Private spend is a strong lever to sustain health system of India

Dr Praneet Kumar -

Improving the organizational effectiveness of the health system of India also calls for considering financial sustainability, for, without the financial resources, best of the ideas and projects gather dust. To judge the financial sustainability would therefore raise the question — ‘Is the health system of India self sustainable?’ An answer to this query would help find solutions to enhance the sustainability of the system. Financial sustainability is no doubt the key to existence of any system, but wisdom demands that it should not be confused with the availability of resources. However, in practice, the lack of financial resources is always blamed for the inadequacies of any system, and it is no different here. In order to examine the fairness of this generally made statement, we have to try and find answers that either support it or defy it. The end result of this examination will determine the financial robustness of our health system.

In order to make the above assessment pragmatic, my suggestion would be to start from the smallest unit of nation - a family. Do we make any allocation in the family budget for our health needs? The answer generally is - ‘no’. The irony of the situation, therefore, lies in the fact that budgetary provision for such an important facet of our own life does not find a place in our own domestic allocations. One can, therefore, deduce that what would be the status at the national level.

The above scenario presents a dismal picture but the redeeming feature of the health system of India stands out to be the percentage of private spends by the individuals. According to the World Health Report, 2000 (Annual Report of World Health Organization - WHO), out of pocket expenses account for more than 86 per cent of total health expenditure in the country. In general terms, it implies that the system does not satisfy one of the major criteria laid down for evaluation of its efficacy, at macro level. Although, the above fact is clearly reflective of a sector that needs funds it also indicates that a major part of the current inflow from out of pocket expenses can be made available for funding the demand side, once this requirement of funds is met on the supply side. It is pertinent to mention here that the financial strength of the health system is gauged by the percentage expenditure of GDP spent on it. World Health Organization (WHO) recommends 6 per cent of GDP as expenditure on health. The government is expected to meet at least 2 per cent of the GDP as its contribution towards the expenditure on health. Even though the developed economies like USA, UK, Germany, France and Japan have exceeded the recommended expenditure, financial sustainability of these systems may not be pronounced as robust. This judgmental comment does not take in to account the availability of services or lack of it, to all. The process of evaluation of the health system of India, carried out in last few weeks, brought to the fore, that despite the inadequacies in the system, it has probably met a large part of its obligations. One can, therefore, conclude to a reasonable extent that the health system of India is sustainable vis-à-vis its current status. Having, therefore concluded that the health system of the country is reasonably robust to sustain itself, let us now look at means and methods to enhance its sustainability.

The question that would now emerge - what does the system need today? The answer is - resources to meet the needs of supply side, i.e. funds, so that the system can satisfy the unmet healthcare requirements and reallocation of the out of pocket spend of individuals to pool risks and spread the health coverage to all, i.e. expand the affordability. Actually, the attainment of the latter will trigger the inflow of investments in the sector to increase the provision of services. The increase in investments and consequently the stepping up of supply position coupled with the enhancement of affordability as a result of risk management and increased coverage will in turn, make the system generate more employment and productivity. Thereby, the sector that is suffering from lack of resources today, will get its share of attention to metamorphose into an organized and professionally managed system that will not only be self-sustainable but also meet the needs and aspirations of the community.

A fair idea of the impact of release of the hidden potential due to the out of pocket spend of individuals in India can be gauged by the fact that conversion of this direct spend in to risk pooling will extend the coverage of healthcare services manifold. A simple illustrative explanation — reallocation of the out of pocket spend to risk pool and even co-payment from this amount will reduce the per capita spend to a fraction of this figure, making a large amount from the corpus thus created, available for investment in to the sector. The enhanced coverage and affordability will then trigger the inflow of investments to put the sector in to high orbit of visibility and ultimately leading to a self-sustainable, efficient and effective system that is also cost-effective. The biggest weakness of the health system of India - high out of pocket spend, therefore can be a strong lever to turn around the health system in to one of the most admired and envied sector.

(The author is head, strategic planning, Fortis Healthcare Limited, New Delhi. He may be contacted at praneetk@indiatimes.com)