Challenges in Financing Healthcare - Ravi Duggal

COMMENTARY - Economic and Political Weekly Sept 1 2012 vol xlviI no 35

The Third People’s Health Assembly was held in July in Cape Town, South Africa with its theme of “Health for All Now”. Developing countries which transformed public health systems under the structural adjustment policies into insurance-based health models have failed in providing healthcare to the poor. Where does India stand in relation to the ruling United Progressive Alliance’s commitment to take public health spending to 3% of the GDP by 2012?

Ravi Duggal (rduggal57@gmail.com) is an independent health researcher and is associated with the International Budget  Partnership and the People’s Health Movement.

The Third People’s Health Assembly (PHA 3), organised by the People’s Health Movement (PHM), was held in July in Cape Town, South  Africa. The theme of this third edition was “Health for All Now” and the debates were around the issues of universal access and coverage. With over 800 participants from 90 countries a rich repertoire of experiences were shared across 109 sessions of plenary, sub-plenary and workshops spread across six days, ending with a rally on the streets of Cape Town on 11 July 2012 (http://www.phmovement.org/en/pha3).

The assembly discussed a wide range of health and related issues, including the political and economic context of health, comprehensive primary healthcare, social determinants of health, universal coverage, mobilising for health, etc. The universal access and financing of healthcare for such access underpinned the discussions across the various sessions.

Financing for Healthcare

The discussion on financing for healthcare was contextualised within the global architecture of finance capital which dominates the economics and politics of our world. The learning from global experience presented at the PHA 3 showed that to move closer towards universal access to healthcare governments need to spend over 15% of their budget or at least 4% to 5% of their gross domestic product (GDP) for healthcare. The Organisation for Economic Co-operation and Development (OECD) countries, with the sole exception of the US have universal access to healthcare accessible to all at little or no direct cost at the time of accessing the care. These governments spend between 5% and 8% of their GDP on health; the US government spends nearly 9% of its GDP (its total expenditure on health is a whopping 17% of GDP) and yet 50 million people do not have adequate access to healthcare in that country. This is due to the way in which healthcare is financed: it is predominantly insurance-based. In the last two decades a number of middle-income countries and a few low-income countries have also reached near universal access for their respective populations and these include Brazil, Mexico, Venezuela, Costa Rica, Thailand, Malaysia and Sri Lanka among others. Countries like Rwanda, Ghana, Kenya, Uganda, and South Africa are rapidly moving in that direction while India, China and Indonesia are also in queue debating their model and approach.

We were told an interesting story at the assembly of why the two latter groups may not realise universal access to healthcare. Mauricio Torres-Tovar (Colombian Health Model: Exportable, Depending on the Interest of the Market) spoke about the Colombia model that failed. Colombia had a reasonable public health system which under the structural adjustment policy of the World Bank was transformed into an insurance-based health model that privatised the healthcare system in Colombia and destroyed the public health system. The African and Asian countries mentioned above are following precisely the Colombia model and their story is not likely to be very different!

One of the key understandings that emerged from the discussions on financing healthcare was about the fiscal space in public budgets to make adequate budgetary commitments for healthcare. To make this possible the following sets of postulates have to be realised:

• Tax: GDP ratio should be above 25%, preferably at least 30%, because such a volume of revenues makes enough space to strengthen social sector allocations like education, health and welfare.

• The taxation must be progressive, that is, most of it should come from income and corporate tax.

• Financing of healthcare must be predominantly tax based.

• Governments have to commit close to 5% of GDP to realise universal access to comprehensive primary healthcare.

• Healthcare should be recognised as a public or social good, and there should be a constitutional and/or legal mandate guaranteeing right to healthcare.

• The tax base needs to be expanded and collection of taxes should be maximised by strengthening the mechanisms for tax collection.

• Tax evasions, including flow to tax havens, need to be strictly curbed so as to maximise government revenues.

