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The Indian Health Care System

by Mrigesh Bhatia

What is the role of government?

The constitution of India considers the “right to life” to be fundamental and obliges government to ensure the “right to health” for all, without any discrimination (MOH, 2009; Thomas, 2009). More recently, the National Health Bill, introduced in 2009, views health care as a public good and health as a human right of every individual (MOH, 2009). The goal of India’s national health policy is universal access to good-quality health care services without financial hardship (MOH 2014).

Under the constitution, areas of public policy are divided between the central and state governments. States are responsible for organizing and delivering health services to their population. The central government, meanwhile, plays an important role with respect to international treaties, medical education, prevention of food adulteration, quality control in drug manufacturing, national disease control, and family planning programs. It also carries out a stewardship role with respect to policymaking, developing the regulatory framework, and supporting the work of the states.

At the local level, Panchayati Raj institutions (PRIs)—a decentralized system of local governance formalized in 1992—and their elected representatives participate in the functioning of district and subdistrict institutions through various committees (MOH, 2014).

Who is covered and how is insurance financed?

Publicly financed health insurance: In spite of strong economic growth, total expenditures on health represent 4.1 percent of GDP (MOH, 2014). Of total health expenditures, 71.6 percent were financed by private funds and 26.7 percent by public funds, including central, state, and local government bodies and external flows (CBHI, 2013). Per capita health spending has risen from USD21 in 2000 to USD44 in 2009 (WHO, 2015). The 12th five-year plan (2012–17) aims to increase public spending to 2 per cent of GDP (MOH, 2011).

In principle, coverage of health services is universal and available to all citizens under the tax-financed public system. In the draft national policy document, it is proposed that tax-based financing remain the major source of funding for the 70 percent of the population who are poor. Free primary care provided by the public sector, supplemented by strategic purchase of secondary and tertiary care services from both the public and private sectors, would be the main financing approach (MOH, 2014).

However, in practice, severe bottlenecks in accessing government health care services compel households to seek private care, often resulting in high out-of-pocket payments.

In addition to public health facilities, a number of health insurance schemes currently exist in India. The central government’s health services for civil servants and state-level employee insurance for formal workers are mandatory schemes. More recently, a number of social health initiatives, like Rashtriya Swasthya Bima Yojana (RSBY), have been launched to broaden health care access, mainly for the poor. These have enrolled 36 million people, expanding coverage from 5 percent to 15 percent over a six-year period (RSBY, 2015). With proposed expansion of the RSBY scheme to include rickshaw and taxi drivers, rag pickers, sanitation workers, domestic workers, street vendors, building and construction workers, and beedi (tobacco) workers, coverage under the scheme is expected to increase further (RSBY, 2015). Given these trends, a World Bank study projects that by 2015, about half the country’s population could be covered with some form of health insurance (Forgia & Nagpal, 2012).

Private health insurance: The majority of private expenditures are out-of-pocket payments made mainly at the point of service, and less than 5 percent are financed by voluntary health insurance (VHI). Despite tax exemptions for insurance premiums, only upper-class urban populations are able to afford VHI, which serves as a substitute for government health services. Given India’s expanding middle class, low VHI penetration is surprising. It appears that in the coming years, the private insurance industry, which is still in its infancy, has the potential to expand.

What is covered?

Services: Covered services, some of which require copayments (see below), include preventive and primary care, diagnostic services, and outpatient and inpatient hospital care. Medications on the essential drug list are free (if and when available), while other prescription drugs are purchased from private pharmacies.

Services available through the national health programs are free to all. India has one of the world’s largest publicly financed HIV drug programs, and all drugs and diagnostic services for vector-borne diseases, such as dengue fever and malaria, are free, as are insecticide-treated bed nets for malaria control. Immunizations and maternal and child health (MCH) services are free as well (MOH, 2014).

Under the National Rural Health Mission, public health institutions in rural areas are being upgraded to meet the benchmarks for quality laid down by the Indian Public Health Standards (IPHS) (MOH 2013), which specify essential and desirable services that must be available in each type of health care facility. For example, at primary health centers these include outpatient services; emergency care provided mainly by nursing staff; referral and inpatient services; MCH-related services; school health and adolescent health services; care for noncommunicable diseases; basic laboratory services; linkages with secondary care providers and community health centers; basic surgical procedures; and medications on the state essential drug list and those required under national programs. The standards also cover necessary infrastructure and human resources. In practice, however, the availability of staff, equipment, and drugs varies significantly between and within states.

