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Indian Healthcare System: Challenges and Opportunities

with Prof.Arnab Mukherji

The private sector has played an important role in the development of India’s economy. This can be extrapolated to hold true in the case of the healthcare system as well. The private medical setups have enormous potential in terms of their technological prowess and overall efficiency. It is no secret that many government programmes suffer from lack of outcome focus, implementation failures, and quality deficiencies. In this interview with Professor Arnab Mukherji, faculty in Public Policy at IIM Bangalore and an avid researcher of healthcare, we develop a perspective on the future of private sector in healthcare in view of the current challenges in the space, and review the extent to which the private institutions’ contribution is feasible and qualitative.

    Inequity in Healthcare

    tejas@iimb: The government launched the National Rural Health Mission (NRHM) 2005-2012 in April 2005. The aim of the Mission is to provide effective healthcare to India’s rural population. With the Mission helping the rural poor, and the urban middle-class already self-sufficient, don’t you think the urban poor are the neglected ones? What can be done about their situation?

    AM: It’s a fairly well known fact that we have NRHM as the major health mission in rural India. In urban spaces there is no equivalent movement as yet. The only thing we have as of now is what is called Jawaharlal Nehru National Urban Renewal Mission (JNNURM) which is a source of funding for people in approximately 100 cities. On an average, urban areas do much better than rural areas. And that is something which decision makers noticed and therefore their focus is largely on rural areas. But if you look at the urban areas and you bifurcate the overall average into so as to say the slum and the non-slum, you’ll find that there are huge differences and disparities in health attainment and in certain instances such as vaccination it may actually be worse off where the roll out is better in rural areas. Most of these areas which exist (where the urban poor reside) are usually believed to be slums. But some work that my colleague Prof. Hema Swaminathan and I have done looks at people who live in slums and compares their nutritional status with people who don’t live in slums. We found that people tend to be malnourished in slums not because of living in slums in its own self but because of the usual notions of malnourishment, which are simply that they’re poor, they have access to low levels of education, and because of the fact that there is genuinely poor access to health services. In case of healthcare for the urban poor, one should look at NGO participation, one of the systems that have been and can be put in place is where the NGOs act as media for the poor people and actually negotiating the public health structure in urban areas. The other thing that has been happening in some places is, for example in Guwahati, there is a Marwari hospital that receives funds from the government to actually treat people at large. So this is a mechanism in which instead of using the public health facilities you are using the private health facilities, which are subsidizing their costs of expenditure to make sure that people who are there can access it. And then you have the health system per se consisting of a range of health services – about how to get there, doctor’s care, nurse’s care and also about pharmacy. So I think post-operative reach out care is also a domain in which the NGOs need to come in. In all of these things what one is talking about essentially is expanding outreach, not necessarily by the government but by inviting, either the NGO domain or alternatively having the private sector step in.

    tejas@iimb: Recently, there has been increasing interest from epidemiologists on the subject of economic inequality and its relation to the health of populations. There is a very robust correlation between socioeconomic status (SES) and health. Lower socioeconomic status has been linked to chronic stress, heart disease, ulcers, type 2 diabetes,rheumatoid arthritis, certain types of cancer, and premature aging. Can you comment on the socio-economic determinants of health risk.

