Health Care Financing and Insurance: Perspective for ...

Margin, Vol. 31 (2), Jan-Mar 1999, pp. 38-68

Health Care Financing and Insurance: Perspective for the Ninth Plan, 1997-2002∗ Abusaleh Shariff, Anil Gumber, Ravi Duggal and Moneer Alam 1.

Introduction: Structure of Health Problems

India with a population heading towards the billion marks has shown a considerable progress in raising the levels of income but failed to ensure a better quality of life of people. No doubt, the per capita food availability has increased from 395 grams per day to 511 grams per day during 195191, suggesting an improvement in the food security as well as in the level of nutrition with the latter has partly been reflected in the decline in mortality rate. However, even while approaching the end of 20th century, India's health care problems are still dominated by communicable, respiratory and diarrhoeal diseases. The maternal, peri-natal and neo-natal morbidity rates have continued to remain high in the country as well as in several states. The morbidity and mortality burden is accentuated because of high incidence of anaemia and other vitamins and micronutrient deficiencies. The risks of mortality and morbidity are clustering among children, women in reproductive ages and ageing population particularly belonging to poor and vulnerable sections of the society (Gumber, 1996), suggesting widening disparities in the quality of life across population groups and regions. Despite understanding well that the gains of development are not fairly distributed across states and among various sections of the society, both the central and state governments could not raise the level of spending on social sector including education, health and family welfare. India barely spends eight per cent of its GDP on essential health and education services whereas in other developing countries with similar per capita income the percentage exceeds 20. Further, in contrast to other developing countries, nearly three-fourths of health expenditure in India is private, i.e. households out-of-pocket expenditure (World Bank, 1995). The public expenditure on health and family welfare is just a little over one per cent of GDP and over and above, the spending is disproportionately low in demographic and socially backward states. As a result, fertility, infant and child mortality, maternal mortality, etc. in these states (particularly in Bihar, Madhya Pradesh, Orissa, Rajasthan and Uttar Pradesh) have remained far from the desired level. It is estimated that these five states would take half a century to match with the current fertility rate of Kerala or reach the replacement level of fertility. A majority of health care problems faced by the Indian masses are amenable through essential public health investments, cost-effective interventions, improvement in efficiency of public health delivery system and reduction in inequity in the distribution of benefits from public health services. In 1991, for example, 44 per cent of all deaths were due to the causes amenable through effective primary health care delivery; this proportion was 49 per cent in 1985 (Registrar General, 1991). Similarly, in 1993, about 34 per cent of ailments suffered by people in rural and urban areas were infectious in ∗

This is the revised version of report prepared by a sub-group on Health Care Financing and Insurance, constituted by the Planning Commission in consultation with the Ministry of Health and Family Welfare, Government of India in March 1996. The sub-group consisted of Dr. Abusaleh Shariff as Convener, late Prof. T.N. Krishnan, Dr. Anil Gumber, Dr. Ravi Duggal and Dr. Moneer Alam as members which were co-opted by the `Working Group on Health Management and Financing' to formulate policy guidelines, strategies and programme objectives for the Ninth Plan (1997-2002). The task for this sub-group was to: a) assess the disease burden and cost of ill health in the country as of mid-nineties and project figures for 2001; b) estimate the current as well as for the Ninth Plan period, the cost of health care by sectors (public, NGO, and private); and c) find alternative sources and strategies for health financing during the Ninth Plan period in order to meet the rising cost of health care. Accordingly, four background papers were prepared (enlisted in the reference).

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nature; and another 37 per cent of ailments were reported as fevers. The gastrointestinal disorders and respiratory diseases were the most common (Shariff, 1995). Both the nature of morbidity and causes of death data suggest clearly the need for an overwhelming focus on primary health care in India. Further, it is argued that health care financing in India is inequitable and not properly targeted. In other words, it is largely characterised by "an emphasis on hospitals rather than primary health care; urban rather than rural population; medical officers rather than paramedics; services that have large private than social returns ...." (Alam, 1996:5). 2.

Disease Burden and Cost of Ill Health: Projections for the Ninth Plan

Estimating disease burden is severely affected by a number of factors including perceptions and recall errors on the part of those reporting morbidity during the household surveys. In the recent past, however, the National Sample Survey (NSS) and the National Council of Applied Economic Research (NCAER) have made commendable efforts to estimate morbidity rates through carefully designed sample surveys. Table 1 presents annual morbidity rate (per thousand population) for major states during 1973 to 1993 as estimated by the NSS and NCAER. The data point to considerable inter-state differentials in the prevalence of morbidity. Incidentally, Kerala (considered to be in the advanced stage of demographic and health transition) has recorded the highest level of morbidity in all the surveys reviewed. Generally speaking, incidence of morbidity is higher in rural than in urban areas. Tables 2 present the Disability Adjusted Life Years (DALYs) lost per thousand population due to mortality, morbidity and disability, by broad age groups and sex. The rate is highest for the younger population which falls and subsequently increases with age. It shows the `J' or 'U' shaped relationship with age, similar to that observed for morbidity and mortality distribution. In terms of absolute number, annually a total of 292 million DALYs are lost in India, of which two-thirds (200 million) are as result of premature deaths. The inter-state differential in the burden of disease in terms of DALYs lost as result of premature deaths is large which is primarily due to differences in child mortality (see Table 3). The child mortality has alone contributed nearly 54 per cent of DALYs lost; the percentage ranged between a low of 23 in Kerala to a high of 64 in Rajasthan and Uttar Pradesh. The overall burden rate (DALYs lost per thousand population) did not differ much by gender; however, amongst states the rate was lower for females in the demographic advanced states of Kerala and Tamil Nadu and higher in demographic backward states of Rajasthan and Uttar Pradesh (Gumber, 1996). Quite likely, in the latter group of states the extensive female infanticide is one the important contributory factors. In terms of incidence of morbidity, as compared to males the rate was marginally higher for females, but the difference was larger in urban than in rural parts of India (Table 4). Both the NSS and NCAER data reveal that the incidence of morbidity for women in the reproductive age group 15-44 is considerably higher than those for men. According to the NCAER survey, the rate was 89 and 136 per month per thousand population for women aged 15-24 and 25-34, respectively; the respective figures for men were 79 and 116. The NSS data suggest that both the incidence of illness and hospitalisation have shown increase with the Monthly Per Capita Expenditure (MPCE) Class. On the other hand, the NCAER data indicate that the decision to hospitalise is not significantly related with income. However, both the surveys conform to that the SCs and STs report lower levels of hospitalisation which is largely due to their inaccessibility to health care facilities on the one hand and lack of resources on the other (see for details on these parameters: Gumber, 1996; Shariff, 1995). About 10 to 15 per cent of all those reporting sickness may not seek treatment at all; the proportion tends to be higher in rural than in urban areas (Tables 5 and 6). It is apparent from Table 6 that the

