Prime Minister’s Advisory Council on Trade and Industry

A healthy society reflects the well being of a nation and is an important contributor to economic growth. Infirmities in the existing health system do not assure India of a healthy society and, in turn, provide the impetus for economic growth. Reforms in health care are vital to secure India’s future. India has to see health not as a social cost but as an investment in human capital, more so in the information era where quality of human capital of a nation determines its economic growth and development

In the existing health system, significant disparities exist between urban and rural areas, between different states and between poorer and wealthier segments of the population. There are stark deficiencies in health care quality and regulation is weak. While the overall spending on health care, at 5.7% of GDP, is comparatively high, government spending, at 1.7% of GDP, is low compared to other emerging nations. There are very few effective financing mechanisms for individuals. Adequate health care is unaffordable for the vast majority of India’s population.

The challenge for the Indian health system is to make available affordable, quality health care available to every one of its one billion citizens; increasing by a quarter in fifteen years time. Further, it has to care for life threatening diseases that daunt a large number of the underprivileged, while simultaneously addressing increasing magnitudes of life style diseases that afflict a large number of relatively well off people.

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 host of initiatives are required to realise the above vision and mission.

1. The referral system for secondary treatment should be strengthened.

2. Health care delivery should be decentralised to the panchayat level with additional responsibility for ensuring standards in related areas such as sanitation, hygiene, nutrition, quality of household fuels and pollution.

3. The government should enlist private providers to deliver preventive care.

4. A mechanism to monitor the clinical effectiveness of quality of services offered at both public and private facilities should be instituted.

5. The private sector should be encouraged to participate in the secondary and tertiary sectors, through tax breaks and incentives structured in a manner to avoid any skew or overcrowding in certain areas.

6. A detailed plan for use of information technology in health care delivery, referral, training and administration should be prepared and implemented.

7. An independent agency should be mandated to regularly assess quality of health care in the public and private sector and, based on this assessment, appropriate incentives and disincentives for providers built in.

8. In health care financing, different segments of the population should contribute to the cost of healthcare, according to their ability to pay. The current system of individual spending should migrate to collective spending on health care.

9. The organised sector should be mandatorily covered though social insurance. The existing schemes (such as CGHS & ESIS) should be consolidated at the state level.

10. The rural population should be covered through community insurance operated at the panchayat level.

11. Voluntary social insurance should be encouraged for people employed in the unorganised sector.

12. In addition, private insurance for people who can afford and want better facilities should be available.

13. A safety net, fully sponsored by the government, should be available for the poor and the vulnerable sections of the society.

14. Additional tax on areas which will increase the health care costs, such as use of tobacco and liquor, have to be levied and dedicated to meet the increased demands for public expenditure on health care.

15. 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.

16. There should be a mix of public and private initiatives in secondary and tertiary segments of health care.

17. A large number of government hospitals should be corporatised and allowed to operate with autonomy.

18. The government should announce health care as a priority sector for lending by institutions.

19. To market India as a destination for high quality and cost effective health care, a promotional body called ‘Health Care Services Export Promotion Council’ should be established.

20. The Government should establish a health care development fund. Contributions to this fund must be fully exempt from income tax.

21. Efforts to continuously train medical and para-medical professionals should be initiated.

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.

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 above measures aim at focussing free government funded health care on the most needy. They induce those who can pay for health care to do so, but through new financing mechanisms designed to ease the burden of obtaining health care.

The costs are huge, but there are enormous payoffs in long-term investment in health care. Health care reform is urgent and strong government commitment at the centre and states is the key to its success.