    AM: This is a very well recognized and understood area of work in the research community. Not only does it matter how much wealth is there in the economy but the distribution of that wealth in the economy also is responsible for a varied health outcome. So health is a multi-dimensional attribute on which many things have impact starting from basic things like education, income, awareness that matter but more complex things like expectations, norms, desires also matter. In a certain sense being healthy is not just being physically fit but also being mentally and intellectually satisfied. There are effects of not having enough education, like not knowing the right things to do for yourself, your family, and therefore there often will be health problems which you could have prevented just by knowing about it. Similarly, just by having income you could have been able to access better healthcare which is otherwise denied to you. Looking at the economy at large these things are not uniformly distributed. So if you are thinking of health as a factor that matters to the economy at large then you are looking at the notion of government intervention. The nature of government intervention in the classic form is one in which you try to account for the lack of access to health services by giving that access to people who are poorer. Socio-economic determinants of health are important enough that a couple of years back a WHO commission by the same name was set up to try and influence government policy by saying that not only are the doctors and their doctoral training responsible for good health but the socio-economic deprivation factors also matter. In so far as the rollout of government policies is concerned, you need to think of them as not just purely poverty-driven or just health-driven but as integrated schemes. Now in such a world you would expect that people who are poor today would also at some point in time need health services. So when you have them enrolled in poverty alleviation programs you also need to think of how they could be also reaching out to healthcare. There are programs like the Aadhaar coming up which are going to provide a way to centralize things and result in a lot of advantages. But how it will work out in real life is something that we need to figure out.

    Issues in Health Insurance

    tejas@iimb: Private expenditure on health in India is close to 78%. Most of the medical expenses incurred by an average Indian are paid from their own pocket. Though there are various health insurance policies available, what is the main roadblock in implementing nationwide health insurance?

    AM: Health insurance is one of the key financing mechanisms by which the health sector can be supported. The entire idea of health insurance is based on the fact that you don t have a parallel need for the health service. So if there are many people who are a part of this larger pool, then we have what is known as health insurance in which all of us pay premiums through a large number of years and there are many people doing this at the same point in time and as and when one of us gets ill, we can go to the hospital and claim all the costs that we incur which will be much larger than the premium. Health Insurance is a way in which we have diseases whose occurrence is non-covariate (covariate is when two happenings are highly correlated). For such diseases, health insurance works by following the balanced budget assumption that the premium that you pay is going to fully cover the company for giving you that coverage when you fall sick. To a large extent in a world in which health costs are very high, they need to charge a reasonably high (and age-dependent) premium. Up till the age of 65, health insurance schemes, depending on what all is covered, range from a couple of thousand rupees to maybe fifteen thousand rupees. The same quality starts increasing towards 25-27000 a year, which is not that large a number if we look at urban salaries, and we can say about 2000 bucks a month; but if you look at the benchmark for national poverty, which is around 500 rupees per month, it hits you in the face that a very large fraction of the population can not only not afford health insurance, but buying a pizza is a big deal for them, once a month. So it is a fairly large expensive deal for them to have health insurance. So, health insurance as a mechanism for financing health in India has not reached its fullest possible extent.

    tejas@iimb: So, what is the best way to provide health insurance to the poor?

    AM: The poor end of the income distribution, while they too need health insurance, cannot self-finance. So as in many other programs we have the government provide health insurance for poor people who are close to the poverty line through programmes like the Rashtriya Swasthya Bima Yojana(RSBY). The idea of the RSBY is that it makes available on a family floater basis, a card on which you can spend a fixed amount of money and that money varies from household to household based on pay. The reason why standard health insurance in India is never going to work is that we are poor. So if we are looking at other mechanisms of healthcare, we are simply looking at social health insurance; RSBY is a sort of social health insurance device. Now this social health insurance is going to need to work on a number of different fronts. Most of the good hospitals don’t locate uniformly; they locate in a clustered sense (because of agglomeration economies). To a large extent there has been a general moral hazard problem with the health sector that once you have insurance set in, it is always a sort of incentive for the care provider to overstate costs. Whereas you may come in needing healthcare for say a flu or you have a broken rib, maybe if they were to do a kidney replacement for you, the costs would be far higher, and they can get that. All that they need is a thumbprint from you confirming the same. This is broadly called corruption these days and the health sector, in terms of insurance does have, and in this particular instance I’m referring to work done by Dr. Prateek Rathi in the Amravati district. He had actually gone in and looked at the insurance claim data and the distribution of cases which come in, and the lineup never is the usual norm of cases. If you look at heart attacks or cardiac patients you’ll find that they are about 4-5% of the national population, but strangely in Amravati you’ll find that number going up to 20%. People are brought in and immediately sent off to the ICU.