• Tax expenditures (or revenues forgone) should be minimised so that the maximum potential of tax revenues is realised.

• All subsidies to the corporate sector need to be made transparent so that accountability is possible.

• The huge volume of speculative transactions in foreign exchange, commodities, shares and securities should be subject to a financial transaction tax to generate additional revenues for social

sector budgets.

• Budget transparency and access to the entire range of budget information is assured so that all financial transactions of the governments at different levels can be held to account.

• Finally, a social movement to politicise healthcare would have to exert the demand-side pressure for right to healthcare.

All of the above are linked to strong democratic functioning of governments and the latter can only be assured if an active civil society exists and demands accountability.

Most developing countries lack most of the above postulates and many of the above are interdependent. For instance if a country has a tax-GDP ratio of over 25% then it is most likely that it has a strong tax administration, is curbing tax evasion, has a progressive tax regime, and a reasonably large tax base.

Reducing Out-of-Pocket Burdens

Let us take the example of India. The tax-GDP ratio for 2010-11 was 15% (centre and states combined)(1), revenues forgone by the centre for the same year was 81% of the net taxes of the central government(2), the public health expenditure for centre and states combined was just 1.1% of GDP or 3.7% of total government expenditure(3), tax evasions and transfers to tax havens are huge, speculative transactions for securities, shares, commodities, forex, including derivatives, is phenomenal averaging daily more than 2% of annual GDP (just forex and government securities in May 2012 averaged daily 1.8% of GDP – EPW, 23 June 2012), the tax base is very small and the social movement for right to healthcare is weak. The consequence of such a scenario,even though India has one of the highest economic growth rates in the world, is that public commitment to health and healthcare is weak despite the United Progressive Alliance (UPA)’s political commitment of reaching 3% of the GDP for public health spending by 2012.

In the last two years there has been a huge debate in India on universal coverage(4), including the appointment of the High Level Expert Group (HLEG), but both the Ministry of Health and the Planning Commission are chewing over the recommendations of the report and trying to work out “schemes” like universal access to medicines or universal healthcare insurance, etc, instead of politically committing to accept the entire package of recommendations of the HLEG and implementing it. It is precisely this fragmented approach of converting comprehensive primary healthcare into schemes or vertical programmes that has prevented most developing countries from moving towards universal access to healthcare and this was condemned across the board at the PHA 3. To change this scenario, the fi scal space as discussed above has to be expanded and appropriate political will demonstrated to accomplish it.

The PHM has recognised these problems and is presently finalising a call to action emerging from Cape Town which will include the need for this movement to engage with health financing, taxation and budget issues in the struggle for health for all people of this world. Another issue from the resources point of view which was raised at the PHA 3 was the concern about the huge South-North flows of doctors, nurses and other technicians.

A valuation of this shows that often such flows are more than the foreign debt-burden of the concerned country and hence compensation for this or a swap with debt needs to be advocated for. Further, there is also a commitment from the PHM to advocate for changes in the global financial architecture by pushing the international governance institutions to rein in and regulate the transnational corporations and finance capital through regulation of transfer pricing, and the establishment of the financial transaction tax. All these efforts will certainly contribute to moving closer to realise the dream of “Health for All Now”. To conclude, as Suwit Wibulpolprasert, one of

the key persons behind Thailand’s success story for universal coverage, mentioned in one of the plenary sessions that one of the main outcomes of universal access to healthcare is that it reduces out-of-pocket burdens and consequently poverty.

Notes

1 Ministry of Finance 2011: Indian Public Finance Statistics, Government of India, New Delhi.

2 Budget 2012-13: http://indiabudget.nic.in/ub 2012-13/statrevfor/annex12.pdf, accessed on 16 March 2012.

3 http://cbhidghs.nic.in/writereaddata/mainlinkFile/File1134.pdf, accessed on 13 July 2012.