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probability of not seeking treatment is higher among females, elderly (aged 60 years and above), and the never married individuals. This probability is also higher among the SCs and STs, and those belonging to lower MPCE quintile. Accessibility, physical proximity and financial constraints are extremely important for taking decisions to seek treatment (Gumber, 1996). Of those having received treatment, 93 per cent have received outpatient care without much inter-state variation (Table 5). 3.

Share of Public and Private Facilities in Health Care Market

Both the NSS and NCAER data confirm that the patients from rural as well as urban areas have overwhelmingly chosen public facilities (government hospitals, CHCs and PHCs) for inpatient care. The reliance on public hospitals for inpatient care was much greater in hilly and backward states, among the SCs and STs and those belonging to lower MPCE quintile (Gumber, 1996). On the other hand, the private facilities are used largely for outpatient care, particularly in urban parts of India (Table 7). Unlike public facilities which are centrally located, the private practitioners are found even in remote and backward areas. (For instance, 70 per cent of hospitals and 85 per cent of hospital beds in the public sector are located in urban areas.) The private practitioners are usually contacted first for day-to-day health care needs before availing of the distantly located public facility. It is also observed that public facilities are used more often in the cases of severe and catastrophic illnesses which the private practitioners are reluctant to deal with. Table 8 presents the estimates of medical and total cost of treatment by type of facility in rural and urban areas separately for inpatient and outpatient care. According to the NCAER data, the average medical expenditure (expenses on fees, medicines, clinical and diagnostic tests, surgery, and hospital bed charges) per episode in 1993 was Rs. 850 and Rs. 1065 for inpatient care in rural and urban areas, respectively; and the respective figures for outpatient care were Rs. 70 and Rs. 97. There were large inter-state and rural-urban variations in the cost of treatment. As expected, the cost of treatment was higher in urban than in rural areas, in private than in public sector and for inpatient than for outpatient care. For both inpatient and outpatient care the private sector agencies, on an average, charged three to four times than the public sector agencies. Overall medical expenditure constituted 84 per cent of the total cost of treatment which also included indirect cost such as expenses on transport, special diet, rituals, gifts, tips and other miscellaneous expenses (Table 9). In almost all the states, the proportion of indirect cost (mainly transportation) was higher in rural than in urban areas thus reflecting poor distribution of health care facilities in rural areas particularly in hilly states. An average Indian household spends Rs. 250 per capita per annum on the use of health services; the figure for urban households was about 40 per cent higher than their rural counterparts. The earlier estimates provided by the World Bank (1995:20) for 1990-91 was Rs. 240, which was based on the previous household survey of the NCAER using two weeks reference period for illness reporting. It appears that the current level of household spending on health (Rs. 250) is bit an underestimate because this time the NCAER survey used relatively a longer reference period (onemonth) for morbidity reporting. And it has been well documented that recall lapse tends to be higher for longer reference period (Gumber and Berman, 1995). Overall, 80.2 per cent of the total health expenditure by the households was for receiving private health care facility. This is largely because the private health care expenditures (for both inpatient and outpatient care) are considerably higher in terms of out-of-pocket payments by the households. It is also a fact that the public services are not free and people do incur out-of-pocket expenditure to realise public health care albeit it may work out to be cheaper than the private facilities. For instance, according to the NSS data, more than two-fifths of inpatients and one-third of outpatients who

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availed of public facilities had to pay for the services (Gumber, 1996). Table 10 presents the share of household expenditure on curative care by public and private facilities. While the household expenditure on receiving medical services from public facilities has worked out to be 0.8 per cent of the NNP, it turned out to be 3.3 per cent of the NNP in the case of receiving services from private facilities. The total curative health care market in India is, therefore, worth Rs. 22276 crores, about 4.1 per cent of the NNP, during 1993. Besides households out-of-pocket expenditure on medical care, the government medical expenditure during 1993 was of the order of 7518 crores (both revenue and capital) which amounts to 1.4 per cent of the NNP (Table 11). Thus, the gross health care market in India is 5.5 per cent of the NNP i.e. Rs. 29794 crores during 1993. There are large inter-state variations in both government and household spending on health care whether expressed in per capita terms or as percentage of state domestic product (SDP). Two hilly northern states (Jammu and Kashmir and Himachal Pradesh) and Kerala spends more than nine per cent of their SDP on health whereas the percentage was around three for relatively developed states of Punjab, Haryana and Maharashtra. It appears from selected health care indicators across major states (presented in Table 12) that the government spending on health, leaving aside hilly states, is low among poorer states; as a result out-of-pocket expenditure by households is high. High morbidity further raises the share of households’ expenditure in total health spending. 4.

