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The
Road Ahead
The
recently released CII-McKinsey report on the healthcare
industry may well be called as a prescription for the
ailing healthcare sector. Nidhi Srivastava presents
an overview of the report.
The
CII-McKinsey healthcare study ‘Healthcare in India:
The Road Ahead,’ is a comprehensive analysis of
the healthcare scene in the country. It also puts forward
a list of most pragmatic and pertinent proposals for
better delivery and enhanced profitability in healthcare
industry.
Starting
with a quick review of where India stands currently, the
report further looks at the next ten years which will
see a shift from third world specific communicable diseases
to lifestyle diseases such as cardiac ailments and cancer,
and a huge increase in demand for physical and human healthcare
infrastructure. A detailed agenda for the government as
well as the industry has also been proposed in the report.
Current
Scenario
Discussing
the salient features of the existing system, the report
stresses upon the requirement of an organised system of
coverage or prepayment for healthcare needs of Indians.
"In
India there are five forms of healthcare coverage, namely
the private insurance, social insurance, employer-provided
cover, community insurance schemes and government healthcare
expenditure; but, they have limited reach. Private health
insurance covers only around four million lives; wage
based insurance such as ESIS covers around 30 million
lives, and employers (e.g. railways) and community based
insurance schemes (e.g. schemes run by NGO’s such
as SEWA) cover around 50 million each. Put together these
four forms of prepayment cover less than 15 per cent of
the population. In addition, government spending on healthcare
being low at 0.9 per cent of GDP, limits the extent and
effectiveness of the coverage it can provide," it
says.
Since
there is no organised system of insurance, the purchase
of healthcare is also inefficient. Because of the limited
bargaining power of the individuals they are unable to
negotiate on the quality or cost of care. Moreover, in
some cases, the financer (e.g. ESIS) himself serves as
the provider, resulting in a no competition situation
and hence reduced efficacy of the expenditures.
Another
problem of the sector is the poor delivery of healthcare
both at the public as well as private level. While the
government takes as meagre as 20 per cent of the total
spend on health, it is unable to completely reach the
poorest segment. While it spends 62 per cent on secondary
and tertiary care, only 26 per cent goes for public health
programmes and 12 per cent for primary care. Though the
public infrastructure is large, especially in the rural
areas, rural Indians mostly go to private providers, because
of the common perception of their better quality and availability.
However, in urban areas, the richest 20 per cent use more
than six times the number of bed days in public hospitals
than the poorest 20 per cent. The private providers are
mostly unregulated and practice without minimum standards
or treatment levels. The market share is mostly captured
by for-profit hospitals and nursing homes.
What
Lies Ahead?
According
to the report, "Changing demographics, disease profiles
and medical inflation will continue to push up private
spending over the next 12 years. Government spending will
also increase. Therefore, the total healthcare delivery
market in India could expand to Rs 194,000 crore-Rs 270,000
crore by 2012 under different scenarios, with private
spending remaining the largest component". Coupled
with a growth in the pharmaceuticals, the total healthcare
market could touch 6.2-8.5 per cent of GDP.
While
the increase in the private healthcare spend driven by
change in demographics, disease profile and prices is
expected to be in line with past trends in private healthcare
delivery, growth in health insurance could add an additional
Rs 39,000 in private spending. A significant increase
in the government expenditure (from Rs 17,000 crore in
2000-01 to Rs 50,000 crore by 2012) is extremely important.
Hence, in the days to come, the major share would be taken
by the lifestyle diseases which will drive the growth
of outpatient spend. Cancer and heart diseases are expected
to drive most of the growth of inpatient spend. The share
of outpatient spend is expected to decrease from the existing
61 per cent to 53 per cent. The shift in infectious diseases
to lifestyle diseases would be in line with trends in
the more developed economies.
Since
the healthcare infrastructure in India is underdeveloped
compared to other countries, especially where tertiary
beds and specialist physicians are concerned. With the
current rates, an addition of 750,000 beds would only
marginally improve India’s position compared to other
developing countries, and even if the number of medical
students is doubled, 25 per cent of non-allopathic practitioners
will need to be involved in delivering healthcare, and
the number of students in the nursing schools has to be
tripled. This will require an investment of Rs 100,000
crore-Rs 140,000 crore in the next ten years. But the
government as well as the international agencies would
probably be able to spend only Rs 30,000 crore. Eighty
per cent of this amount will have to come from the private
sector, thus increasing their share in healthcare delivery.
Dose
for organized providers
The
private providers can give their share through three delivery
formats i.e., high investment driven tertiary care, medium
investment driven secondary care and a low investment
driven primary care. This would increase the tertiary
care market to Rs 2,700 crore, the secondary care market
to Rs 20,000 crore and the primary care market to Rs 36,800
crore. Additional delivery models like an Integrated Delivery
Network, Telemedicine, Mobile Care and Home Care will
also play a significant role in further increasing the
profits.
Prescription
for the government
In
view of the significance of assured health status of the
population on long-term economic growth of the country
through various channels, the report gives a five point
agenda to the government. To pursue this aggressively
the government should set up an empowerment and representative
task force comprising key stakeholders from the Centre,
states and private institutions, states the report. The
prescription is - "stimulate private investment in
healthcare, define and enforce minimum standards for healthcare
facilities, facilitate the supply of quality manpower,
stimulate the growth of private, social and community
insurance and reform the government’s role and payor
and provider.”
Where
will we reach?
"A
systematic execution of these recommendations by government
and industry can have far reaching implications on coverage,
purchasing and delivery. These in turn will improve the
equity through effective cross subsidization between the
healthy and the ailing, and the rich and the poor, due
to greater coverage through insurance. Equity will also
increase through the growth and quality of private facilities
in under served areas and the targeting of government
spending on primary care in rural areas. The efficiency
would increase in terms of the purchasing power of healthcare
as out of pocket spending gives way to spending through
insurers. Splitting the payor, provider roles of the government
and other integrated entities such as ESIS, and empowering
government hospitals with greater autonomy as well as
the emerging public private partnerships and the resulting
competition will pave way for higher affordability in
healthcare delivery. Finally, and most important, the
quality of healthcare in India would get a boost because
of setting up of minimum standards for healthcare facility,
driving accreditation, creating public private partnerships,
and attracting more investments from organized providers.
Additionally splitting the payor-provider roles of government
and decentralizing its health spending to local bodies
will lead to the delivery of quality of healthcare, suited
to the needs of the community. |
