The Role Of Government In India’s Healthcare After Covid-19
Workers transport a patient to an ambulance in Prayagraj, Uttar Pradesh. (Photographer: Prashanth Vishwanathan/Bloomberg)

The Role Of Government In India’s Healthcare After Covid-19


7 lakh children die In India each year before the age of one, largely on account of poor healthcare quality. There are 3 lakh deaths annually due to tuberculosis because of poor public health measures, and 1 lakh people commit suicide in part because we are unable to provide them even basic mental-wellness services. However, the 1.5 lakh deaths due to Covid-19 that we have seen thus far, have sent a shock wave through the entire country in a way that nothing else has for a variety of reasons. The natural and urgent question that has followed relates to the role the government needs to play going forward as we seek to recover from the debilitating consequences of this crisis.

One possible answer could be that state and central governments should undertake to transfer as much money to the vulnerable segments of the population as they can but otherwise should allow market mechanisms to function in an unfettered way and find the best possible solutions. While in some of the other sectors, such as agriculture and retail services this may indeed be the best direction to follow, in healthcare, the market-mechanism fails to perform even its basic function of ensuring efficient use of resources, leave alone finding solutions that are equitable and just. Many have, in fact, argued that the extent of market failure associated with healthcare in developing country environments like India is so severe that that full financing via taxation and direct provision by the government is the only way forward.

While there are many debates, including within the government, on how healthcare needs to be best provided, there is a strong global and local consensus that if we are serious about making progress towards universal health care, our state governments, would need to triple their annual healthcare expenditures from the current level of close to 1% of their gross state domestic product to at least 3%. While this does at first sound like an impossible ask, globally this kind of movement has not at all been unusual, even without the impetus of a crisis like Covid-19.

In fact, within the last two decades, multiple countries have substantially increased their commitments towards healthcare and have sharply reduced the extent of out-of-pocket expenditures for their citizens.

These include China which took OOP down from 60% in 2000 to 36% in 2016, Iran which went from 60% to 39% during the same period, and Thailand which went from an already low level of 34% to 12%.

In India, on the other hand, despite multiple pronouncements to this effect over the last several decades by the central government, no large state—the level of government at which most of these funds actually reside—has followed-up with any similar commitments.

Why Do States’ Spending Priorities Lie Elsewhere?

This consistent lack of funding commitment for health, over several decades, both by richer states like Kerala and Maharashtra and by the poorer ones such as Bihar and Orissa, is puzzling and bears further examination. There are multiple potential hypotheses that have been advanced, which need further exploration.

Perhaps the states have not been persuaded of the direct link between their growth and poverty reduction aspirations and additional healthcare expenditures and would prefer to invest their scarce resources in more 'hard' infrastructure.

Perhaps concerns relating to the longer-term nature of the political impact from increased healthcare expenditures, which is well beyond the typical electoral cycle, act as a deterrent. Since the added government allocation would, for the most part, be spent by the respective state-level health departments on facilities owned and operated by them, perhaps there is a lack of confidence in the ability of these departments to deliver value.

Or, perhaps, lawmakers are not convinced of the severity of market failures in healthcare provision?

For all of these reasons, there is a real fear that given the kind of strain that has been put on their fiscal resources, state governments may once again choose to overlook healthcare despite the recency of the pandemic and the severity of its impact.

The Areas That Need Urgent Reform

Stepping away from the question of additional allocations of funds, there has also been little to no engagement of the government in reforms in the larger health system. The one notable exception, in the last few years, has been in the field of medical education where the Medical Council of India has been replaced by the National Medical Commission and has already taken several important steps to address key issues, including rapidly modifying telemedicine guidelines to allow the medical profession to respond to the crisis. There are many other areas that would benefit from similar attention.

For example, the Employees’ State Insurance Scheme, a mandatory insurance scheme for all workers in the formal sector earning less than Rs 21,000 per month, with an annual claims ratio of under 50% has been building large cash balances from its unspent resources, instead of improving its ability to provide healthcare to its members, including during the pandemic. Most recently, instead of taking steps to reform and expand the scheme, in a country where the paucity of pooled funds is perhaps one of our most significant problems, the government saw it fit to reduce the contributions being made into the ESIS.

Similarly, the Rs 100 crore as minimum capital to set up an insurance company that the Insurance Act requires, acts as a significant impediment to the growth in the insurance market, when most jurisdictions around the world, including in developed countries such as France and Germany, require less than Rs 20 crore. The government has thus far not acceded to requests to reduce this steep entry barrier. Without insurance, many of our citizens were exposed to severe health-related financial shocks during the current crisis.

Additionally, given the power of payments over providers, globally, health insurers and the health insurance regulators act in close concert as powerful forces, to regulate all aspects of the behaviour of healthcare providers. Something similar needs to urgently happen within India. Recognising that health insurance is inalienably linked to healthcare provision and that only the two together make for a ‘complete’ product, most jurisdictions allow the two to comingle including on a mutually-exclusive basis (Kaiser Permanente in the United States is a prime example of this). This is not yet permitted under Indian law and, in part because of this, during the current crisis customers faced the twin problems of overcharging by hospitals and the denial of claims by their insurers.

Also, for a variety of historic reasons, ministries and departments of health in India see themselves principally as competitors to the private sector, instead of, as in the case of other ministries such as civil aviation and telecommunication, as stewards and guardians of the entire system, both public and private. This anomaly needs to be addressed on an urgent basis because no matter how much money the government eventually decides to allocate towards healthcare, there are always going to be other forms of financing and provision present in the system, even on a longer-term basis, which will need to be regulated. This need becomes even more urgent and important in the current environment in India when there is a severe shortage of funding coming in from the government and, as was very visible during the current crisis, the reliance on the private sector is greater than ever.

The government has multiple core roles in healthcare, including those of financing and stewardship. In India, for reasons that are not yet entirely clear, on both these fronts, there are large gaps that remain. There is an urgent to explore these reasons carefully, and to engage with policymakers after obtaining a deeper understanding of what is holding them back.

Nachiket Mor is Visiting Scientist, The Banyan Academy of Leadership in Mental Health, Tamil Nadu. Views are entirely personal.

The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.

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