private sector facilities, this
is a remarkable result.
However, the revised health sector plan expenditure is

THE ROLE OF THE PRIVATE SECTOR
IN HEALTH CARE DELIVERY
There is vast diversity in the composition of the private
sector, consisting largely of sole practitioners or small
nursing homes having 1-20 beds; serving the urban
and semi-urban population and focused on curative
care

In the absence of regulations governing location,
standards, pricing, to name a few, private facilities run
in marketplaces, residential colonies, pharmacy shops,
with freedom to provide any kind of service, of
whatever quality and at exorbitant cost, which varies
from facility to facility.
Of concern is the documentation, though limited, on
the poor quality of services being provided at the rural

ISSUES FOR POLICY
EQUITY: COST OF CARE
Pricing of services in the private sector is influenced
by the source of capital and interest rates and prices
of other inputs such as labour, rentals, technology,
etc.
QUALITY OF CARE
Whether people are getting value for their money is
difficult to evaluate in the absence of norms or
yardsticks with which to measure good quality
against bad.
While the private sector has expanded access and

PUBLIC POLICY RESPONSE:
PUBLIC-PRIVATE PARTNERSHIP
Having realized the
dominant position of the
private sector, the
government has, of late,
attempted to engage the
private sector in
providing services under
the national health
programmes with the

HUMAN RESOURCES FOR HEALTH
• The first contact for care in the organized health
system: THE MULTIPURPOSE HEALTH WORKERS
• NURSING SERVICES: shortage of nurses
• The nurse to population ratio in India is 1:1264
while in Europe it is 1:100-200
• AVAILABILITY OF DOCTORS

INITIATIVE BY GOI
AT NATIONAL LEVEL
NRHM
RSBY
AT STATE LEVEL
STATE HEALTH INSURANCE
8/5/2016 32

NRHM
• Launched in 2005 – to provide universal access to
equitable, affordable and accountable quality health care
• Better staffing as per IPHS and HR developmental policy.
• Rogi kalyan samiti
• Bottom up approach has adopted
• During 11th plan there was 4 fold increase in budget
allocation to health sector. Out of this 65.7% was
proposed for NRHM.
• In 12th plan, there has been more than two fold increase
over 11th plan budget.
• But failed to achieve 2-3% of GDP.
8/5/2016 33

RASHTRIYA SWASTHYA BIMA
YOJANA
• It is a Central Govt. Health insurance scheme to meet
the health needs of the poor
• Centre: state – 75 : 25. In north east 90:10.
• The maximum premium by the central Govt. Is limited
to 750 per insured family/yr.
• Benefits:
• Hospitalization expenses upto rs 30,000
• Maternity newborn care
• Day care services
• Transportation cost (rs.100/visit, limit of 1000/yr)
• Cover all preexisting diseases
8/5/2016 34

12TH PLAN INITIATIVE
• Universal health coverage
• Private sector has to be partnered for health care
delivery.
• Essential medicine list needs to be brought under
price control mechanism,
• Incentivization of states
• Flexibility in central funding for state
8/5/2016 35

OTHER MODELS OF
FINANCING
• PUBLIC PRIVATE PARTNERSHIP (PPP)
• MEDICAL TOURISM
• FDI IN HEALTH SECTOR
• RESOURCE GENERATION BY FACILITIES AND
COLLEGES
8/5/2016 36

CHALLENGES
• PPP: cost escalation. Invariably expensive drugs and
procedures are prescribed.
• Insurance companies provide health cover to the
young, the employed and the rich, and avoid those
who are elderly, unemployed and poor.
• There is a cozy relationship between the insured, the
insurance company and the healthcare provider.8/5/2016 37

CHALLENGES
• Insurance covers only the cost of hospitalization and
not expenditure on outpatient care. Statistics show
that close to 70% of the out-of-pocket expenditure
of the household is for outpatient care, which will
not be covered by insurance.
• In the Indian situation where a majority of the people
are self-employed, universal coverage will remain a
mirage.
• Many villages in India do not have a hospital worth
8/5/2016 38

RECOMMENDATIONS
• Rather than further expand the provision of free
primary, secondary, and tertiary health care services in
the public sector, the government must focus on
providing financial resources to the poor for routine
and non-routine care.
• Once the poor have been provided the financial
resources necessary to pay for their health care
expenditures, there does not remain a case for

The assumption seems to be that community
empowerment and participation will happen with
minimal effort or financial commitments.
Focused and adequate financial commitments
for community based accountability measures
and decentralised planning will be a step forward
in the right direction.

REFERENCES:
• Report of the national commission on
macroeconomics and health 2005
• Financing and delivery of health care services in India:
background papers of the national commission on
macroeconomics and health.
• Health care financing reforms in India: M. Govinda rao
and Mita Choudhury
• Government health financing in India: challenges in
achieving ambitious goals: Peter Berman, Rajeev
Ahuja, Ajay Tandon, Susan Sparkes and Pablo Cottret
• Financing healthcare for all in India: towards a

THANK YOU.
“Health systems financing:
the path to universal coverage”

Health care financing in India

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