Cost-sharing and out-of-pocket spending: Most states have some user charges for outpatient visits, hospital admission, diagnostic and prescription drugs, though there is huge variation in fee policies among the states. More than 70 percent of total health expenditures are financed through user fees, and most out-of-pocket spending is for hospital admissions. Nearly all admission, even to public hospitals, lead to catastrophic health expenditures, and over 63 million people are faced with impoverishment every year because of health care costs. In 2011–12, out-of-pocket spending on health care as a share of total monthly household spending per capita was 6.9 percent in rural areas and 5.5 percent in urban areas (MOH, 2014).

Under the National Rural Health Mission, free treatment in public hospitals, as part of the Janani Suraksha Yojana, was extended to maternity, newborn, and infant care and to control of tuberculosis, malaria, and HIV/AIDS. For all other services, user fees continue to apply, especially for diagnostics and drugs excluded from the state’s essential drug list (MOH, 2014).

(Janani Suraksha Yojana (JSY) is a safe motherhood intervention under the National Rural Health Mission with the objective of reducing maternal and neonatal mortality through the promotion of institutional delivery among poor pregnant women.)

[Defined as monthly per capita consumption expenditure of INR972 (USD55) in rural areas and INR1,407 (USD79.50) in urban areas. Please note that, throughout this profile, all figures in USD were converted from INR at a rate of INR17.7 per USD, the purchasing power parity conversion rate for GDP in 2014 reported by OECD (2015) for India. The poverty ratio at the all-India level is 29.5 percent (Planning Commission, 2014).]

Safety nets: Safety nets for the poor and other vulnerable groups are provided by a number of government-funded health insurance schemes that have been introduced in recent years. These are intended to improve access to hospitals and reduce out-of-pocket payments. Some states finance hospital care through health insurance programs. The RSBY (see above) protects mostly those below the poverty line. Evaluations of such schemes show improved utilization of hospital services (mainly private), especially among the poorest 20 percent of households (MOH, 2014).

Another program, designed to reduce maternal mortality, is Janani Shishu Suraksha Karyakarm, launched in 2011 and currently implemented all over India. It entitles all pregnant women to free delivery, including by caesarean section, in public health institutions. Women receive free food, drugs, and consumables, as well as free diagnostics. Free transportation is also provided. Similar entitlements are available for all sick infants (up to age 1) at public health facilities (MOH, 2015a).

How is the delivery system organized and financed?

The average number of patients seen by a registered doctor and nurse is 1,212 and 532, respectively (WHO, 2013). This implies an average of 0.7 doctors and 1.1 nurses per 1000 population, compared to 3.2 and 8.8, respectively, in countries within the Organisation for Economic Co-operation and Development (OECD, 2014). Although India has a much younger population than OECD countries, this acute shortage of providers is a major constraint as India moves toward universal coverage.

Health care services are delivered by a complex network of public and private providers, ranging from single doctors to specialty and “super-specialty” tertiary care corporate hospitals. The government health care system is designed as a three-tier structure comprising primary, secondary, and tertiary facilities.

Primary care: Facilities at the primary level include: sub-centers (SC), for a population of 3,000 to 5,000; primary health centers (PHC), for 20,000 to 30,000 people; and community health centers (CHC), which serve as referral centers for every four PHCs, covering 80,000 to 120,000. Primary health centers (PHCs) are the cornerstone of rural health services, serving as a first “port of call” to a qualified doctor in the public health sector and providing a range of preventive, promotive, and curative health services. On average, they have about six beds for inpatient admission. In 2012, there were 148,366 subcenters, 24,049 PHCs, and 4,833 CHCs (CBHI, 2013). Availability of staff in these primary care facilities is a major concern. For example, specialist shortage at CHCs is nearly 70 percent (CBHI, 2013).

Primary care doctors working in the public sector are employed by local governments and paid salaries. No registration is required, and patients generally go to the nearest PHC located in their geographical area. There are number of other staff at PHCs, among them auxiliary nurse midwives, pharmacists, and lab technicians—all on salary. Normally, there is limited scope for primary care doctors to earn additional income via incentives. Although government doctors in most states are banned from private practice, officials find it is difficult to monitor and take action against offending doctors.

In the private sector, an array of services is provided, in both urban and rural areas, by solo practices ranging from unregistered “quacks” to registered medical practitioners to small nursing homes and poly clinics. There are estimates that as much as 40 percent of private care is provided by unqualified providers (MOH, 2014). Patients pay out-of-pocket for the services received. There are no fee schedules.