Strategies for Health Care Planning for the Ninth Plan

Should the Ninth Plan strategy be to augment the role of government in health care delivery or otherwise? What should be the relative roles of public and private sectors? Whether the relative priorities in sector specific services need a fresh look? How will the altered situation affect health care financing? Is there a scope for cost recovery and if so for what type of services and how should the services be targeted so as to increase the allocative efficiency? These are some of the issues that require necessary attention in the future plan of action to improve the health condition of the country. (a)

Expanded Definition of Primary Health Care

The role and commitment of government in delivering quality primary health care delivery should be increased. Primary Health Care which is normally associated with immunisation and maternal and child health services should include the outpatient, day care surgeries and treatment, basic diagnostics, ophthalmic and dental services as well. The cost efficient strategy to ensure health status of future citizens in India should aim at reducing under-nutrition, malnutrition, vitamin deficiencies and morbidity among the expectant women and lactating mothers. This strategy is essential to minimise the low weight births and improve child survival. Financing programme aiming to eliminate malnutrition among the women in reproductive ages in general and pregnant women in particular will go a long way in improving morbidity and mortality situation in India. This can be achieved through by (a) enhancing public expenditures on primary health care and nutrition supplement programmes; (b) integrating public nutrition supplement programmes such as the ICDS and the primary health care programme at the grass roots with increasing role of community level institutions including NGOs; and (c) introducing innovative community health insurance system to insure the expectant women through non-governmental regulatory institutions. (b)

New Strategies for Allocation of Public Health Expenditures

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The allocations to relatively cost effective service such as the public health programmes which has greater externalities and social returns should be increased. The hospital and speciality services do generate large but private benefits. Therefore, they should be met by private expenditures and private sector should be encouraged to cater to this requirement. In India, a vast majority of population lives in rural areas and suffers from high incidence of morbidity and mortality caused by diseases that need not be treated in hospitals. A shift in commitment to public health will also place higher emphasis on the low cost health providers such as the paramedical/health workers, Auxiliary Nurse Midwives, multipurpose workers and bare-foot doctors. This will enable considerable savings which should be reinvested in providing refreshers training to health workers and in alternative programmes as well as in upgrading health care infrastructure facility. On the other hand, if government continue to play increasing role in financing secondary and tertiary hospitals, not only private resources are pushed out but also a large share of the public budget is absorbed, in part because of the high cost of modern medical technology. If the role of primary health care is enlarged by including the provision of essential services relating to immunisation, maternal and child health, outpatient care, day care surgeries and treatment, basic diagnostics, ophthalmic and dental services and if these services are provided free of cost, then the government can indeed take a bold step-forward to impose user fees on the hospital services which produces mainly private returns. Indeed, to begin with any inpatient service can be with a charge on a pro-rata basis by introducing registration fee. (c)

Regulating Private Sector

Health care access and availability in India has a public-private mix which is dependent upon purchasing power of individuals and sustains upon income and price elasticity of health care (Duggal, 1996). Besides, a number of market imperfections operate both favouring and adversely affecting health care utilisation by those who need these services. Although overtime there has been a considerable expansion of public health care system both in terms of manpower and physical infrastructure across the country, it is the private sector that dominates in India. While the private sector operates on market led for-profit principles; the realisation of services from the public facilities is not free either. Further, the portfolio of public services is comprehensive consisting of a relatively large number of primary health care services, on the contrary, the private sector focuses on diagnosis, clinical tests, curative and 'high-tech' services which are amenable to direct marketing and immediate cost recovery. The private facilities have also made substantial in-roads into rural and remote areas. However, a large number of private practitioners particularly in rural, backward and remote areas are unqualified. Several of them had knowledge of traditional system of medicines but now practising in demand-driven allopathic medicines. While there is a need for systematic improvements in the delivery of quality services by the public sector itself, it is also important to regulate and control the health care dispensation, quality and pricing in the private sector. The government should, therefore register, certify, regulate and monitor private providers/agencies by enacting legislation; increase government capacity to control drug supply and dispensing as well as to undertake social marketing of essential drugs. There is a considerable scope to provide adequate training to unqualified private practitioners to ensure quality service. Special fees can be collected for conducting training, registration, inspection and certification of private facilities. Besides, a non-government-institutional regulatory mechanism could be developed to obviate and optimise the services of the private health care market. Institutions such as the

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Indian Medical Association, Federation of Indian Chambers of Commerce and Industry and so on could be approached to develop non-governmental regulatory mechanisms for the private health sector. Over the last eight plan periods, neither the policy nor the planning process has paid heed to the way the private health sector has grown or operated. In fact, the State has subsidised the growth of the private health sector by various means - subsidised medical education for those who ultimately go into private practice or even migrate abroad; concessions, subsidies and tax relief to private practitioners and hospitals - many private hospitals function as trust hospitals whose incomes are exempted from tax. Further, the public sector units supply bulk drugs and raw materials at subsidised prices to the private pharmaceutical industry and in the process have gone `red' and become inefficient. Over and above, the private sector gets duty concessions for importing the expensive new medical technology which largely benefits the richer sections (Duggal, 1996). (d)