4 See www.mfcindia.org  medico friend circle bulletin issues, 342-50. 

The Uncharitable Trust Hospitals

A huge amount of capital is being invested in multi-specialty hospitals in Maharashtra which take advantage of the Public Charitable Trust Act, 1950 and avail of tax waivers and land concessions. However, the mandatory benefits to poor patients in lieu of these waivers are totally ignored. There should be an investigation into this social and economic crime and the loss to the exchequer should be recovered along with penalties imposed on these hospitals.

The Public Charitable Trust Act, 1950 was enacted to enable private entities to set up charities that would serve the deprived sections of society. To encourage and incentivise such investments, the Act provided for waiver of income tax for such charitable insti­tutions. Historically, many seths (merchant capitalists) invested in setting up charitable hospitals. The initial trend was to build and equip the hospital and even provide working capital annually and hand it over to the government or the municipality to run it. Their only expectation was that the particular hospital should be named after a close relation. Thus many of the top public hospitals we have in Mumbai today, including the teaching hospitals, like the J J Hospital, Cama Hospital, KEM Hospital, Nair Hospital, and the two Bhabha Hospitals were established through charities and later became government or municipal hospitals.1 Apart from this, many small hospitals and dispensaries were set up by businessmen and their charities, by missionaries and other motivated individuals to provide healthcare to those in need.

Post-Independence the trend changed. Bourgeois capital entered the fray and began to use the Public Trust Act to set up hospitals, instead of using the Companies Act, so that they could get the advantage of the tax waiver benefits. While a number of them began with being genuinely charitable, over time most of them have become hospitals for the use of the elite or those who can afford health insurance. The classic examples are the Jaslok, Breach Candy, Bombay Hospital, Leelavati, Hinduja, Nanavati, and Ambani Hospitals apart from others that no longer engage in any form of charity or follow the minimal provisions of the law for providing free services in lieu of the tax breaks. Thus their not-for-profit status needs to be challenged and all taxes that were forgone along with appropriate penalties should be collected from them. The Maharashtra assembly has rightly raised the issue of having the Economic Offences Wing (EOW) investigate the ­finances of these hospitals. Further, the issue is not only the tax waivers but also a host of other benefits they may have received like concessional land2 or a cheap lease rent, extra floor space ­index (FSI), concessional utility rates, waivers or concessions for other taxes like octroi, customs duty, etc. All these benefits add substantially to the surpluses of these hospitals. And if there is no charity forthcoming from them, it amounts to a huge economic and social crime that should be investigated.

Loss to Society

What is the economic loss to society due to this state of affairs? I have inquired into the finances of large public and private hospitals3 and found that on an average a multi-specialty hospital has a net expenditure between Rs 15 and Rs 20 lakh per bed per year (turnover between Rs 25 and 35 lakh per bed per year, the difference being their gross profit). We have over 70 trust hospitals in Mumbai that have an estimated total of 10,000 beds. This means roughly a minimum turnover of Rs 2,500 crore per year and a gross profit of nearly Rs 1,000 crore across these hospitals. As for-profit ­entities such hospitals would have contributed Rs 300 crore in income taxes to the state exchequer. We know that these hospitals are exempt from taxes but there is a quid pro quo. They are obliged to ensure that 10% of the beds are free and another 10% are given on concessional rates to poor patients. The free beds in this case would mean 1,000 beds or an expenditure of Rs 150 crore and the 10% concessional beds would be at half the rate or an additional Rs 75 crore. Together this is much less than the taxes forgone by the state and if the land and indirect tax benefits are ­included then the loss to the state exchequer is much more. If we add up all the years of the non-compliance of trust hospitals to the legal provisions then we are looking at lakhs of crores which could have been added to the health budgets of the government.

