Financing of Health in India
K. SUJATHA RAO
SECRETARY NATIONAL COMMISSION ON MACROECONOMICS AND HEALTH, GOVERNMENT OF INDIA NEW DELHI E-MAIL: email@example.com
S. SELVARAJU SOMIL NAGPAL
INSTITUTE OF ECONOMIC GROWTH, UNIVERSITY OF DELHI ENCLAVE, NORTH CAMPUS, DELHI 110007 E-MAIL: firstname.lastname@example.org
INANCING IS THE MOST CRITICAL OF ALL DETERMINANTS OF A HEALTH SYSTEM. The nature of financing defines the structure, the behaviour of different stakeholders and quality of outcomes. It is closely and indivisibly linked to the provisioning of services and helps define the outer boundaries of the system’s capability to achieve its stated goals. Health financing is by a number of sources: (i) the tax-based public sector that comprises local, State and Central Governments, in addition to numerous autonomous public sector bodies; (ii) the private sector including the not-for-profit sector, organizing and financing, directly or through insurance, the health care of their employees and target populations; (iii) households through out-of-pocket expenditures, including user fees paid in public facilities; (iv) other insurance-social and community-based; and (v) external financing (through grants and loans). While taxation is considered the most equitable system of financing, as tax is a means of mobilizing resources from the richer sections to finance the health needs of the poor, out-of-pocket expenditures by households is considered the most inequitable. Under a system dominated by out-of-pocket expenditures, the poor, who have the greater probability of falling ill due to poor nutrition, unhealthy living conditions, etc. pay disproportionately more on health than the rich and access to health care is dependent on ability to pay. Assessing how pro-poor a system of financing is again depends on how the different types of financing interact with each other. For example, a country may have a social health insurance policy but may not cover public hospitals as they are in theory expected to provide free care. In such a situation there may be greater incentives for patients to go to private hospitals as expenses are covered by insurance resulting in no incentives for the public hospitals to function well. In that case, the poor who have no immediate access to insurance or private hospitals may stand to lose with poor quality public care. In India, as in most countries, there is a clear urban-rural, rich-poor divide. Affluent sections, urban populations and those working in the organized sector covered under some form of social security such as the ESIS or CGHS, have unlimited access to medical services. The rural population and those working in the unorganized sector have only the tax-based public facilities to depend on for free or subsidized care, and private facilities depending on their ability to pay. The impact on equity then gets determined on whether the tax-based public facilities are able to provide a similar quality of care as provided under the Social Health Insurance Scheme. Because, if funding is low and the quality of care falls below expectation, is inaccessible, entails informal payments, etc. then the benefit of free care at the public facility gets neutralized with the second option of paying out-of-pocket to a relatively hasslefree private provider available close by, making the system of financing inequitable as well as inefficient. How and why this is so will be discussed in this section, as an understanding of the current structure of financing is important to identify future options for a better system.
Health Spending in India
Health spending in India is estimated to be in the range of 4.5%-6%. These estimates are based on a weak methodological background. Therefore, an exercise was undertaken to construct estimates of health spending based on a National Health Financing and Delivery of Health Care Services in India
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Financing and Delivery of Health Care Services in India
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