SANEI: Completed Studies: Abstract

Health Policy Challenges in India: Some Lessons from the International Experience

Improvements in health are desirable because they contribute to enhancing the capabilities of individuals, and also because better health can serve as a means to promote economic growth. To the extent that health improvements are easier to achieve among those who are at the bottom end of the good health scale, efficient mechanisms for improving "average" levels of health in population have implications for improved health equity as well. India has achieved substantial gains in its health indicators over the years - life expectancy at birth increased from 50 years in 1970 to more than 60 years at present, and infant mortality rates have declined from 137 per 1,000 live births in 1970 to 69 per live births in 1991. Yet it still lags significantly behind countries such as China and Sri Lanka in health performance. Moreover, there are significant inter-state differences across states and socio-economic groups in health achievements. Additional challenges are likely to emerge, as an ageing population becomes susceptible to expensive chronic illnesses such as heart disease and cancers.

Good health depends on several factors. These include individual behaviour that is often influenced by a person's education, income status, and community and cultural factors. It depends on factors that an individual or his family may have less control over, such as age, the climate and genes. It also depends on government policy that makes available to the individual, subsidised access to clean drinking water, sanitation, and good quality health care, both preventive and curative. Efficient provision of health care of good quality will obviously enhance good health, for a given level of expenditure. If affordable, it will also enhance the access of the poor to such care, thereby promoting equity in health outcomes, and possibly incomes as well.

In this report we focus on a key ingredient of good health, namely the systems that govern the provision, the financing, and the regulation of health care, in the Indian context. Specifically, our analysis is guided by two sets of questions. First, we ask whether the existing system in India (modified to allow for private health insurance) is likely to yield health care that is cost-effective, financially equitable, and of good quality. Second, we ask if there are other systems in place elsewhere in the world, and how the functioning of these health systems holds up in terms of the three criteria that we have previously outlined. Addressing the first question would help policy makers in better evaluating the existing situation in India, particularly with regard to any deficiencies that exist. Addressing the second would help avoid a complicated and lengthy learning process of trial and error with different policy strategies. The large number and the considerable variation in the health reforms that have been undertaken in developed countries in recent years offers just this opportunity.

Chapter I provides an assessment of the existing health system in India, in terms of its implications for equity, cost of care provision, and the quality of care that Indians are able to access. It concludes that health care in India is somewhat costly, and there are reasons to suspect that the financial burden of care is somewhat unequally distributed. Moreover, the quality of care that is provided is poor, with regulation either non-existent, or poorly implemented.

Chapter II examines whether the introduction of private health insurance will change the Indian health system in a way that reduces the costs and inequity that are currently prevalent, and enhance quality of care. It concludes that the entry of private health insurance could have adverse consequences for the above policy goals, but that an informed consumer and a well defined and implemented insurance regulation framework will ameliorate some of the problems. There are areas where regulation with regard to health insurance would be clearly useful, such as instituting uniformity in benefits packages, restrictions on risk selection, along with efforts to promote consumer protection. Moreover, insurance regulation is unlikely to work in isolation, and would require progress in the design and implementation of regulations relating to providers of care. Some efforts to reform government operated social security schemes are needed as well. States' jurisdiction over health provider regulation, and parliamentary authority over relevant social security regulation means that the newly constituted Insurance Regulatory and Development Authority (IRDA) has its work cut out.

Of course, the impact of the entry of private health insurance is likely to depend on the size of the private insurance market in India. The Appendix to Chapter II develops a simple model to estimate the market for private health insurance in India and provides simulation-based estimates under different scenarios, depending upon the relative quality of private and public care, and the costs of administering private insurance.

If the entry of private health insurance is unlikely to deliver the goods, that may be reason enough to look at other options, based on the experience of other countries. Chapter III assesses the rationale and effectiveness of health system reforms in six countries - Canada, Germany, Israel, Singapore, Netherlands and the United Kingdom and draws upon their experiences to draw lessons for Indian health policy. These four countries were chosen because they provide a set of four options reflecting a wide range of health system possibilities. Moreover, each of the health systems considered has at least some features that are similar to those in the Indian system, examples being tax-funded public services, wage-linked contribution schemes, private insurance, and the like. The main messages emerging from this survey are a need to focus on patient choices among insurers and providers, approaches to reconcile cost-containment with patient choice, and understanding the trade-off that arises between increased consumer choice and increased equity.

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