India’s Universal Health Care – Where is the Money?

In February 2012, India’s Planning Commission released the Report of the Steering Committee on Health for the 12th Five-Year Plan. The report recommended that India should target eight national health outcome goals, one of which is to reduce household “out-of-pocket” (OOP) expenditure on health care from the current 71% to 50% of total health care expenditure. To achieve this, India announced that it will provide, to all its residents, a universal and cashless access to an Essential Health Package including essential medicines. Considering WHO estimates that OOP spending on medicines and health care services will push millions of Indians (about 3.2%) below the poverty line, the idea of universal health care (UHC) is laudable despite its rise in priority 65 years after Independence.

What the government and policy makers have yet to clarify is the implementation plan. Currently, just 35% of India’s population has access to health services. With these state of affairs one can only wonder how the Indian government plans to enroll all its residents into an Essential Health Package, provide the package of health services free to all and most importantly, ensure equitable delivery and health outcomes from high-quality services that reduces OOP expenditure on health.

Providing UHC is challenging because it means broadening health security to all residents and expanding it from being a labour-market oriented perquisite where employers pay for health care costs of their employees. Further, the Planning Commission has changed the scope of UHC to include “residents” of India as opposed to the “citizens” of India. This brings health security to an entire section of population that lies outside the tax net. While this may make political sense, given the looming general elections, it certainly doesn’t make economic sense. If people who do not contribute to treasury revenues have to be given equitable health services, where will government raise the money from? Also, with a health care system that is one of the most privatized in the world, how will India pay for UHC which is social security and best provided through the public sector?

India will do well to study the hybrid systems of health financing being adopted by many developing countries moving towards UHC, which are markedly different from those in the developed world. Pre-paid financing (through payroll taxation and household premiums) that works in the developed world is unlikely to succeed in a country like India where a majority of the population is “informally” employed. Currently India finances health for the poor through general taxes, which leads back to the labor-market. This is unfair because the taxes paid by the employed help to subsidize services for the poor while doing nothing to lower costs for tax-payers. Other low-income countries have overcome the challenge of large informal populations that present challenges for taxation and premium collection, by expanding government spending as a percentage of total health expenditures, with increases between 5 and 11 percentage points in Ghana, Indonesia, Rwanda, and Vietnam.

Financing an expanded health security will therefore be inadequate if the government does not increase its spending on health care a percentage of GDP. Currently India spends the least (0.9%) on health care among BRIC nations but recently announced an increase to 1.95%. This is lower than the HLEG recommendation of 2.5% and WHO recommendation of 5%. In Mexico, a country similar to India and one that achieved 100% UHC in a decade, health financing is done by a public insurance scheme (Seguro Popular) funded entirely through public resources. This calls for financial reform to release funds into health care and more importantly ensure funds flow back into the State Treasury. Cutting down on unproductive doles and subsidies is one way to do that while steps to additionally tax public health hazards such as tobacco, alcohol and junk food manufacturers can be an option but one that requires strong political will. As India progresses towards UHC it will do well to realize that the public health of a billion people should not be left to luck or chance. 

One thought on “India’s Universal Health Care – Where is the Money?

  1. Great educative post. UHC is a great leap forward – it must be lauded for its sheer imaginative scope. The mind has to first conceive before actions can be taken. Now that we have a policy in place, it gives us a way to move forward however painfully.

    It is important that there be a lot of discussions about UHC like this. What is more disappointing than the govt’s lack of details about implementation is the complete lack of awareness about UHC among Pharma professionals.


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