    Demographically Oriented and Preventive Healthcare

    tejas@iimb: The age distribution of the population of India is projected to change by 2016, and these changes should determine allocation of resources in policy intervention. According to the National Commission on Population, the population below 15 years of age (currently 35 percent) is projected to decline to 28 percent while the age group of 60 plus years is projected to increase from the current levels of 7 percent to nearly 9 percent by 2016.In view of the changing demographic profile of our country how is healthcare projected to change?

    AM: As people live longer their surplus needs to expand to support people who are now living longer. The question is how is that going to affect the health system. As you grow older there is a need for health systems that will keep you healthy as you live longer. What is definitely going to happen are the following: Since the economy has largely undergone the demographic transition from high birth rate and high death rate to one in which there is high birth rate but low death rate, the third stage is where the birth rate and death rate are again equal at low rates, which means that the number of people born young is actually declining. If you look at the 2011 census ,you start seeing such profiles coming up, not only at the national level, but also at the state level and district level, particularly in Kerala where this is very apparent. Historically, when India became independent and even till the 80s the demographic profile was that of a nice triangle. But the expectation was that we should have a much more rectangular age profile as time goes by with a much greater fraction of the population above 60 which includes the elderly. The major challenge for health sector looking forward is to anticipate how much health care demand is going to come. A part of that is you are going to have some fairly young age life style management coming into play. It is not only portfolio-asset management but also portfolio-health management that people are going to think about. Maybe it’s about cutting back on cigarettes or getting up in the morning and going for a walk or pay attention to the calories you consume. So, all of these are going to be things which are going to come into play on the preventive side. The same treatment given for a young patient cannot be done for an older patient because it has effects on other aspects of his health. And increasingly as the focus point of our society shifts from extremely young to the elderly population, the health sector need to adapt. Historically, it has always been the growing middle category (15-45 yrs) that has been supporting people at the top. But that profile is going to change and many people above 45 years are going to have to support themselves and that means good health and that means a good health system. So we need to be forward looking towards that.

    tejas@iimb: There are many diseases which can be prevented by avoiding certain risk factors. Yet the current health care system, more often than not, is curative in nature and responds to acute symptoms of diseases. Considering that preventive care would reduce medical costs to a great extent do you think the private sector health facilities should step up their initiatives towards promoting preventive medical care? What are the obstacles in undertaking such programmes?

    AM: Socioeconomics is also strongly correlated with the kind of lifestyle you lead. Many of the existing preventive health care measures try to predict if the person is likely to need a certain kind of healthcare in future. This is the reason why the later you go for a private health insurance, the more number of tests you are required to take. So, one of the most fascinating problems in today’s medical domain is tuberculosis. Tuberculosis is managed under the DOTS programme which aims to reach out to people in all parts of India. Now the problem with the treatment is that it has a very high dosage of antibiotics and so it requires a parallel diet to support the level of medication. Currently the DOTS does not really do much about that because what can be done about it? But this is still a source of problem because poor people cannot afford the required nutrition. And this is probably the reason why they got TB in the first place. And when every one of us goes abroad and tests for TB we all test positive. Because we have all been exposed to TB and our normal level of nutrition is not enough to withstand TB. Now their tests have been modified over the time. But this used to be one of the concerns for students in an earlier time. In that sense socioeconomic factors are also a strong determinant of what might happen to a person. In fact in corporate sector jobs the employees are required to go through a medical test to determine the risk factors. In a preventive sense the person is given the treatment that needs to happen even before the symptoms become obvious. So socioeconomic screening is a good strategy at the insurance level, state level and individual level to try and make sure that extreme health outcomes are prevented.

    Role of Private Sector and Global Opportunities

    tejas@iimb: Today, there are over 20 international healthcare brands in India with several corporate hospitals. However, a large section of the ‘private healthcare delivery segment’ is scattered and quality of medical care continues to remain a matter of concern. What is your perspective on monitoring the quality of private health care?