Encourage Private Providers and NGOs in Delivery of Essential Health Services

Besides strengthening the role of public sector, the new approach would be to set up an organised public-private mix to provide universal and comprehensive health care to all. In other words, the public providers, NGOs and private practitioners should not compete each other, the need of the hour is to look at the entire health care delivery system in unison to evolve some sort of a national system. This approach would considerably help in avoiding wastage and duplication, achieving optimum utilisation of health manpower and financial resources, and improving efficiency and quality. In this regard, private providers and NGOs need to be encouraged through information, training, incentives and finance schemes to identify public health related diseases such as TB, STDs, acute respiratory infections, diarrhoea and dysentery, malaria, leprosy, etc. and in providing diagnostic, referral and treatment for such priority diseases. The government can persuade them through incentive schemes to deliver both preventive and promotive health services particularly in remote and under-served regions. The NGOs are other potential partners in delivery of these essential services to the community with primarily focussing on IEC for low cost and better health. In this regard, state governments can be asked to set up the district level co-ordination committee to identify priority diseases and interventions and to facilitate interaction between the private providers, NGOs and the government's PHCs, CHCs and secondary level hospitals in order to cut costs, increase efficiency and ensure quality. (e)

Insulate Cost Escalations

The burden of health care due to cost escalation should not fall either on the government or on the vulnerable population groups. An organised public-private mix system would definitely halt and check the rising cost of health care. Besides, alternative manufacturing facilities for mass production of generic drugs to be supplied to the public health care providing institutions and for general sales through special pharmaceutical outlets can be a good strategy to beat the escalating drug prices. A dual priced dispensation of health care with adequate guarantee to quality services is likely to lead to self-selection and better targeting. 5.

Proposed Structure of Public Health Expenditure during the Ninth Plan

It is well documented today that public health expenditures have been declining rapidly, and especially so during the Eighth Plan which roughly coincides with the liberalisation phase (Duggal, 1996; Tulasidhar, 1993). Medical care and capital expenditures are worst affected and the declining trend in such expenditures can be seen right across states (Duggal, 1996). This trend must be

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reversed. The WHO has been firm about nations spending 5 per cent of GDP on health care. In India, the government spending is just one per cent of GDP. So the first effort must be at getting the State to commit a much larger share for the health sector from existing and potential resources. The target for the Ninth Plan must be to reaching a level of about 2.5 per cent of GDP. Capital expenditures and medical expenditures especially in rural areas, expenditures on drugs and medical equipments, expenditure on mobility (such as mobile clinics, ambulances for referral services, etc.), expenditure on immunisation and maternity services, and expenditure on communicable diseases such as TB, malaria, etc. must get much larger shares of the health care budget. Accordingly, the ministries of health and family welfare must spend on an average of about Rs. 350 billion per year (Rs. 350 per capita) of which half must be allocated for primary health services. The following Chart presents the break up. Proposed Central and State Health Allocations [Minimum of 2.5 % of the GDP] | | 10 % of allocation should be on Capital Account with a moratorium on investment in Urban secondary and tertiary level hospitals during Ninth Plan | | ------------------------------------| | | | Primary Health Curative/Hospital/ Care Tertiary/Medical Education [2/3rd allocation] [1/3rd allocation] [80 % of planned expenditure] [private/user-fee] | | | | Salary : non-Salary ratio Salary : Non-Salary ratio [50 : 50] [35 : 65] Highlights: *

Make a commitment to enhance the total health care allocations from the current level of about 1 to 1.5 per cent to 2.5 to 3 per cent of GDP.

*

Ensure that 10 per cent of allocation must be on capital account which should be allocated on a priority basis on building and up-keep of infrastructure in primary health care. It is suggested that there can be a moratorium on public investments in urban areas, which should essentially be kept open for the private sector investment.

*

Two-thirds of the allocation should be earmarked to primary health care delivery alone.

*

Place equal priority for both rural and urban areas that will eliminate the present anomaly caused by an `urban bias' in investments.

*

50: 50 salary and non-salary ratio would ensure supply of drugs and recurring expenditures

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needed for surveillance, extension activities and disease control programmes. Much of the public expenditure on health care is in fact spent towards payments of wages and salaries (Alam, 1996). For example, while the proportion of public expenditure on wages and salaries ranged from 50 to 60 per cent in major states during 1974-78, it was in the range of 60 to 90 per cent during 1988-90. In fact, the proportion of expenditure on commodity purchase during 1988-90 was as low as 5.4 and 6.3 per cent in Kerala and Karnataka, respectively. This expenditure was about 39 per cent in Maharashtra and 28 per cent each in Bihar and Uttar Pradesh. In the latter two states, it may be due to non-availability of required staff and many unfilled positions. Statement I shows the projections made in the context of the preceding discussions. Thus, for the Ninth Plan period the requirement for health and family welfare services (excluding water supply and sanitation) would be Rs. 1760 billion and the Plan should contribute about 800 billion of this if the suggested improvements must be put in place. While overall between 50-60 per cent of the budget should be reserved for primary care services, nearly 80 per cent of the Plan funds will have to be devoted to strengthening the primary health care sector. Further, 50 per cent of the primary care budget should be for non-salary demands so that allocative efficiencies are maintained and the services are effective and of a reasonably good quality. At the secondary and tertiary levels the nonsalary component will have to be between 60-70 per cent (Duggal, 1996). Statement I Projected Public Health Expenditures for the Ninth Plan Period (Rs. in billion at current prices) ----------------------------------------------------------------Plan Projected Public Expected Percentage Years Health Expenditures of GDP ----------------------------------------------------------------1997-8 250 2.09 1998-9 280 2.06 1999-2000 340 2.13 2000-1 400 2.26 2001-2 500 2.48 ----------------------------------------------------------------Total Plan Period 1760 _________________________________________________________________

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Alternative Sources of Financing Health/Hospital Care

(a)

Registration Fee

Cost recovery especially for speciality services, hospital and inpatient care in the public sector is necessary in spite of being unpopular notwithstanding a possible opposition to this move. It should be noted that implementation of registration fee is feasible and practical only if the primary health care services as defined above are provided completely free of cost and are made easily accessible to the masses across villages, towns and semi-urban centres. It is suggested that the public hospitals and inpatient facilities be graded using clearly defined parameters reflecting quality and level of services. A one-time registration or entrance fee can be imposed on a differential basis to suit the gradation. For example, for utilising the inpatient facility irrespective of number of days and type of care to be received one can collect Rs.100 per patient at the level of the PHC and CHC. The district level hospitals where a large number of speciality facilities are available, a fee of Rs. 200 may be imposed. However, high technical and speciality hospitals may consider collecting Rs. 1000 per inpatient admission. Exemptions can be extended to the vulnerable population groups such as the SCs and STs, patients coming from remote and tribal areas, poor, infants, senior citizens, patients suffering from trauma and accidental injuries and also those needing reproductive health care, etc.

