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The Indian Health Care System

by Indrani Gupta and Mrigesh Bhatia, London School of Economics and Political Science

What is the role of government?

The constitution of India considers the “right to life” to be fundamental and obliges the government to ensure the “right to health” for all.1,2

To a significant extent, India’s health sector has been shaped by its federal structure and the federal–state divisions of responsibilities and financing. The states are responsible for organizing and delivering health services to their residents. The central government is responsible for international health treaties, medical education, prevention of food adulteration, quality control in drug manufacturing, national disease control, and family planning programs. It also sets national health policy including the regulatory framework and supports the states.

The draft National Health Policy prepared in 2015 proposes that health be made a fundamental right and views government’s role as critical.3 If accepted, it would clarify, strengthen, and prioritize the role of government in shaping the health system.

Who is covered and how is insurance financed?

Total health expenditures in India for 2013–2014 were 4.02 percent of GDP. Government expenditures amounted to 1.15 percent of GDP, which is lower than the average for low-income countries.4,5 Household out-of-pocket health spending was 69.1 percent of total health expenditures, making this a major component of the financing system.

Publicly financed health insurance: In principle, government health services are available to all citizens under the tax-financed public system. In practice, bottlenecks in accessing such services compel households to seek private care, resulting in high out-of-pocket payments.

One key initiative for making health care accessible and affordable is the Rashtriya Swasthya Bima Yojana (RSBY), begun in 2008 under the Ministry of Labour and Employment to provide health insurance coverage to families living on incomes below the poverty line. In 2015–2016, 41.3 million families were enrolled, achieving 57 percent of the target.6 The scheme now also includes 11 other categories of unorganized workers, with the aim of increasing coverage.7

Among other health coverage schemes, the Employees State Insurance Scheme for factory workers is India’s only true social health insurance scheme, to which both employers and employees contribute. The Central Government Health Scheme is for civil servants. These schemes comprise 4 percent of total government expenditures. In addition, railway and defense employees have their own schemes, and states have schemes for their employees as well. Overall, around 8 percent of all government spending is for health coverage.8

Despite these various schemes, evidence indicates that by 2014, less than 20 percent of the population was covered by any form of health coverage.9

Private health insurance: The majority of private expenditures are out-of-pocket payments made mainly at the point of service. Despite tax exemptions for insurance premiums, there has been limited uptake of voluntary private insurance among Indians.

What is covered?

Services: In principle, all services at government facilities, including preventive and primary care, diagnostic services, and outpatient and inpatient hospital care, are delivered free of charge. In practice, severe shortages of staff and supplies limit access to care. Medications on the essential drug list are free (though there are often shortages), while other prescription drugs are purchased from private pharmacies. 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 services are free as well.10

Most of the services under health packages like the Central Government Health Scheme and Employees State Insurance Scheme are free. These remain the most generous of health coverage programs catering to a small section of the population, raising issues around equity.11 Under the RSBY insurance scheme for the poor, hospitalization services are free, up to allowable amounts.

Cost-sharing and out-of-pocket spending: High out-of-pocket spending (69% of total health expenditures) results in part from patient fees charged by private health care providers and, to some extent, public providers.12,13 Under the National Health Mission, described below, free care in public hospitals was extended to certain services: maternity, newborn, and infant care and disease control programs.14 Also, despite plans to upgrade facilities to meet benchmarks laid down by Indian Public Health Standards, the availability of staff, equipment, and drugs varies significantly between and within states, forcing patients to seek care in the more expensive private sector.15

More than 63 million Indians are faced with impoverishment every year because of catastrophic health care costs.16

How is the delivery system organized and financed?

Health care services are delivered by a complex network of public and private providers, ranging from single doctors to specialty and multispecialty tertiary care hospitals.

Public sector: The government health care system is designed as a three-tier structure comprising primary, secondary, and tertiary facilities. In rural areas, primary health care services are provided through a network of subcenters, primary health centers, and community health centers.17 The subcenter is the first point of contact between the primary health care system and the community, designed to handle maternal and child health, disease control, and health counseling for a population of 3,000 to 5,000. At least one auxiliary nurse midwife or female health worker, one male health worker, and one female “health visitor” supervise six subcenters.

