We are happy to present this report titled ‘A policy framework for reforms in health care’ to the Prime Minister’s Council on Trade and Industry, Government of India. We are grateful to the Prime Minister for this opportunity and for the honour.

There are many infirmities in the existing health infrastructure and system. These infirmities do not assure India either of a healthy society or of a health care industry that can be a force for economic growth. Reforms in health are vital to secure India’s future. The Indian health system has to make available affordable, quality health care to a population that is growing from one billion now to one and a quarter billion in fifteen years time. It has to care for life threatening diseases that affect a large number of underprivileged, while simultaneously addressing life style diseases that impact a large number of relatively well off people.

If India has to provide health for all, public expenditure has to be significantly stepped up and focussed on the poor and indigent groups. At the same time, there has to be greater play for private participation in the health sector. Several innovative financing mechanisms have to be institutionalised. India has the potential to be at the forefront of modern health care, given its strong base in quality health care professionals and cost effective research. India has the opportunity to harness these strengths to deliver quality health care not only for its people but to larger geographical regions as well. India has to see health not as a social cost but as an investment in human capital for economic growth.

With this perspective, we commend the recommendations in this report.

We thank officials in the Prime Minister’s office for their support and acknowledge the insights provided by a number of academicians, social scientists, policy planners, Andersen Consulting and the Business Intelligence Unit, Chennai in the preparation of this report.

New Delhi Mukesh Ambani

April 24, 2000 Kumarmangalam Birla

 CONTENTS

LIST OF TABLES

LIST OF ABBREVIATIONS

The state of health of citizens of a nation is important in two ways – it reflects the quality of life of its people and impacts economic development.

The world has made remarkable improvements in life expectancy. Significant strides have been made in the control of several diseases. However, developing countries still face enormous problems in the health sector. For example, the child mortality rates in developing countries are about ten times higher than those in the developed countries. Developing countries are fighting the war against ill health simultaneously on two fronts - infectious life threatening diseases and looming lifestyle diseases. India, as a developing country, has the dual problem of addressing life-threatening diseases for a vast population, while simultaneously tackling the growing numbers afflicted with lifestyle diseases.

India does not have a strong health infrastructure and has several infirmities in its health system. The overall level of funding allocated for health care on a national basis is comparatively high (5.7% of GDP). Government’s funding for health care (1.7% of GDP) is low compared to other emerging nations. Funding for health care is largely individual, rather than collective. There are very few effective financing mechanisms. This is responsible for the fact that adequate health care is unaffordable for the vast majority of India’s population.

The existing system of health care in India is fraught with many inequities. Current funding is being used sub-optimally and is not directed to maximising health gain. Significant disparities exist between urban and rural areas, between different states and between poorer and wealthier segments of the population. The current structure of the health care delivery system, especially public health care, does not provide enough incentives for improvement in efficiency. There are stark deficiencies in health care quality and regulation is weak.

This state of affairs portends a major handicap for India in the information era where quality of human capital of a nation determines economic growth and development. An improvement in health systems and infrastructure is vital to assure India’s future.

It is necessary to significantly overhaul the existing system through a comprehensive set of reform measures. The vision for India in the area of health should be ‘to foster a healthy society through provision of quality health care services to all citizens’. To realise this vision, India has to focus on health development with the mission of ‘creating an affordable and efficient health care system, balancing preventive and curative measures and establishing an enduring public-private partnership’.

A study of the health systems in Australia, Singapore, South Korea, Thailand and China offers a number of insights for shaping India’s health care reforms. The important lesson is that the government’s focus has to be on primary health and preventive medicine. Also that there should be a mix of government and private initiatives, with direct participation from both.

A host of measures need to be undertaken in India to realise the above vision and mission. These are provided in the summary of recommendations. The agenda for reforms presented in this report aims at focussing free government funded healthcare on the most needy. It induces those who can pay for healthcare to do so, but through new financing mechanisms designed to ease the burden of obtaining healthcare when it is most needed.

The current system of individual spending should migrate to collective spending on health care. The government should facilitate this migration though introducing multiple health care financing schemes targeted at different socio-economic segments of the population. This should be through a mix of private and public sources. In addition, there could be other measures such as reallocation of funding and increased revenues for the government.

Steps, to ensure that these measures do not unduly increase health care costs across the society, have to be taken, primarily through increased insurance coverage. The organised sector should be mandatorily covered though social insurance. The existing schemes (such as CGHS & ESIS) should be consolidated at the state level.

A safety net, fully sponsored by the government, should be available for the poor and the vulnerable sections of the society. The rural population should be covered through community insurance operated at the panchayat samiti levels. Voluntary social insurance should be encouraged for people employed in the unorganised sector. In addition, private insurance for people who can afford and want better facilities should be available. There should be provision for selective user charges in government funded schemes to prevent misuse.

The government’s role apart from providing free and affordable health care to the indigent and needy sections of the population should focus on primary and preventive health care programmes. There has to be a mix of public and private initiatives in health care in secondary and tertiary segments of health care. The government should also utilise the private sector and NGOs for improving the reach of the health care delivery system. A large number of government hospitals must be corporatised and operate with greater autonomy.

In the area of preventive health, it is imperative that such factors as nutrition, hygiene, water supply and sanitation, food adulteration, quality of drugs, environmental protection, quality of household fuels and health programmes in schools and occupational areas are addressed. An inter-sectoral approach in collaboration with other agencies dealing with these areas is essential. A decentralised approach right up to the village level is advocated.