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(b)

Dual Pricing of Public Services

Another method to raise resources without affecting the equity in service utilisation is to introduce a dual pricing system in both Primary Health and Curative care. If a minimum quality is ensured in the dispensation of health care services in public facilities, then these services can be offered through `two windows' appearing at the same place. A `green' window can dispense services free of cost, and a `red' can dispense the same services on a reasonable cost on out-of-pocket payment basis. This provides opportunities for the very poor individuals and household to choose a `green channel' without much hesitation, whereas the relatively well off and those who can afford will chose a `red channel'. This system if properly implemented will lead to self-targeting of public health care services. If quality is ensured there will be an overall improvement in the utilisation of public health care services. (c)

Structure of Health Insurance

It must not be ignored that major part of private health expenditures are mostly recurring in nature and are on outpatient and primary health care. There should, therefore, be mechanisms to improve accessibility and utilisation in a cost efficient manner for these services. Improving the quality and availability of drugs alone can bring down cost of curative health care. Similarly, an effective Information, Education and Communication structure and provision of dependable information will reduce cost at all levels - primary, secondary and tertiary health care. There is a need to evolve community health insurance schemes on the lines of group insurance in which the whole panchayats can be insured and the panchayats can subsequently ensure equity in access and utilisation of health care. Given the high incidence of disease and morbidity especially among the vulnerable and poor, it is imperative that Hospitalisation Insurance System is to be established in India. A recent NCAER survey helps us to estimate that 41 million individuals were reported to be on medication for major sickness at a given point of time in 1994. A large majority of these may have already gone through hospitalisation or need hospitalisation in near future. Hospitalisation insurance, therefore, can be a workable proposition if proper procedures are followed to identify and target individuals/households. In this regard a proposal for health insurance suggested by Krishnan (1996) is noteworthy. The proposal intends to provide financial protection to people during episodes of illness through a scheme of hospitalisation insurance in India. The scheme can be introduced first to cover households below the poverty line that can be expanded in future to cover the population at large. The justification for health insurance protection for the poor rests on the premise that an episode of illness requiring hospitalisation imposes undue economic burden on them. It cuts both ways: compel borrowing to meet heavy expenditure on treatment, and loss of earnings not only of the ill person but also of the member taking care of the patient. The estimates derived from the NSS data show that the proportion of the total cost of treatment to annual per capita consumer expenditure varied between 40 per cent in Kerala to 160 per cent in the poorer states. In contrast, in the case of the top 10 per cent of the population, such proportion ranged between 5 and 40 per cent. Simultaneously, however, health care insurance structures, both through personal and group insurance schemes, should be established to ensure a choice based health care system. The governments at various levels can share the burden of insurance on certain agreed criteria. For example, the Central Government can insure all those who are above 65 years of age, widows, those living below the poverty line and so on. The State Governments can additionally insure people living in backward districts, the tribals, the scheduled castes and so on. However, the hospital

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insurance system, which accords large private returns, should essentially be organised and managed by individuals and the local community. Various evaluation studies have also suggested that there is an urgent need to streamline the Employees' State Insurance Scheme (ESIS) as well as the Central Government Health Scheme (CGHS). The response rate to an innovative voluntary health insurance scheme known as 'Jan Arogya' introduced by the General Insurance Corporation (GIC) in 1996 has remained far below the expectation due to lack of information, guidelines and managerial support. The scheme, which was especially meant for the vulnerable people by covering hospitalisation expenses up to Rs.5000 per person per year at a modest premium of Rs.70, has succeeded in protecting only 400,000 people. Further, the existing Mediclaim policy is not encouraging and incurring losses due to collusion between insurers and doctors and hospitals (according to GIC the rate of claims under the Mediclaim was as high as 130 per cent in 1995). As a result, GIC is not very keen in pursuing both the health insurance schemes; they would rather wait for an entry of private sector to take up and streamline these schemes. Another area amenable to insurance is the `reproductive health' - which is defined to include medical termination of pregnancy, menstrual regulation, and the problems associated with reproductive tract infections and contraception. All these problems need urgent attention, if one has to build up an efficient reproductive health and family welfare programme. During 1991-92, over 631 thousand MTPs have reported to be legally conducted across the country. This alone works out to be a direct MTP market of about Rs. 320 million and another of about 100 million in indirect expenditures of those who underwent MTPs. However, the estimated induced abortions in India are placed at about 6.7 million. Thus, the total MTP market is worth about Rs. 3355 million direct and Rs. 670 million indirect market. 7.

