Improving healthcare infrastructure

Abstract

The structure of country’s health system is a key determinant of the distribution of out-of-pocket payments (OOPs) for medical care that its citizens must pay. For a country at India’s level of development, its national expenditure is unusually low at 4.5% of GDP for a country at its level of development. Over 70% of this was financed by OOPs in 2005, prior to the roll-out of the National Rural Health Mission. With a high level of poverty, this constitutes an excessive burden on households when they fall ill and often leads to denial of care, or excessive debt burdens and reinforces poverty. The memo looks at alternative ways that one can reduce OOP payments in India. With health being a “state subject” in the constitution of India, a rich body of alternative models of government financing of health care has evolved that provides valuable guidance on ways to address the excessively high burden of OOP payments and try to provide a Universal Health coverage to its citizens. These experiences are in parallel to central government experiences that provide advice on a pan India basis. Each program has made a number of innovations in financing of health care. These may be classified into innovative practices in identifying poor who need tertiary care, procuring private tertiary care for the poor, containing costs, and ensure adequate quality of care. While a number of evaluations studies, some less rigorous than others, document increasing benefits and expanding use of tertiary care facilities, there exists limited evidence that such programs have had an effect on OOPs if we use NSSO data. Apart from looking at average costs of care two other types of data needs further study – 1) Is there a rise in the fraction of households who report health expenditures? 2) What share of households report catastrophically high expenses? A review of literature finds that the academic and scholarly literature reports imprecise and inconsistent findings on these questions. Large OOP costs are often generated by households who seek secondary and tertiary care. In this context, government financed health insurance schemes may provide a targeted way of accessing care. However, this care cannot be exhaustive thus, raises a number of alternatives issues that remain unresolved. For example, what about provision of care for diseases not covered, or beyond coverage limits? Similarly, how does one incorporate preventive and promotive health practices in an effort to contain costs? What are strategies to strengthen primary and secondary care provision? This memo documents that the government finance schemes can provide important gains in very specific domains and to this extent it is likely to reduce OOPs healthcare financing thereby reducing the CHE crisis. However, this is only a part of the pictures; other channels through which OOPs is generated remains to be reliably addressed.