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Economic Survey Takes Aim at Out-of-Pocket Spend, High Private Healthcare Costs

Economic Survey Takes Aim at Out-of-Pocket Spend, High Private Healthcare Costs

CEA Krishnamurthy Subramanian. Photo: PTI/Files.

The following are some salient points on healthcare in India drawn from the Economic Survey 2020-2021, released by Krishnamurthy V. Subramanian, the chief economic adviser, Ministry of Finance, earlier today. The points are presented verbatim, with slight edits for clarity. The document is available to read in full here.

* 71% of global deaths and about 65% of deaths in India are caused by non-communicable diseases (NCDs). Between 1990 and 2016, the contribution of NCDs increased 37% to 61% of all deaths.

* We observe positive correlations between total number of cases and deaths with respect to health expenditure per capita implying better health infrastructure. So, better health infrastructure is no guarantee that a country would be able to deal better with devastating pandemics like COVID-19. As the next health crisis could possibly be drastically different from COVID-19, the focus must be on building the healthcare system generally rather than a specific focus on communicable diseases.

* Despite improvements in healthcare access and quality (healthcare access and quality scored at 41.2 in 2016, up from 24.7 in 1990), India continues to underperform in comparison to other Low and Lower Middle Income (LMIC) countries. On quality and access of healthcare, India was ranked 145th out of 180 countries (Global Burden of Disease Study 2016). Only few sub-Saharan countries, some pacific islands, Nepal and Pakistan were ranked below India.

* At 3-4%, the hospitalisation rates in India are among the lowest in the world; the average for middle income countries is 8-9% and 13-17% for OECD countries (OECD Statistics). Given the increasing burden of NCD, lower life expectancy, higher MMR and IMR, the low hospitalisation rates are unlikely to reflect a more healthy population as compared to middle income or OECD countries. Thus, the low hospitalisation rates reflect lower access and utilisation of healthcare in India.

* India has one of the highest levels of out-of-pocket expenditures (OOPE) in the world.

Source: Economic Survey

* In recent times, the percentage of the poorest utilising prenatal care through public facilities has increased from 19.9 per cent to 24.7 per cent from 2004 to 2018, and there is a similar increase in the percentage of the poor accessing institutional delivery as well as post-natal care The poorest utilising inpatient care and outpatient care has increased from 12.7 per cent to 18.5 per cent and from 15.6 per cent to 18.3 per cent. At the same time, both inpatient and outpatient utilisation among the richest dropped from 29.2 per cent to 26.4 per cent and 30.1 per cent to 26.9 per cent, respectively.

* According to National Health Accounts, 2017, 66 per cent of spending on healthcare is done by the states.

* India ranks 179th out of 189 countries in prioritisation accorded to health in its government budgets (consolidated union & state government). As Figure 10 shows, this prioritisation of health in India is similar to donor-dependent countries such as Haiti and Sudan, and well short of its peers in development.

* The states that have higher per capita spending have lower out-of-pocket expenditure, which also holds true at global level. Hence, there is need for higher public spending on healthcare to reduce OOP. … An increase in public spending to 2.5-3 per cent can substantially reduce OOP from the current level of 60 per cent to 30 per cent.

* WHO identified an aggregate density of health workers to be 44.5 per 10,000 population and an adequate skill-mix of health workers to achieve composite SDG tracer indicators index by 2030 (WHO 2019). The WHO also specified a lower range of 23 health workers per 10,000 population to achieve 80 per cent of births attended by skilled health professionals. Although aggregate human resources for health density in India is close to the lower threshold of 23, the distribution of health workforce across states is lopsided.

* State-level variations in the density of health workers and the skill mix reflects that while Kerala and Jammu and Kashmir have a high density of doctors, states like Punjab, Himachal Pradesh and Chhattisgarh have a larger number of nurses and midwives but a very low density of doctors. Andhra Pradesh, Delhi and Tamil Nadu reflect a better balance of doctors and nurses and midwives.

* Around 74% of outpatient care and 65 per cent of hospitalisation care is provided through the private sector in urban India.

* To understand the difference in quality between the public and private sector providers, we use data from PMJAY. Among the most common metrics of quality in the hospital setting is unplanned readmissions. Readmissions typically impose a heavy burden on patients and their families and on health systems in general as a result of unnecessary care. In general, readmissions are costlier than original admissions. Using the data till November 2019, it is observed that the average claim amount in a readmission case is Rs 19,295 compared to Rs 12,652 in the corresponding original case. The average length of stay is also higher in the readmission, 7.5 days versus 6.6 days.

* The data shows that the mortality rate for neonatal procedures is much higher in private hospitals than in public hospitals, 3.84% and 0.61% respectively. Public sector patients get readmitted to the same hospital 64% of the time versus 70% for private hospitals. About 3/4th of outpatient care and 2/3rd of hospitalisation care is provided through the private sector. So, a large proportion of deaths in India manifesting due to poor quality of healthcare is likely to reflect that the quality of treatment in the private sector may not be significantly better than that in the public sector in India.

* The costs of treatment are not only uniformly higher in the private sector, the differences are humongous for in-patient treatments of severe illnesses such as cancers (3.7x), cardio (6.8x), injuries (5.9x), gastro (6.2x), and respiratory (5.2x).

* Impressive growth has been seen in the adoption of telemedicine in India since the outbreak of the COVID-19 pandemic … coinciding with the imposition of lockdown in India and the issuance of the Telemedicine Practice Guidelines 2020 by the Ministry of Health and Family Welfare (MoHFW) on March 25, 2020. eSanjeevani OPD (a patient-to-doctor tele-consultation system) has recorded almost a million consultations since its launch in April 2020. Similar growth was also reported by Practo, which mentioned a 500% increase in online consultations (varying from 200-700% across different specialties) in just three months.

* With limited visibility into patients’ medical records and no standardised treatment protocols, insurance companies have a risk of adverse selection at the time of policy issuance and a risk of moral hazard at the time of claims. To safeguard against this risks, insurance companies resort to high premiums and restriction of services covered in the insurance policy.

All charts from the Economic Survey 2021.

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