Conclusion

In this paper a number of issues and ideas are presented to improve accessibility, equity, efficiency and quality in the provision, utilisation and financing of health care services. A good number of them aim at restructuring the public health programmes administered and financed by both central and state governments. Many such administratively feasible strategies for change could be screwtightening and fine-tuning exercises, which would generate far reaching gains during the plan period. For example, the strategy to provide incentives for those willing to work in rural areas (including separate pay scales for lady physicians in rural areas) will enhance the performance of the family planning and reproductive health programme implementation. Given the overwhelming need to focus on the delivery of primary health care facilities, another strategy, which can be implemented with administrative manipulations, is to create a separate directorate for the paramedical personnel and field-based extension workers. To achieve the goal of universal and comprehensive health care to all, the precondition is to make the public sector efficient, cost-effective and socially accountable. The government should also make serious efforts to regulate, monitor and integrate and redefine the role of private providers and NGOs in the provision of essential health care services. There is a lot of scope for improvement in public health services with better planning, reallocation of existing resources as well as pumping in additional resources - especially for non-salary expenditures, reducing wastage and improving efficiency by better management practices and separation of primary, secondary and tertiary care through setting up of referral systems, improving working conditions of employees, etc. One good example of enhancing the value, efficiency, effectiveness and social returns on public investments is to assure that all medical graduates who pass out of public medical colleges (14000 graduates every year) serve in the public system for say at least five years without which they should be denied the

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license to practice as well as admission for postgraduate studies. This is desirable because after all the government is spending about Rs. 800,000 per medical graduate. The report has also discussed and suggested several health financing strategies. Some of them are experimental in nature, which need to be developed further with substantial research input to establish the suitability of the alternatives. Feasibility of user fee in health care, dual pricing (including free supply of services), rural health insurance, community health insurance, insurance for hospitalisation and so on fall into these categories. A Summary of Policies and Financing Strategies 1. Restructuring of public health care sector * Expanded definition of primary health care. * Increase investment in improving quality of primary health care. * Invest in training and increase the strength of paramedical and extension staff as opposed to medical staff. * Ensure easy and cost-free access to primary health care services. * Enhance outreach through IEC and social marketing of essential drugs and services. 2. Restructuring of public allocations * Public investments are essential in basic curative, preventive and promotive services. * Public allocations to be raised to at least 3 per cent of the GDP. * At least 10 per cent of the allocation should be on capital expenditure. * A moratorium on capital expenditures on secondary and tertiary care during the Ninth Plan period. Direct capital expenditures towards building and strengthening primary health care. 3. Regulating and redefining the role of private health care sector * Facilitate a non-government private regulatory authority. * Reduce public subsidies in creating private health infrastructure. * Register and train the unqualified private practitioners in delivery of essential health care package. * Increase co-ordination among public, NGOs and private agencies with suitable incentive schemes to provide comprehensive health care to all. 4. Health insurance and alternative financing schemes * Insure hospital care especially to the vulnerable population. * Evolve community health insurance systems using the panchayat structures. * Introduce graded registration fee for hospital care. * Introduce dual pricing in public health dispensation.

References Alam, Moneer (1996): 'India's Health Scenario: An Overview', Background paper, Sub-group on Health Care Financing and Insurance: Strategies for the Ninth Five Year Plan, constituted by the Planning Commission and the Ministry of Health and Family Welfare, Government of India. Duggal, Ravi (1996): 'A Note on Health Care and Financing Strategies for the Ninth Five Year Plan', Background paper, Sub-group on Health Care Financing and Insurance: Strategies for the Ninth Five Year Plan, constituted by the Planning Commission and the Ministry of Health and Family Welfare, Government of India. Duggal, Ravi, Nandraj, Sunil and Vadair Asha (1995): 'Health Expenditure Across States - Part I & II- Regional Disparity in Expenditure', Economic and Political Weekly, Vol. XXX, Nos. 15 & 16, pp. 834-844 and 901-908.

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Gumber, Anil and Berman, Peter (1995): Measurement and Pattern of Morbidity and Utilization of Health Services: A Review of Recent Health Interview Surveys in India, Working Paper No. 65, Gujarat Institute of Development Research, Ahmedabad. Gumber, Anil (1996): 'Burden of Disease and Cost of Ill Health in India: Setting Priorities for Health Interventions During the Ninth Plan', Background paper, Sub-group on Health Care Financing and Insurance: Strategies for the Ninth Five Year Plan, constituted by the Planning Commission and the Ministry of Health and Family Welfare, Government of India. India, National Sample Survey (1980): 'Notes on Morbidity: NSS 28th Round (October 1973-June 1974)', Sarvekshana, Vol. 4, Nos. 1 & 2, July-October, pp.17-21 and S137-180. India, National Sample Survey (1992): 'Morbidity and Utilization of Medical Services: NSS 42nd Round (1986-87)', Sarvekshana, Vol. 15, No. 4, April-June, pp. 50-75. India, Registrar General (1991): Survey of Causes of Deaths (Rural), Ministry of Home Affairs, New Delhi. Krishnan, T.N (1996): 'Hospitalisation Insurance - A Proposal', Background paper, Sub-group on Health Care Financing and Insurance: Strategies for the Ninth Five Year Plan, constituted by the Planning Commission and the Ministry of Health and Family Welfare, Government of India. Also published in Economic and Political Weekly, Vol XXXI, No.15, pp.944-949. National Council of Applied Economic Research (1992): Household Survey of Medical Care, NCAER, New Delhi. Shariff, Abusaleh (1995): Health Transition in India, Working Paper No. 57, National Council of Applied Economic Research, New Delhi. Sundar, Ramamani (1992): 'Household Survey of Medical Care', Margin, Vol. 24, No. 2, January-March, pp. 169175. Tulasidhar, V.B. (1993): 'Expenditure Compression and Health Sector Outlays', Economic and Political Weekly, Vol. XXVIII, No. 45, pp. 2473-2477. Visaria, Pravin and Gumber, Anil (1994): Utilization of and Expenditure on Health Care in India, 1986-87 (A Study of Five States), Gujarat Institute of Development Research, Ahmedabad. Visaria, Pravin, Gumber, Anil and Jacob, Paul (1996): Morbidity, Health Care Utilization and Expenditure Pattern in Andhra Pradesh, Kerala, Madhya Pradesh and Punjab, 1986-87, Gujarat Institute of Development Research, Ahmedabad. Visaria, Pravin and Gumber, Anil (1997): Level and Pattern of Morbidity, Health Care Utilization and Expenditure in India, 1986-87, Gujarat Institute of Development Research, Ahmedabad. World Bank (1993): World Development Report 1993: Investing in Health, Oxford University Press, New York. World Bank (1995): India: Policy and Finance Strategies for Strengthening Primary Health Care Services, Population and Human Resources Operations Division, Report No. 13042-IN, Washington D.C.