The primary health center is the first point of contact between a village community and a medical officer and provides curative and preventive services to 20,000 to 30,000 people. It serves as a referral unit for six subcenters and has four to six beds for patients.

Community health centers are managed and maintained by state governments and are required to have four medical specialists supported by 21 paramedical and other staff, with 30 beds, laboratory, X-ray, and other facilities. It covers 80,000 to 120,000 people.

Finally, an existing facility like a district or subdivisional hospital or a community health center is named as a fully operational first referral unit if it is equipped to provide round-the-clock emergency obstetric care and blood storage. District hospitals function as the secondary tier of public providers for the rural population. Of a total of 628,708 government beds, 196,182 are in rural areas.18 Government hospitals operate within a yearly budget allocation.

Despite this elaborate infrastructure, severe shortages of staff and supplies in public-sector health facilities remain. India has a doctor-to-population ratio of 1:1,674, compared with the World Health Organization norm of 1:1,000, a situation that results in acute shortages and uneven distribution of doctors.19 India’s urban poor are especially vulnerable, given that primary care facilities in the cities are generally less organized and fewer in number than in rural communities.20,21,22,23 Lack of access to care appears to take a toll: nearly 60 percent of urban poor children have not received all recommended immunizations before age 1. Life in slums also exposes people to a variety of diseases.

Private sector: India’s private health care sector is not well regulated. Private health care providers deliver an array of outpatient services in solo practices ranging from those not registered with the relevant medical council to trained medical practitioners to small nursing homes and multispecialty clinics. An estimated 40 percent of private care is provided by unqualified providers.24

The private hospital sector has expanded rapidly, and government-sponsored health schemes also rely on private hospitals as a part of public–private partnerships. From 2002 to 2010, the private sector created more than 70 percent of new beds, contributing 63 percent of total hospital beds.25 Private hospitals currently provide about 80 percent of outpatient care and 60 percent of inpatient care.26 Until the 1980s, private-sector hospitals were mainly nonprofits run by charitable trusts. With India’s economic liberalization, growing middle class, and the rise in medical tourism, the number of private, for-profit hospitals has grown substantially.27

Public sector: Physicians working in government facilities earn salaries and are not permitted to work in private practice in most states. Other staff members such as nurses and technicians also earn fixed salaries.

Private sector: Physician payment in the private sector varies depending on local market conditions. Overall, private-sector physicians are better paid than their government counterparts. However, nurse salaries in the private sector have historically been low; India’s Supreme Court is looking into the issue.28

diagram of health care system

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 bodies.

Each state has its own Directorate of Health Services and Department of Health and Family Welfare. 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 authority for development of an integrated health information system.29 There is lack of clarity 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.

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 levels with the aim of protecting patients and improving quality of care. 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 1986.30 To ensure quality of care and define standards for health facilities, several laws were introduced, including ones creating a national accreditation system for primary and secondary health care services.31,32 In addition, many hospitals undergo accreditation and certification from international bodies.33

The Health Management Information System was launched in 2008 to monitor health programs. Currently, about 633 of 667 districts report data by facility.34 Large-scale surveys are periodically undertaken at the district, state, and national levels. In addition, the Indian Council of Medical Research 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.35 It has come into force in certain states and in all union territories except Delhi. In addition, the law requires facilities to charge rates for procedures and services as determined by the central government in consultation with the state. The act stipulates fines and penalties if provisions are breached by any facility. A national council will oversee implementation and compliance at the national level. Similar councils at the state and district levels will be established to enforce compliance locally. This is one of the most important, far-reaching pieces of public health legislation enacted to date. However, it is up to the states to adopt this, by passing suitable resolutions in their respective assemblies. If implemented and enforced well, it could change the supply side of health care in significant ways and go a long way toward meeting the comprehensive approach to quality assurance envisaged in the draft Health Policy for 2015.36

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.

