Context: The Health Ministry released the National Health Accounts Estimates for India (2019-20) and noted that there has been significant decline in share of out-of-pocket expenditure (OOPE) in total health expenditure.
National Health Accounts Estimates for India (2019-20):
- Total Health Expenditure (THE) for India is estimated to be around 3.3% of GDP and ₹4,863 per capita.
- Share of Out-of-Pocket Expenditure (OOPE) in Total Health Expenditure declined from 62.6% in 2014-15 to 47.1% in 2019-20.
- Share of Government Health Expenditure in Total Health Expenditure increases from 29% (2014-15) to 41.4% (2019-20).
- Government Health Expenditure’s share in country’s total GDP increases from 1.13% (2014-15) to 1.35% (2019-20).
Government Health Expenditure and Out-of-pocket expenditure as % of Total Health Expenditure (%)
Government Health Expenditure as % of GDP
Despite the significant increase in government expenditure on Health, it is still way below the target of National Helath Policy (2017)- 2.5% of GDP.
Need for Government Health expenditure
- Preventive Healthcare: Unlike private Health expenditure, public spending invests heavily on preventive health care services like Immunization and Nutrition which ultimately reduces the expenditure burden on curative Healthcare.
- Reduce Catastrophic expenditure: In a country like India whose workforce is predominantly concentrated in informal sector and devoid of social security net, there is more probability for incidence of catastrophic health expenditure on its population. Hence, significant public spending on health is necessary to reduce catastrophic health expenditure and incidence of poverty as a result of it.
Limitations of Private participation
- Affordability: Since private institutions require heavy investment in infrastructure, advanced equipment and quality professionals, health services are not affordable. This causes heavy out-of-pocket expenditure by households, especially in secondary & tertiary care.
- Issues in Private insurance: Adverse selection (asymmetric information between buyer and insurer) and moral hazard (reckless attitude of insured consumers), lead to higher pay-out by insurance companies. This cost is adjusted by increasing premium prices, which makes health insurance less attractive for the majority of Indians.
- Issues with private participation in public-funded health protection schemes:
- Supply-induced demand: When patients are protected under schemes like PMJAY, private hospitals can resort to over-prescription of medication, non-standardised tests, and a longer duration of therapy to generate additional revenue.
- Low-reimbursement tariffs set by the government deter genuine private hospitals to be part of such schemes.
- Overpriced drugs: Private firms have invested heavily in R&D for new drugs, especially for secondary and tertiary care; hence, the price of patented drugs is passed on to consumers.
Hence, private participation can only complement but can’t replace public spending on Health to achieve the goal of Universal Health Coverage.