This being election season, we are treated to politicians engaged in heated debate on a daily basis. However, on critical issues like health, what’s at stake is much more than political careers. What’s at stake is the health of your & our relatives and friends. Hence you might want to read this piece in IndiaSpend carefully because as Prachi Salve explains, something out-of-the-ordinary is taking place here: “A key factor for access to healthcare is the rate of hospitalisation. In 2014, India had 31.5 hospitalisations for every 1,000 people, National Sample Survey data for the 71st round show. By 2017-18, in the 75th round of the Survey, this number fell to 28 hospitalisations per 1,000 people. This is the first time in four decades that hospitalisation rate has declined, Indranil, professor at the Jindal School of Public Policy, noted in the State of Finances in India report 2022-23 by the Centre for Financial Accountability (CFA).”
So what’s going on here? Part of the challenge is that neither the Centre nor the states spend enough money on healthcare in India. Ms Salve says “Health expenditure as a percentage of GDP rose from 1.3% in 2013 to 2.1% in 2022-23, as per the Economic Survey 2022-23….“The WHO recommends allocating 5% of GDP to healthcare,” says Amulya Nidhi, national convener of Jan Swasthya Abhiyan…As a percentage of government expenditure, India’s health spending–including local, Union and state governments–is 5.02%, as per the National Health Accounts, 2019-20. Countries such as Malaysia (8.5%), Russia (10.2%), Brazil (10.5%) and South Africa (15.3%) spend a higher proportion, as per the World Health Statistics 2022.”’
So, whichever way you cut it, government spending on healthcare is inadequate. However, there is one more layer of analysis that we need to take into account: “The figure of 2.1%, for 2022-23, includes spending in water, sanitation and hygiene (WASH) and disaster management, Nidhi says. “Notably, recent budget analyses indicate that only about 1.2% of GDP is allocated to healthcare, reflecting the actual spending by health ministries and emphasising the need for a more robust healthcare funding strategy.””
Basically, India spends 1/10th as much as other developing countries on healthcare! And then we have to pretend that we are disappointed when our sportstars return from the Olympic with a handful of medals.
There is no point in doing any finger pointing here because none of the political parties has shown any great desire to ramp up spending on health.
And barring a couple of small states, none of India’s states have shown an appetite for ramping up spending on health.
There appears to be one ray of hope – the free market: “More importantly, the increase in health sector spending has moved from National Health Mission to Ayushman Bharat indicating a shift from the universal healthcare approach (followed in Sri Lanka) to insurance-based healthcare (followed in Canada, where they have public health insurance).
“There’s a deliberate effort under way to reshape the healthcare sector in favour of large corporations,” says Nidhi. “It’s undergoing privatisation, corporatisation, and commercialisation. Over the past decade, this administration has fundamentally altered the essence of healthcare. What was once focused on providing services has now transitioned into an industry. When the very definition changes, it impacts all policies, programmes, and frameworks. Numerous documents, including those from NITI Aayog, reveal a clear inclination towards promoting a market-oriented healthcare system and industry, intertwining health with tourism and market interests.””
Ayushman Bharat has already become (in terms of the number of people enrolled) the largest health insurance program in the world and it appears that after the elections the health cover available under this scheme will be increased from Rs5 lakhs to Rs10 lakhs per family: “Pradhan Mantri Jan Arogya Yojana is a health insurance scheme aiming to reduce out-of-pocket expenditure, offering coverage of up to Rs 5 lakh to 130 million eligible families (650 million individuals) based on Socio-Economic Caste Census (SECC) 2011 criteria such as occupation and shelter. Eligible families receive Ayushman cards for accessing services in empanelled hospitals. In 2023-24, the Government has allocated Rs 7,200 crore to Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), a 12% increase over the previous year’s revised estimates, which stood at Rs 6,412 crore.
As of November 2022, the National Health Agency registered 78.7 million beneficiary households, covering 73% of the targeted 107.4 million households…In January 2022, the Union government expanded coverage to 120 million families…”
However, even if health cover under Ayushman Bharat is doubled after the elections, there are two serious problems with the program. Firstly, the program increasingly relies on private hospitals to provide care (with the government compensating the said hospital). Since most private hospitals are in India’s big cities, in vast swathes of the countryside, the poor have no option but to make the long trek with their sick relatives to India’s expensive & overcrowded cities.
Such journeys out of pocket expenses. This is where the second weakness of Ayushman Bharat kicks in: “Patients often bear expenses for initial consultations and diagnostic tests at nearby private clinics, which may not be covered by insurance packages or if the nearest hospital is not empanelled. Subsequent hospitalisation incurs additional costs for transportation, accommodation, meals, medications, and consumables, potentially exacerbating financial burdens….”
Ayushman Bharat is deservedly a successful scheme but it can be made better so that the poor do not have to bear the burden of out-of-pocket expenses: “The scheme has brought down costs for those who have been able to utilise it. However, even then, those costs remain high. A 2021 study conducted by Institute of Rural Management shows that in Uttar Pradesh, of 1,925 episodes studied, 1,159 hospitalisations were under the scheme. While the average total expenses for all 1,925 patients are Rs 16,157, it is about half (Rs 8,828) for those who availed the scheme benefits. “However, Rs 8,828 can be considered a significant expenditure given the socioeconomic background of the scheme beneficiaries,” the study said.
The study also pointed out that a majority of the expenditure was reported on medicines and consumables (45%), followed by diagnostic tests (21%), and consultation (12%). Thus, 78% of the expenditure is on direct health services. Another 10% expenditure is on transport and 12% is on food and accommodation, and informal payments.”
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.
Copyright © 2022 Marcellus Investment Managers Pvt Ltd, All rights reserved.