Outpatient specialist care: In government health facilities, salaried, full-time specialists are located at CHCs and district hospitals. Usually, choice is limited in rural areas. These specialists are not permitted to work in private practice in most states. In the private sector, there is a huge choice of specialists, especially in urban areas. Consultation fees vary, as there is no fixed fee schedule, and they operate from their own clinics, hospitals, or poly clinics, or from speciality hospitals. Private specialists are commonly visited by upper- and middle-class urban residents.

Administrative mechanisms for direct patient payments to providers: There are no direct payments in public health facilities and most government-sponsored insurance programs. In the private sector, patients usually pay directly out-of-pocket. Only in a small percentage of cases where patients have VHI is payment made upfront and claims submitted to the insurer for reimbursement.

After-hours care: All PHCs are expected to provide basic emergency services (mainly by nursing staff), and all CHCs are equipped to provide emergency services around-the-clock. Primary care doctors are required to provide after-hour care, reimbursement for which is built into their salaries. A free medical help line is being operated by certain states in India.

Hospitals: District hospitals function as the secondary tier of public providers for the rural population (MOH, 2011). The average population served per public bed is 1,946. Of a total of 628,708 government beds, 196,182 are in rural areas (CBHI, 2013). Government hospitals operate within a yearly budget allocation.

There has been a major expansion of the private hospital sector recently, and government-sponsored health schemes rely on private hospitals as a part of public–private partnerships. Between 2002 and 2010, the private sector created more than 70 percent of new beds, contributing 63 percent of total hospital beds (Gudwani et al., 2012). The private sector currently provides about 80 percent of outpatient care and 60 percent of inpatient care (MOH, 2014). In addition, about 80 percent of doctors, 26 percent of nurses, and 49 percent of beds are in the private sector (Wennerholm et al., 2013).

Private-sector hospitals range from small, family-run general hospitals to facilities providing super-speciality tertiary care. Until the 1980s, private-sector hospitals were mainly run by charitable trusts and registered as not-for-profit. With India’s economic liberalization, a growing middle class, and the rise in medical tourism, a number of corporate hospitals have been established, and for-profit private hospitals are becoming more common. There has also been a considerable expansion in tertiary care service providers in recent years, mostly in the private sector. The need for tertiary care is growing, but the costs are growing even faster and have become prohibitive (MOH, 2014).

Physician payment in the private sector varies from salary to fee-for-service. Hospitals that pay doctors a fixed salary do have incentives for attracting new patients but provide no incentives for internal referrals within the hospital.

Mental health care: Mental health is one of the most neglected areas of India’s health system. India has less than 21 percent of the psychiatrists its population needs and less than 2 percent of clinical psychologists and social workers required (CBHI, 2013).

Attempts are being made to rectify the situation. For example, the Mental Health Care Bill of 2013 makes access to mental health care a right for every person. Access at government health facilities must be affordable, of good quality, and provided without discrimination. Recently, under the National Mental Health Programme (NMHP), a mass media campaign on creating awareness and reducing stigma was undertaken. To address the gap in mental health resources and increase training capacity, 10 centers of excellence and 23 postgraduate departments in mental health specialties have been established across the country (MOH, 2011).

According to the IPHS guidelines under NMHP, primary health centers should ensure early identification (diagnosis) and treatment of common mental disorders such as psychosis, depression, anxiety disorders, and epilepsy, as well as referral services. It is also essential that PHCs provide information, education, and communication on prevention, stigma removal, and early detection of mental disorders. However, given capacity constraints, it remains to be seen to what extent these steps are implemented.

Long-term care and social supports: Despite the growing elderly population, there has been a lack of long-term care services. Families have mainly been responsible for providing necessary care. Recently, the central government launched the National Programme for Health Care of the Elderly to address the health-related problems of elderly people (MOH, 2015a; DGHS, 2011). This is intended to provide additional human resources and funding for home care, screening for early diagnosis, vaccinations for high-risk groups, and health education for caregivers.

Examples of social welfare support provided to the elderly include old-age pensions, subsidized food and transport, lower income tax, and higher savings interest rates. Benefits under certain schemes for the elderly, such as the old-age pension scheme and the public distribution system, are available to those below the poverty line.

Given increasing life expectancy, an expanding middle class, and technological advances, there has been growing interest in the private sector in providing home care for the elderly.

