Healthcare Expenditure In India- Explained Pointwise

The Supreme Court of India has expressed concerns over the rising Healthcare expenditure in India. The SC bench is hearing a Public Interest Litigation (PIL) filed by an NGO praying for direction to determine charges in hospitals across the country in terms of Rule 9 of the Clinical Establishment Act. The rules mandate notification of a standard rate for various medical treatments and procedures, subject to certain conditions and in keeping with the living standards of different regions.

The Court has threatened to impose the Central Government Health Scheme (CGHS) rates on all hospitals as an interim measure, if the government failed to find a solution. The SC has directed the Union Health Secretary to convene a meeting of state health secretaries to ensure that standard rates are notified within a month.

What is the structure of Healthcare Sector of India?

Healthcare Sector in India- It comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment.

India’s healthcare delivery system is categorised into two major components – public and private.

Public Sector- It comprises limited secondary and tertiary care institutions in key cities and focuses on providing basic healthcare facilities in the form of Primary Healthcare Centers (PHCs) in rural areas.

Private Sector- The private sector provides the majority of secondary, tertiary, and quaternary care institutions with a major concentration in metros, tier-I, and tier-II cities.

The exorbitant rates charged by the private sector and the low public expenditure by the govt on healthcare has led to the increase in health care expenditure in India.

What is Status of Health Care Expenditure in India?

1. High Out of Pocket Expenditure (OoPE)- According to the National Health Accounts over 47% of the total medical spending is done from people’s pockets. India’s total out-of-pocket expenditure is around 2.3 % of GDP.

2. Low Government Expenditure- The total central government budget for health (not including research) will be roughly Rs 86,175 crore (Budget 2023-24). This translates to only Rs 615 for every citizen.

3. High rate of Healthcare inflation- Healthcare Inflation in India is higher than the overall inflation rates in India. According to estimates the healthcare inflation has risen by 9.6% in 2023 and is expected to rise by 11% in 2024.

4. Low Healthcare coverage- The Health insurance coverage is very low In India. Nearly 400 million individuals in India have zero access to health insurance.

What are the Challenges in Reducing Health care Expenditure in India?

1. Vested Interest of Private Healthcare Industry- The private healthcare industry is entrenched everywhere in India and has extremely vested Interests of generating huge profits. The private health care industry has strong links with politics and government. Many politicians are directly involved in the medical education and hospital sectors.

2. Non applicability of ‘Cashless everywhere’ scheme of General Insurance Industry- The lack of standardised treatment rates and resistance of private healthcare industry, has defunct the ‘Cashless everywhere’ scheme of General Insurance Industry.

3. Higher cost of treatment in private hospitals- The private hospitals in India charge higher rates of treatment due to lack of proper regulations and enforcement. For ex- Cataract surgery in a government hospital costs up to Rs 10,000 while the same costs around Rs 30,000-1,40,000 in a private facility.

4. Low Healthcare expenditure by the Govt- The government (Centre and states put together) spends about Rs 2.8 lakh crore, that is roughly around 1.1% of the GDP. This is extremely low when compared to other government health expenditure in countries like China (3%), Thailand (2.7%), Vietnam (2.7%) and Sri Lanka (1.4%).

5. Non implementation of Clinical Establishment (Central Government) Rules 2010- These rules mandate the notification of a standard rate of treatment in consultation with states for the treatment and procedures of ailments in metros, cities and towns. However, these rules have not been implemented resulting in higher cost of treatment.

What are the advantages of reducing Healthcare expenditure in India?

1. Improving the Access to Healthcare- The Lancet in its latest study ranked India at 145th among 195 countries in terms of quality and accessibility of healthcare, behind its neighbours China, Bangladesh, Sri Lanka and Bhutan. Thus, there is a need to decrease the Healthcare expenditure to make it more accessible in case of future epidemic.

2. Improved Health Outcomes- Affordable healthcare can lead to earlier detection and treatment of diseases, resulting in improved health outcomes and a decrease in the burden of illness. For ex- Early detection and treatment of Non-Communicable diseases like Cardiovascular Diseases.

3. Reduction of Financial Burden- Reducing healthcare expenditure can alleviate this financial burden and improve household financial stability by reducing their high out of pocket expenditure. According to the WHO, 55 million people fall into poverty or deeper poverty every year due to catastrophic expenditures on health.

4. Social Justice- Universal healthcare and publicly funded health system would provide timely, effective and free care, irrespective of social class. This in turn will promote social justice and the fulfillment of DPSP principles. Promote the healthcare of elderly and the children belonging to lower economic strata.

What have been the Government initiatives to reduce healthcare expenditure in India?

Mentioned below are the govt initiatives to reduce healthcare expenditure in India.

What Should be the Way Forward?

1. Implementation of the NITI Aayog Action Plan for Health- It has recommended to focus on public health through significantly increasing government expenditure on it (2.5% of GDP) and prioritize preventive care rather than provide curative care.

2. Rationalisation of Health care rates- The Health care rates must be rationalised according to the Clinical Establishment (Central Government) Rules 2010, for increasing the viability of public healthcare schemes like the AB-PMJAY.

3. National commission for Health care cost management- The government should appoint a national commission to make recommendations for the spending on healthcare systems and monitor its performance.

4. Universal health coverage- State governments should draw up blueprints for universal health coverage and begin experimenting and innovating with pilot programmes.