Defining a new pathway for enhanced healthcare
The article has been authored by Nachiket Mor, visiting scientist, The Banyan Academy of Leadership in Mental Health.
The challenges faced in the past by the Indian healthcare system pale in

comparison with those brought on by the pandemic. That India consistently
delivers solutions during crises, has long been well-proven.
However, when it comes to establishing a resilient, future-ready health
care regime, the current system reveals several lacunae.
The foundation of a strong and efficient healthcare system rests on the
quality of health outcomes, financial protection offered and
responsiveness to consumers, across the social strata. Unfortunately,
according to the most recent National Health Accounts Estimates for
India, while the total health expenditure in 2017-18 was 3.3% of Gross
Domestic Product (GDP), only 41% of this (or 1.35% of GDP) was met
by the government, with the rest coming from other sources. This was
the key factor behind the large quantum of out-of-pocket expenditure on
health by households, their impoverishment on account of these
expenditures, and the great extent of unmet need for healthcare. There
was also a high degree of variation in the per-person amounts being
spent by each state government on health, from a low of ₹556 by
Bihar, to a high of ₹9,450 by Arunachal Pradesh leading to a high
degree of inequality of access to this essential service across the country.
Globally it can be seen that government expenditures on health need to
be more than 70% to 75% of total health expenditures to deliver truly
high-quality healthcare services. Unfortunately, it ranges between 30%
to 50% in most Indian states with the states allocating only about 5% of
their annual budgets for this sector against a number of more than 15%
in a country like Thailand. A review of the November 2021 State of
State Finances report of the Parliamentary Research Service indicates
that this is because the government continues to prioritise investment
into sectors such as agriculture, roads, ports, and financial services,
where the private sector is perfectly capable of making these
investments or India is already a global leader (for example in road
density per square kilometre) instead of focusing on sectors such as
healthcare where, driven by market failures, there is a real need. With
this distorted investment pattern state governments risk impairing the
long-term growth potential of their economies both by distorting well-
functioning markets and neglecting the development of their human
capital.
Having said that, the government’s efforts to address the growing health
disparity in the country cannot be overlooked. For example, while the
Ayushman Bharat scheme which aims to improve access to affordable
and quality healthcare, at under 0.10% of GDP (or 3% of total health
expenditures), is currently far too underfunded to have any direct impact
even on its target population, its flagship National Digital Health
Mission has the potential to reform the entire architecture of the Indian
health system both in the public and private sectors. Even during the
ongoing pandemic while there were several missed opportunities to offer
good healthcare to the people who needed it, resulting in a very large
number of needless deaths, once it overcame the initial delays in getting
started, the government has created a global record in ensuring that
vaccinations proceeded at a fast pace. Over 60% of the very large
eligible population now stands fully vaccinated.
Our successes in vaccinations notwithstanding the pandemic has
highlighted the need to address the gaps in healthcare systems, not only
to ensure our resilience against any future outbreaks but also to deliver
consistently high standards of healthcare to the people, wherever they
are – in urban areas or remote villages. But before this can happen there
will need to be a substantial shift in several of our mental models,
starting with the sharp reduction of investments in well-functioning
markets and a focus on those sectors, such as health care, where is there
is strong evidence of serious market failures.
State governments will also need to shift their focus from only managing
the public sector to strongly governing the entire health system so that it
delivers the maximum benefit to the people in their respective states.
They would need to use the instruments of regulation and
incentivisation, as well as complement the actions of the existing
providers to ensure that there is full and equitable access to health care
services across their entire state. For the public sector specifically, there
is also a real concern that it may not be performing as efficiently and in
as responsive a way as it could do, even with the limited resources at its
disposal. It is also possible that for this reason in several states such as
Kerala, Himachal Pradesh, Goa, and the those in the Northeastern
Region, despite some very high government expenditures on health care,
universal health care remains a distant dream. Most countries with high
quality health systems have discovered that merely exhorting and
providing training to their staff will not energize the public sector.
Instead, there will have to a complete shift in the way health departments
are paid – from an automatic annual budget basis to one that is directly
linked to outputs and outcomes. Countries such as Thailand, Turkey, and
Vietnam have successfully implemented these payment approaches.
It is also unfortunate that while government funding has remained
between 30 to 50% of total health expenditures, even the share of the
commercial insurance market has remained close to 7% for many years.
Additionally, its current indemnity-insurance approach does not provide
any assurance of availability of health care or of good health outcomes
but risks setting off a serious inflationary spiral as it has done in the US.
To address these issues in a comprehensive manner several changes will
be needed. As has happened in many countries around the world,
insurers and providers will need to be permitted to either merge or to
enter into mutually exclusive partnerships, allowing them to offer
integrated healthcare plans to their members. In the meanwhile, the
government, instead of launching underfunded tax-financed purchasing
schemes, will need to offer government-designed and operated
contributory health care plans through the national and state health
authorities in order to compensate for both its own unwillingness to fund
health care adequately, and the lack of interest amongst commercial
insurance companies to expand access. It will also need to permit the
insurance regulator to sharply lower the minimum capital requirements
for new insurance companies which, currently, stands at Rs100 crore, a
number that is, shockingly, six times higher than in the European Union,
and is acting as a significant entry barrier.
Finally, even as the government begins work on the reform agenda, the
private sector, in its own commercial interests, would need to make an
effort to both expand access and to move competition, even in the
currently dominant out-of-pocket environment, away from a focus on
volumes to one that is based on value. Healthcare providers, both large
and small, would need also to start to see primary care not just as a
skeletal hospital outreach effort with poorly trained and equipped
outreach workers but, as has happened in many parts of the world,
including remote rural Alaska, Costa Rica, and Brazil, a full-service
offering which is able to competently resolve-not-refer most of the
patients that it encounters. They would also need to fully unlock the
power of complementary channels such as pharmacies and schools to
access and serve their patients just as countries such as South Africa,
Indonesia, Peru, and Portugal have done.