In recent years, there has been some progress in government regulation to ensure quality. However, the pace has been slow, and implementation is a challenge, in part because there is no single authority responsible for quality assurance.37,38,39 The lack of a coherent approach in this area has raised concerns about the extent to which government can influence the rapidly expanding private sector to adopt ethical and standardized health services.40,41,42,43

What is being done to reduce disparities?

Significant inequalities with respect to health care access and outcomes exist between India’s states, rural and urban areas, socioeconomic groups, castes, and genders. For example, children in rural areas are about 1.6 times more likely to die before their first birthday and 1.9 times more likely to die before their fifth birthday than those in urban areas. From 1991 to 2013, neonatal mortality declined by 53 percent in urban areas, compared with 44 percent in rural areas.44 There are also significant interstate differences in health outcomes. The social determinants of health play a significant role in health equity, with income, education, caste, and social group determining to a significant extent the distribution of health outcomes. With respect to access, it is estimated that the urban rich obtain 50 percent more health services than the average Indian citizen.45 Also, the number of government hospital beds per population in urban areas is more than twice the number in rural areas, and urban areas have four times more health workers per population.46,47 There is also evidence that public spending does not always translate into benefits for those most needing them.48,49

Recognizing the lack of a comprehensive national health care system as an important factor in shaping health inequalities, the Ministry of Health and Family Welfare strengthened its flagship program, the National Health Mission. Through the program, 900,000 accredited social health activists work at the community level to promote immunization, disease control, effective breastfeeding, and healthy nutrition. Other initiatives seek to reduce maternal mortality—for example, by incentivizing women, including through cash payments, to deliver their babies in government health facilities. Recent evidence indicates that these policies have reduced disparities in maternal care.50

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

Patient care continues to be fragmented in India. There has been very little effort made to redesign how care is delivered or to promote patient-centered care. Likewise, health coverage models are fragmented, with patients given limited choice across packages.

What is the status of electronic health records?

The Ministry of Health and Family Welfare in 2015 set up a National Health Portal that provides the public with information on diseases, health services, health programs, and insurance schemes.51 In addition, a Health Statistics Information Portal has been set up to provide information and data on health indicators, compiled from multiple sources.52

Recognizing that multiple health information systems are in use across the public and private sectors, the ministry has proposed creation of the National eHealth Authority to set regulations and standards.53 States would be able to develop systems to suit their needs and priorities, provided they were consistent with standards set by the authority. The authority also would be responsible for developing health information systems and enforcing laws and regulations related to the privacy and security of patient health information.

How are costs contained?

The Indian health system does not promote efficiencies or control costs. Studies have found that most hospital systems across states are inefficient.54,55 Lack of competition has made the public health infrastructure costly.

Some state governments have been able to control costs, especially for drugs. Tamil Nadu, for example, has a drug procurement system that relies on a centralized process that lowers prices and makes a wider range of drugs available.56 Since 2011, Rajasthan has provided essential medicines free of cost to patients visiting public facilities. Evidence indicates that this initiative has resulted in increased financial protection of households and better health outcomes.57

There also have been efforts to make medicines more affordable and accessible by increasing the supply of generic pharmaceuticals. Launched in 2008 by the Department of Pharmaceuticals, the Jan Aushadhi scheme has opened stores to sell high-quality generic medicines at low prices.58 And recently, the National Pharmaceutical Pricing Authority has reduced the allowable prices of certain drugs, which could help reduce costs for consumers.59

What major innovations and reforms have been introduced?

The most important recent reform undertaken in India is the National Health Mission, which seeks to strengthen health systems as described above and sets national priorities for efforts such as disease control.60

The Ministry of Labor and Employment’s effort to expand health coverage through RSBY has also been important. In fact, the Prime Minister has recently announced a similar scheme, the National Health Protection Scheme, to extend health coverage to more of India’s poor citizens.61 However, it has not yet been implemented.

In addition, ongoing fiscal restructuring and program cuts are likely to have significant impacts on the health sector in the future.62,63


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