    AM: There is a National Hospital Accreditation Board that is a couple of years old. Hospitals like Apollo have certification from this board. But by and large private health care clinics do not have this. For private clinics indicators of quality is of the following nature: by getting an extremely important person like Amir Khan, the President of India etc. But most private healthcare centers in rural India and some parts of urban India are full of people who are not trained. If you think of private healthcare one should stop thinking about big hi-tech hospitals and one should also think of small hole-in-the-wall places in which all sorts of concoctions are given by people who are actually not trained to do so. In my field work I ran into the “Bengali doctor”, a guy with an English Literature degree who has tablets which are anyways expired and which happened in the plague in Latur, which was a long time back(1993). So he’s still carrying them in 2005 and if you’re sick he’ll say, here is half a tablet; this is some high level possibly unusable antibiotic which if you ingest, might have its own effect, and if it doesn’t, then it might actually make you feel better for a little while because the symptoms are down because of the antibodies. But then if you don’t have the full course of antibiotics you’re sort of making the patient immune to future antibiotics of the same line. This happens because there are major holes in provision of healthcare in society which allow such people to step in like this. So private healthcare is an answer but only of it is nurtured properly; there needs to be a check on quality.

    tejas@iimb: India has seen an estimated 30% growth in attracting medical tourists. According to you, is it feasible and useful to use India’s success in attracting medical tourists in order to generate resources for funding public facilities?

    VN: GI think medical tourism is an interesting way to go but there are a lot of ethical aspects which come into play. Medical tourism is the outcome of a basic economic phenomenon, that is, comparative advantage. In India there are cost advantages in terms of how health care is provided. The reason for that is there is lot of labor abundantly available and there is lot of skilled labor being trained at low-cost and therefore people from other countries can take advantage of that. Primary example of this is of people from all over the world coming in to India for fancy cancer care which was earlier unheard of. Hospitals such as Apollo are sending teams of doctors to other countries to conduct camps. Some of these countries are not very rich like Africa, and U.S.S.R. These doctors are able to handle fairly complex procedures. In so far as we have that level of skill we should completely make use of it as a nation. But one has to always confront the situation that on an average we are a poorer nation and on average there are lots of people who are unable to avail health care. So is it the case that we are able to say that medical tourism as an activity can fund that? I think that the answer may be yes, but not based on the current trend. Based on the current trend medical tourism is still too small an activity of the entire health sector to support that sort of activity. So I think that it is promising, I think there is a lot that can be done, I think there are a lot of ways you can pair that up with voluntary and charitable work which has benefit for the larger economy as a whole. But the scale is still small.


    The general outlook when it comes to the healthcare sector is that there exists imbalance in terms of the urban poor getting ignored in the general scheme of healthcare initiatives. Going forward, healthcare needs to be directed more towards the elderly. There is some merit to the discussion of medical tourism being a boon for India but it is yet at too small a scale to contribute much. The private sector does help where the public sector lacks, but quality is still a big deterrent.


    Arnab Mukherji is currently an Assistant Professor in the Centre for Public Policy at IIM Bangalore.Besides being a faculty at IIM Bangalore since 2007, he has been a Research Fellow at Pardee RAND Graduate School (2006-07) and before that, a Teaching Assistant (Microeconomics, and Modern Prediction Methods) from 2002 to 2006 at the same institution. He has published a number of reports and papers, including one on Health Infrastructure and Immunization Coverage in Rural India in the Indian Journal of Medical Research (January 2007) and another on Trends in Andhra Pradesh with a Focus on Poverty, Technical Report for Young Lives in the Oxford University Archives (2008). He obtained his Ph.D. as well as M.Phil. in Policy Analysis from Pardee RAND Graduate School, after completing his B.A. in Economics from the Ramjas College, Delhi University, followed by M.A. in Economics from the School of Social Sciences, JNU (New Delhi).


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