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Table 1 Annual Morbidity Rate (Per Thousand Population) for Selected States in India, 1973-1993 --------------------------------------------------------------------------NSS NCAER Region/

1973-74

1986-87

1990

1993

State Prevl. Incid. -------------------------------------------------------------------------RURAL INDIA 605 348 805 2056 1248 North Haryana 435 260 918 660 888 Himachal Pradesh NE NE 597 1726 1752 Jammu & Kashmir 472 308 781 3359 NE Punjab 737 523 1768 981 1548 Upper Central Bihar 288 145 428 2321 1176 Uttar Pradesh 359 222 910 2003 1284 Lower Central Madhya Pradesh 555 280 515 2200 1320 Orissa 657 406 838 3115 2124 Rajasthan 463 278 729 707 1308 East Assam 468 236 677 395 1020 West Bengal 755 330 1297 1755 960 West Gujarat 270 122 425 1344 900 Maharashtra 733 478 534 1832 792 South Andhra Pradesh 847 560 1094 1955 1452 Karnataka 399 231 622 1138 1392 Kerala 1935 1053 1925 3479 2196 Tamil Nadu 906 559 729 2674 936 URBAN INDIA 612 371 434 1760 1212 North Haryana 453 245 605 836 1044 Himachal Pradesh NE NE 497 1653 2136 Jammu & Kashmir 351 248 317 3487 NE Punjab 658 454 965 1292 1740 Upper Central Bihar 319 179 203 2498 1224 Uttar Pradesh 286 175 389 2029 948 Lower Central Madhya Pradesh 578 308 115 2129 1404 Orissa 657 470 342 2273 1956 Rajasthan 335 203 228 834 1800 East Assam 325 176 393 4236 780 West Bengal 919 489 599 1520 972 West Gujarat 170 81 318 1441 1008 Maharashtra 853 537 129 1425 936 South Andhra Pradesh 735 485 492 1687 1644 Karnataka 359 200 393 1288 1116 Kerala 1157 977 1024 2677 2100 Tamil Nadu 851 566 370 1659 900 --------------------------------------------------------------------------Note:

The estimates for 1973-74 included the prevalence of chronic longduration diseases; the figures for rural and urban India were 21 and 20 per thousand population. The estimates for 1986-87 included

annual incidence of hospitalisation; the figures for rural and urban India were 26 and 57 per thousand population. NE - Not Estimated. Source : India, 1980 and 1992; Visaria and Gumber, 1994 and 1997; Visaria et al. 1996; Sundar, 1992; Shariff, 1995.

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Table 2 Burden of Disease in Terms of DALYs Lost by Broad Age Groups, India, 1990 -------------------------------------------------------------------------------------------Age Total DALYs Lost DALYs Lost as Result of DALYs Lost as Result of Group Million Rate Per 000's Premature Deaths (Million) Disability (Million) Population Male Female Person Male Female Person -------------------------------------------------------------------------------------------0-4 137.2 1178 53.0 55.1 108.1 14.2 14.9 29.1 (39.5) (38.4) (39.0) 5-14 42.3 164 9.4 10.8 20.2 6.4 5.7 12.1 (51.5) (54.8) (53.3) 15-44 65.8 172 18.9 17.7 36.6 12.0 17.2 29.2 (33.2) (31.8) (32.6) 45-59 28.9 308 9.8 7.3 17.2 6.7 5.0 11.7 (14.7) (17.2) (15.8) 60+ 28.2 480 9.7 8.7 18.4 5.2 4.6 9.8 (6.4) (6.9) (6.6) All Groups 292.5 344 100.8 99.7 200.6 44.5 47.4 91.9 (23.6) (25.7) (24.6) -------------------------------------------------------------------------------------------Note: Figures in parentheses are the average number of potential disability free life years lost per death. The rate is calculated by dividing the total number of DALYs lost due to premature deaths by estimated number of deaths in the respective age groups. Source: Calculated from World Development Report 1993 (Table B.4).

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Table 3 Estimated Burden of Disease in Terms of DALYs Lost as Result of Premature Deaths for Major States in India, 1990 -----------------------------------------------------------------------------------Major Total DALYs Lost (Million) % DALYs Lost DALYs Lost/'000 Population States -------------------------- due to Child -------------------------Male Female Person Mortality Male Female Person -----------------------------------------------------------------------------------North Haryana 1.7 1.7 3.4 53.9 200 218 209 Himachal Pradesh Punjab 1.7 1.6 3.3 42.7 167 170 169 Upper Central Bihar 11.1 11.8 22.9 54.3 255 284 270 Uttar Pradesh 21.3 23.6 44.9 64.0 303 373 338 Lower Central Madhya Pradesh 10.4 10.6 21.0 62.9 318 347 332 Orissa 4.6 4.7 9.3 57.8 294 305 300 Rajasthan 6.0 6.3 12.3 63.7 265 302 284 East Assam 3.8 3.8 7.5 52.0 295 322 308 West Bengal 6.7 6.2 13.0 46.7 199 200 200 West Gujarat 4.9 4.3 9.2 52.0 237 219 228 Maharashtra 5.4 5.7 11.1 44.1 142 158 150 South Andhra Pradesh 7.0 6.2 13.3 46.6 221 198 210 Karnataka 4.8 3.9 8.8 52.0 213 179 197 Kerala 1.4 1.1 2.5 22.9 94 69 81 Tamil Nadu 5.5 4.7 10.3 38.9 196 172 184 ----------------------------------------------------------------------------------All-India 100.8 99.7 200.6 53.9 238 250 244 ----------------------------------------------------------------------------------Source: Gumber, 1996.