What are the key entities for health system governance?

Public actors in the Indian health care system include the Ministry of Health and Family Welfare, state governments, and municipal and local level bodies. The ministry consists of the Department of Health and Family Welfare and Department of Health Research (MOH, 2015a). Despite the existence of the latter, there is very little evidence that comparative research and cost-effectiveness studies are used in policy formation.

The Directorate General of Health Services, an attached office of the Department of Health and Family Welfare, provides technical advice and is involved in the implementation of health schemes. In 2014, the new Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homeopathy was formed. In addition, health care services are provided by other ministries and departments to their personnel (e.g., defense, railways, ports, mines, and employee state insurance schemes).

Each state has its own State Directorate of Health Services and State Department of Health and Family Welfare, which is responsible for providing care to its population. District-level health services provide a link between each state and primary care services.

Other agencies involved in health system governance include the Insurance Regulatory and Development Authority, which regulates the health insurance industry, and the National eHealth Authority, which is to become the nodal authority for development of an integrated health information system (MOH, 2015b). There is confusion in India with respect to which entities are responsible for regulating the private sector and for ensuring quality of care, as there are multiple agencies under different ministries, with no single responsible agency. For example, the Bureau of Indian Standards and Consumer Protection Act are under the Ministry of Consumer Affairs, whereas the Quality Council of India is under the Ministry of Commerce and Industry. An attempt is being made to bring these agencies under one authority.

What are the major strategies to ensure quality of care?

Over the years, several regulations have been enacted and authorities created at the state and national level with the aim of protecting patients and improving quality of care. For example, at the state level, the Nursing Home Act and State Drug Controllers ensure quality of care provided by the private sector. A major impetus to establishing patient rights was the inclusion of private medical practice under the Consumer Protection Act in 1986 (Balarajan et al. 2011). To ensure quality of care and define standards for health facilities, a number of laws were introduced, including those creating a national accreditation system, the National Accreditation Board for Hospitals (NABH, 2006; Gyani, 2015), and the Indian Public Health Standards (IPHS, 1997) for primary and secondary health care services. In addition, many hospitals undergo accreditation and certification from international bodies such as the Joint Commission International (JCI) and the International Organization for Standardization (Wennerholm et al. 2013).

The Health Management Information System was launched in 2008 to monitor health programs and provide key inputs for monitoring and policy formulation. Currently, about 633 of 667 districts report data by facility (MOH, 2015a). Large-scale surveys like the National Family Health Survey, the District-Level Household Survey, and the Annual Health Survey are periodically undertaken at the district, state, and national levels. In addition, the Indian Council of Medical Research (ICMR) maintains disease registries for cancer, diabetes, cardiovascular diseases, and other illnesses.

The 2010 Clinical Establishments (Registration and Regulation) Act calls for prescribing minimum standards for all public and private clinical establishments in the country (MOH, 2012; MOH, 2015c). The act has already come into force in certain states (e.g., Arunachal Pradesh, Himachal Pradesh, Mizoram and Sikkim) and in all union territories (CBHI, 2013). In addition, facilities shall charge rates as determined by central government in consultation with the state. The act stipulates fines and penalties if provisions are breached by any facility. A national council for clinical establishment will oversee implementation and compliance at the national level. Similar councils at the state and district levels will be established to enforce compliance locally (MOH 2015c).

Currently, a shift to one comprehensive approach of quality assurance is envisaged to replace the existing fragmented approach. For public health care facilities, the strategy would ensure that every facility is measured and scored for quality, and certified and incentivized when it achieves a certain minimum score. Quality measures would include clinical quality as well as patient safety, comfort, and satisfaction. In the private sector, voluntary accreditation with certificates like that of National Accreditation Board for Hospitals and National Accreditation Board for Testing and Calibration Laboratories would predominate. For private facilities that are part of a public–private partnership, quality certification would be mandatory either through those boards or through the public system (MOH, 2014).

To ensure quality of medical education, a common national entrance exam is being debated. A licentiate exam will be introduced for all medical graduates, with renewal at periodic intervals (MOH, 2014).

Although there has been some progress made and new legislation introduced, progress in government regulation has been slow and implementation challenging (MOH, 2014; Gudwani et al. 2012), and there is no single government authority responsible to ensure quality of care (Wennerholm, 2013). Although the Clinical Establishments (Registration and Regulation) Act is one of the most important, far-reaching pieces of public health legislation enacted to date, its effective and uniform implementation in each state remains to be seen.