India’s population is expected to be around 1.24 billion by the year 2015. To meet its obligation for a healthier society, large investments in the health sector are required. The total expenditure on health in 2015 is estimated at Rs 1,81,120 crores, at current prices. Of this, Rs 1,17,423 crores (65 %) should be in the public sector and Rs 63,697 crores (35 %) in the private sector. This pattern of spending between public and private will be a reversal of the current situation where government spending is about 22 % of the total health expenditure. The government will have to spend about five times its current spending on health, but focusing on primary and preventive health.

In terms of GNP, the health expenditure works out to 3.06 % of GNP for the year 2015 and 9.72 % of GNP for the year 2000. Public expenditure will be 6.3 % of GNP at current levels and 1.99 % on 2015 year levels.

As for human resources, the number of doctors will have to increase three times from the existing level of 3.6 lakhs to 12.4 lakhs by 2015. Similarly, there is need for substantially increasing the number of paramedical professionals for meeting the increased health care needs.

The costs are huge, but there are enormous payoffs in long-term investment in health care. Such investments can not only raise quality of life for all citizens but also make the health care industry in India a great force for economic growth.

The challenge of the future is daunting. Rapidly escalating healthcare demand fuelled by a dual burden of disease and population growth and the rising expectations of a wealthier and better-informed society will place an untenable strain of the nation’s healthcare system.

Health care reform is urgent and strong government commitment at the centre and states is the key to its success.

A. HEALTH CARE DELIVERY

Enforce a proper referral system, wherein for treatment at the secondary level, a referral from the primary level has to be made. In case there is no referral from the primary health centre at either the secondary or the tertiary centre, the patient may be charged a higher fee.

2. Decentralised Health Delivery System

Decentralise the health facility delivery system to the taluka level, supported by the community. Form a health association accountable and responsible to the panchayat samiti. The key responsibilities of the health association would include monitoring health status at village level, effective inter-sectoral co-ordination and mobilising community involvement.

Form a health care federation of the health associations in the district should be formed at the district level and accountable to the zilla parishad. The key responsibilities of this federation would include monitoring the overall health status of the district, effective management of the referral network between community health centres and district hospitals, inter-sectoral planning with the departments of education, sanitation, sewage and water (all key factors affecting health) for focussed and co-ordinated action plans.

Enlist private providers to deliver preventive care through local delivery channels for specific preventive and promotive services. This would enhance the reach of the health delivery system and also reduce the need for extensive infrastructure to be established by the government.

4. Quality of Health Care

Institute a mechanism to monitor the clinical effectiveness of quality of services offered at both public and private facilities.

5. Competition

Encourage the participation of private sector in the secondary and tertiary sectors through infrastructure creation. This could be in the form of tax breaks and incentives. The incentives should be structured to avoid any skew or overcrowding in certain areas.

6. Use of Technology

Devise a detailed plan for use of information technology in health care delivery, referral, training and administration should be made and implemented.

7. Quality Rating

Mandate an independent agency to regularly assess quality of health care in the public and private sector and appropriate incentives and disincentives built in.

1. User Pays Principle

Ensure that the different segments of the population contribute to the cost of health care, according to their ability to pay. The free health care and government expenditure should be used for the indigent group and for priority public health services such as communicable disease control, immunisation and family welfare.

Introduce a host of financing mechanisms to improve our health infrastructure. Encourage private sector and NGO initiatives in health care through appropriate tax breaks and incentives.

3. Multiple Financing Options to Provide for Health Care

Migrate from the current system of individual spending to collective spending on health care. Facilitate this migration though introduction of multiple health care financing schemes targeted at different socio-economic segments of the population. This should be through a mix of private and public sources.

4. Insurance

Provide mandatory insurance coverage to the organised sector through social insurance. Consolidate the existing schemes (such as CGHS & ESIS) at the state level insurance schemes.

Provide insurance cover to the rural population through community insurance operated at the panchayat samiti levels. Encourage voluntary social insurance for people employed in the unorganised sector. Make available, in addition, private insurance for people who can afford and want better facilities. Prevent misuse of government funded schemes by a provision for selective user charges.

5. Safety Net

Provide a safety net, fully sponsored by the government, for the poor and the vulnerable sections of the society.

6. Tax on Tobacco and Liquor

Levy additional tax on areas which will increase the health care costs such as use of tobacco and liquor have to be provided to meet the increased cost of health care systems.

Health Care Development Fund

Establish a health care development fund drawn from contributions from institutions and individuals offering appropriate tax incentives.

1. Develop Inter-Sectoral Linkages, Especially in Promotive and Preventive Services

Address the areas which impact health in a co-ordinated manner with all the agencies at all levels, as against the current practice of inter-sectoral linkages in an ad-hoc manner.

Regulate critical service related regulations such as accreditation and mandatory quality assurance systems. The current regulatory mechanism is extremely weak. Decentralise the regulatory mechanism to the state level made immediately. However, the centre should set the regulations, which will be applicable all over the country.

Allow select government hospitals autonomy and self-determination. This can be achieved through the route of corporatisation.

Separate the government roles of financier, purchaser and provider. The government should allow private providers to compete with the government agencies in providing service.

Role of Government

Redefine the role of the Ministry of Health to include :

purchasing the agreed range of health services at optimal prices from a range of providers. The quality should not be compromised on any count.

monitoring all providers for performance under contractual arrangements and benchmarking providers against best practices and each other.

enforcing relevant legislation and licensing Acts

planning to address issues regarding equity of access and services to the indigent.

6. Refocus Government Expenditure

Shift from the current emphasis on curative, advance and urban services to increase funding for preventive services and better services in the rural areas. The government expenditure should cover both health care for the poor and health promotion and disease prevention for all. Channel the government funded health care services to the indigent.

7. Government Focus on Preventive and Primary Health Care