‘More health for the money’: Obtaining more value from financing - Hindustan Times

‘More health for the money’: Obtaining more value from financing

ByHindustan Times
Sep 15, 2021 01:13 PM IST

The piece has been authored by Nachiket Mor, visiting scientist at The Banyan Academy of Leadership in Mental Health.

Currently, we in India spend a total of about 4% of our Gross Domestic Product (GDP) on health care, with almost 2.5% being directly paid for by us at the time that we use any health care services, and only 1.25% being spent by the government. The contribution by the government is clearly too low and needs to go up substantially. However, even as we wait for increases in government allocations to take place to bridge the financing gap, there is a need to ensure that consumers derive the maximum possible benefit from current expenditures. 

The contribution by the government is clearly too low and needs to go up substantially. PREMIUM
The contribution by the government is clearly too low and needs to go up substantially.

While, at 1.25% of GDP, government spending accounts only for 31.25% of the total health expenditure, this money nevertheless represents a substantial quantum of public resources and needs to be used well. However, as we can see from examples such as (a) the excessive caesarean section rates (over three times the WHO recommended rate) in several government hospitals along with the very low rates of pre-pregnancy check-ups offered to women by government providers even in a state like Kerala, and (b) the very large unspent balances with the Employees’ State Insurance Corporation (ESIC), there is a lot of room for improvement in how these resources are being used by government departments.  Effecting these improvements is imperative both to ensure that people get the maximum benefits from these existing expenditures and to build a credible rationale for an increase in amounts allocated to these departments by state finance ministers. 

Having failed to obtain substantial improvements within their current systems using traditional methods, a number of countries, including Thailand, Turkey, and Vietnam, have now taken the route of launching bodies like the State Health Authorities in India, to effect a “purchaser-provider-split” and have transferred all the healthcare-related financing to them. They have taken away guaranteed budgetary allocations from their health departments and have instead given these new bodies the power to purchase health care services on an outcomes basis from all the government-owned providers. 

However, given the example of ESIC, and various other Trusts and Mission Directorates in states, it is unclear that such “internal-market” mechanisms, first enacted by prime minister Margaret Thatcher in the UK, will automatically work in India in the absence of a significant enhancement of overall state capacity. These arrangements, if mechanically executed, also run the risk of creating the kind of fragmentation between financing and provision that commercial “indemnity” insurance schemes have already done, thus destroying the value that the current integrated approaches to financing and provision within government add. This could result in both poorer health outcomes today as well as higher levels of health care cost inflation over time. 

In order to fundamentally alter how government funds are spent, a careful investigation of the larger question of state capacity and how it can be improved, therefore, urgently needs to be undertaken.  In the specific context of the health system, the need will be to get both the institutional design and the resourcing right while thinking about trajectories for each state. Prioritisation and sequencing will also be critical and will need to be context-specific so that it does not further verticalize or fragment the health system or in other ways impair even its current levels of performance. Perhaps working closely with a few state governments, which have the higher levels of capacity, would yield new insights on whether and how ideas such as “internal markets” and “purchaser-provider splits” can be beneficially brought to bear on their government-run health systems. The importance of addressing these issues as soon as possible cannot be overemphasised because the principal direction being pursued for financing UHC is to persuade state finance ministers to increase their budget allocations for health. 

At 62.5% of the total health care expenditure, out of pocket expenditures are the largest source of financing for healthcare and even if there are strong commitments made by state governments to increase their share of financing, this situation is likely to continue for at least the next decade if not longer. It, therefore, becomes important to ensure that consumers are able to derive the most value from their current expenditures by making every effort to steer them towards primary care and by enabling the growth of high-quality primary care and integrated care in the country. 

Investing in the creation of shared services platforms for Primary Care Providers (PCP) such as validated screening, treatment protocols, and utilities such as electronic medical records and PCP identifiers have the potential to improve the quality of care. The financial distress associated with out-of-pocket expenditures at the point of care could also potentially be locally mitigated by encouraging the use of tailored instruments such as dedicated bank accounts meant to encourage savings for health expenses, also referred to as Health Savings Accounts, and small-scale Community-Based Health Insurance approaches. These and other mechanisms need to be urgently researched and validated so that better health outcomes can be achieved, and the extreme financial distress currently being experienced, ameliorated. Such approaches, by encouraging the growth of primary care and value-based payment mechanisms, are also well positioned to be eventually integrated into the larger UHC framework that emerges through other efforts. 

In its work on financing UHC, The Lancet Citizen’s Commission on Reimagining India’s Health System expects to delve in greater depth into these questions and to develop recommendations for consideration by the people of India and Indian policymakers. 


(The piece has been authored by Nachiket Mor, visiting scientist at The Banyan Academy of Leadership in Mental Health)


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