What is being done to reduce disparities?

Significant inequalities with respect to health care access and health outcomes exists between states, rural and urban areas, socioeconomic groups, castes, and genders. For example, the infant mortality rate is 48 per 1,000 live births in rural areas, while it is 29 in urban areas (Save the Children, 2013). With respect to access, it is estimated that the urban rich obtain 50 percent more health services than the average Indian citizen (Gudwani et al., 2012). And the number of government hospital beds per population in urban areas is more than twice the number in rural areas (Balarajan et al., 2011), and urban areas have four times more health workers per population (Planning Commission of India, 2011).

Recognizing the lack of a comprehensive national health care system as an important factor in health inequalities, the government views universal coverage through the National Health Mission as the main strategy to address the problem, along with a strengthening of the primary health care infrastructure in both rural and urban areas.

While there is no single agency responsible for ensuring that health inequalities are reduced, a number of new initiatives have been launched on behalf of low socioeconomic groups and other vulnerable populations. For example, with respect to maternal care, the Janani Suraksha Yojana, which provides mothers with cash incentives for institutional delivery, transportation in case of emergency, and additional incentives for accredited social health activists. Another initiative is expanding the use of information and communication technology in an attempt to increase rural Indians’ access to health services.

Broadly, there is growing recognition about the need to address the growing burden of noncommunicable diseases, which are responsible for two-thirds of the total morbidity burden and just over half of deaths (WHO, 2015). Starting in 2013–14, the National Programme for Prevention and Control of Cancer, Diabetes, Cardiovascular Diseases and Strokes is being implemented in 35 states and union territories (MOH, 2015a). It must be emphasised, however, that the effort against these diseases is still in its initial stages.

What is being done to promote delivery system integration and care coordination?

No information available

What is the status of electronic health records?

The establishment of a composite health information system (HIS) is proposed in the government’s 12th five-year plan. The HIS will be based on adoption of national electronic health record standards, linked systems at the state and national levels, issuance of a unique health card to every citizen, and creation of a national health information center (MOH, 2015a).

States can develop systems to suit their needs and priorities, as long as they are consistent with standards set by the new National eHealth Authority (NeHA). NeHA will be the nodal authority responsible for development of the HIS and for enforcing the laws and regulations relating to privacy and security of patient health information and records (MOH, 2015b).

How are costs contained?

There are no comprehensive policies to hold down costs. Most cost-containment strategies are limited to cost-sharing and use of generic drugs. There is limited evidence with respect to use of cost-effectiveness assessments, monitoring for financial performance, improvement in operational efficiency, and health technology assessments.

As the public health care system is financed through taxes, costs are contained in the first instance by allocations made to the health sector, which currently amount to less than 2 percent of GDP. Most government health facilities have to operate within the yearly allocated budget. Where there are public–private partnerships, government negotiates prices with private providers and reimburses accordingly.

What major innovations and reforms have been introduced?

A key goal of the 12th five-year plan is to move toward universal coverage to provide universal access to equitable, affordable, and quality health care, with supplementation from the private sector (MOH, 2015a, MOH, 2014). Toward this end, the National Health Mission and its two Sub-Missions, the National Rural Health Mission and the National Urban Health Mission, was approved by the Cabinet in May 2013. The main components include health system strengthening in rural and urban areas; the Reproductive, Maternal, Newborn, Child and Adolescent Health strategy; and control of communicable and noncommunicable diseases (MOH, 2015a).

A number of initiatives are being introduced with respect to quality of care, as described in the section on quality, above.

An example of health system integration reform is the RSBY scheme. This scheme, now under the Ministry of Health & Family Welfare, is helping the state and central ministry move to a tax-financed, single-payer system (MOH, 2014).

Reforms have also been introduced to ensure equity in resource allocation. Allocation decisions are to take into account financial ability, developmental need, and high-priority districts, targeting specific population subgroups, geographical areas, health care services, and gender-related issues. A risk equalization formula based on health care need could be developed, with built-in financial incentives for facilities providing a certified quality of care (MOH, 2014).

Other initiatives being introduced include the India Newborn Action Plan, to reduce preventable newborn deaths and stillbirths; the provision of providing free drugs and diagnostic services; the aforementioned National eHealth Authority; and a new health rights bill to ensure health as a fundamental right (MOH, 2015a).


The author would like to acknowledge the input provided by Elias Mossialos and the LSE editorial team for editing the previous draft.


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