Raise govt spending to cut out-of-pocket expenditure

The Economic Survey has backed the 2017 National Health Policy’s pitch for more than doubling public spending on healthcare, arguing that it can halve the out-of-pocket (OOP) expenditure on healthcare for Indians. The Survey has also proposed the establishment of a regulator to mitigate the market failures stemming from “information asymmetry” that leads to “suboptimal” quality of care in the healthcare sector.

Comparing India’s spend on healthcare with countries like Indonesia, China and Thailand, the Survey concluded the country could “substantially” reduce the OOP share of overall healthcare spends to 30 per cent from 60-65 per cent currently. This would happen if it increased its public spending on healthcare from 1 per cent of GDP, at present, to 2.5-3 per cent.

This is important, given that India has “one of the highest” levels of OOP expenditure in the world, according to the Survey.

It also said the government needed to “seriously” consider a sectoral regulator to regulate and supervise healthcare, “given the information asymmetries that make unregulated private enterprise suboptimal in healthcare.” This recommendation comes in the backdrop of the private sector’s dominance in the country’s total healthcare provision — around 74 per cent of outpatient care and 65 per cent of hospitalisation care is provided through this sector in urban India.

At the same time, the Survey observed that the quality of treatment in the private sector “does not seem to be markedly better” when compared to the public sector. Citing expert findings that a “large proportion” of deaths in India manifests more due to poor quality of healthcare than insufficient access, the Survey said India’s proportion of deaths due to poor quality care was “significantly higher” than other countries in the world, including neighbouring countries.

It added, at the same time, the costs of treatment are not only “uniformly higher” in the private sector, the differences are “humongous” for in-patient treatments of severe illnesses like cancers (3.7x), cardio (6.8x), injuries (5.9x), gastro (6.2x), and respiratory (5.2x).

As per the Survey, following the pandemic, a “key” portfolio decision that healthcare policy must make is about the relative importance placed on communicable versus non-communicable diseases. While Covid is a communicable disease, the Survey warned the next healthcare crisis could possibly be “drastically different”. The Survey, which has pulled up India for its underperformance in healthcare access and quality compared with other Low and Middle Income Countries, added India still needs to improve “significantly” on metrics like maternal and infant mortality despite the improvements it has made so far.