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Table 4 Morbidity Prevalence Rate by Place of Residence and Gender, Selected States in India, 1993 (Rate Per Month Per Thousand Population) ------------------------------------------------------------------------------------------------Region/ Rural Areas Urban Areas Combined State Male Female Person Male Female Person Male Female Person ------------------------------------------------------------------------------------------------North Delhi 40 236 107 93 142 115 88 149 115 Haryana 76 71 74 77 98 87 77 79 77 Himachal Pradesh 127 166 146 156 204 178 130 169 149 Punjab 150 106 129 119 175 145 140 127 134 Upper Central Bihar 98 98 98 106 98 102 99 98 99 Uttar Pradesh 107 106 107 77 82 79 101 101 101 Lower Central Madhya Pradesh 107 114 110 121 113 117 110 114 112 Orissa 149 209 177 156 172 163 150 204 175 Rajasthan 103 116 109 137 166 150 111 128 119 East Assam 89 81 85 64 65 65 86 79 83 West Bengal 75 87 80 73 88 81 74 88 80 West Gujarat 72 78 75 74 94 84 72 84 78 Maharashtra 65 67 66 77 79 78 70 71 70 South Andhra Pradesh 131 111 122 132 143 137 131 124 128 Karnataka 122 110 116 131 87 101 93 111 109 Kerala 185 181 183 185 166 175 185 177 181 Tamil Nadu 78 79 78 75 82 75 77 77 77 ------------------------------------------------------------------------------------------------All-India 102 105 104 96 106 101 101 105 103 ------------------------------------------------------------------------------------------------Source: NCAER Survey, 1993.

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Table 5 Percentage Distribution of All Episodes (Not-Treated and Treated) by Gender, Selected States in India, 1993 ----------------------------------------------------------------------------------------------Not-Treated Treated Major Outpatient Inpatient State Person Male Female Person Male Female Person Male Female ----------------------------------------------------------------------------------------------North Delhi 3.7 6.1 2.0 88.1 86.2 89.5 11.9 13.8 10.5 Haryana 7.2 7.7 6.5 90.5 87.6 94.3 9.5 12.4 5.7 Himachal Pradesh 4.5 3.3 5.4 91.2 87.8 94.1 8.8 12.2 5.9 Punjab 3.1 2.8 3.4 89.3 86.3 92.9 10.7 13.7 7.1 Upper Central Bihar 13.1 15.5 10.2 93.2 93.0 93.5 6.8 7.1 6.5 Uttar Pradesh 13.8 12.7 15.2 92.7 89.8 96.3 7.3 10.2 3.7 Lower Central Madhya Pradesh 8.8 6.8 11.0 96.0 95.4 96.6 4.0 4.6 3.4 Orissa 17.6 15.9 19.0 95.8 96.6 95.1 4.2 3.4 4.9 Rajasthan 9.6 11.1 8.2 92.5 88.8 96.3 7.5 11.2 3.7 East Assam 6.6 4.3 9.6 94.4 94.0 95.1 5.6 6.0 4.9 West Bengal 11.1 19.5 2.8 98.3 97.9 98.7 1.7 2.1 1.3 West Gujarat 8.3 5.7 10.9 92.3 91.5 93.1 7.7 8.5 6.9 Maharashtra 10.0 6.6 13.7 88.0 85.1 91.1 12.0 14.9 8.9 South Andhra Pradesh 11.6 11.2 12.0 87.3 86.6 88.2 12.7 13.4 11.8 Karnataka 15.0 18.2 11.6 92.9 92.7 93.1 7.1 7.3 6.9 Kerala 5.3 5.1 5.6 88.8 90.5 86.9 11.2 9.5 13.1 Tamil Nadu 9.6 7.3 12.0 95.8 93.9 97.8 4.2 6.1 2.2 -----------------------------------------------------------------------------------------------All-India 10.9 10.9 10.9 92.7 91.3 94.1 7.3 8.7 5.9 -----------------------------------------------------------------------------------------------Source: NCAER Survey, 1993.

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Table 6 Results of the Logistic Regressions (Odds Ratios) for Factors Contributing for Not Seeking Medical Treatment, Selected States in India, 1986-87 -----------------------------------------------------------------------------Predictor Rural Areas Urban Areas -----------------------------------------------------------------------------I. Characteristics of the Ill Person 1. Whether Female 1.23* 1.41* 2. Age (0-4) 05-14 1.17** 1.25** 15-24 1.07 1.27* 25-34 1.13 1.45** 35-44 1.21 1.76** 45-59 1.34* 1.51** 60+ 2.09* 1.78** 3. Whether Never Married 1.32* 1.41** 4. Whether Head 1.16** 1.30** II. Characteristics of the Head 1. Whether Female 2. Education Level (Illiterate) Below Primary Primary Middle Secondary Above Secondary III. Characteristics of the Household 1. Scheduled Caste/Tribe 2. Main Source of Income (Self-Empl.) Regular Empl. Casual Empl. Others 3. Monthly Per Capita Expenditure Quintile (5) 1 Lowest 2 3 4 4. Household Size (