Civil society groups and health activists have been demanding that such institutions should be made accountable for over two decades now, including filing a public interest litigation to make these hospitals provide all benefits as mandated by the law of the land. The government on its part has been very lax and the concerned authorities like the charity commissioner and the income tax department have failed to monitor, audit and assure the rule of law with ­regard to these hospitals. The efforts of the government in response to the Bombay High Court orders to set up committees to review the situation and suggest action points or draft schemes to utilise these benefits have been piecemeal, and lacking in political commitment and ­seriousness. The committee set up under Ratnakar Gaikwad recently consists entirely of bureaucrats and is doomed to failure. The issue here, apart from the failure of the trust hospitals to comply with legal provisions, is one of the ­accountability of the government agencies and the government goes and ­appoints only bureaucrats on this committee! How can they be expected to be self-critical and take action against their own fraternity?

Finally, the insurance-based Jeevandayi Yojana scheme of the government is in itself a questionable scheme, and the move to link it with the benefits due to the poor under the Public Trust Act provisions is problematic. The Trust Act benefits are in lieu of income tax waivers to these hospitals. If they want to be a part of the Jeevandayi Yojana then they should engage with the scheme independent of the Act. This scheme should not be confused with the 20% free and concessional beds which are due to poor citizens as a right under the Trust Act. The government too seems to be inclined to maintain the confusion. This is illegal and will further complicate matters relating to the uncharitable trust hospitals.

Ravi Duggal,  International Budget Partnership (rduggal57@gmail.com)

Notes
1 Government of Maharashtra (GoM) 1986, Gazetteer of India – Maharashtra: Greater ­Bombay District, Vol III (ed. K K Chaudhari), Gazetteer Department, Government of Maharashtra, Bombay.

2 The recent CAG Report on Maharashtra revealed that a number of hospitals received land in fraudulent ways at a huge loss to the state exchequer, including the Dhirubhai Ambani Hospital – CAG, 2011: Audit Report (Revenue) Maharashtra 2010-2011, Chapter 4: Land Revenues, http://saiindia.gov.in/english/home/Our_Products/Audit_Report/Government_Wise/state_audit/recent_reports/Maharashtra/2011/Revenue/Chap_4.pdf

3 Ravi Duggal (2011), “Financing the Cost of Universal Access to Healthcare”, mfc bulletin 348-50, August 2011-January 2012, pp 8-12.

http://www.epw.in/system/files/pdf/2012_47/25/The_Uncharitable_Trust_Hospitals.pdf (published in EPW
June 23, 2012)

Comment on Aamir Khan's episode on medical practice

Dear Aamir

Happy to see you raise the issue of medical malpractice and lack of ethics in the medical profession. The natural corollary of this should have been a strong message for regulation of medical practice and the profession. It was heartening to see that the failures of MCI projected. For your information the Maharashtra Medical Council took away the license of one doctor, Dr. Shriram Lagoo, incidentally who never practiced medicine! Was happy to see Dr. Gulati but was disappointed that you were advertising for Dr. Devi Shetty and the model of the Arogyashri/Yeshahswani types of insurance which is further destroying the public health model and encouraging huge malpractices like the unnecessary surgeries  of hysterectomies, cardiac bypasses for very low level of blockages by misreporting results, or sometimes the surgeries only happening on paper similar to the basin tests you talked about. The height of malpractice was in UP where insurance passed claims for hysterectomies in men and prostrate surgeries in women!!

Further while it was great to see Dr. Samit Sharma and his outstanding work, It would have been better if you had also discussed the Tamil Nadu model where the focus is on strengthening public health facilities and assuring that all medicines are available free to those who come to the public health system. The Rajasthan model is important to the extent that it helps regulate markets but it cant be an ultimate solution. You yourself agreed with Dr. Gulati that the same kind of healthcare should be available to all whether poor or rich. It would have been great if you had projected some success stories of the public health system.

Response to Aamir Khan's Satyamev Jayate

Aamir Khan’s thoughts in his column in HT’s 7^th May edition titled Daughters are Precious and his 6^th May launch of Satyamev Jayate has seen a lot of euphoria (never mind the copying of the tune of the Euphoria band) being expressed all around. He is the new hero to take up cudgels for lost social causes and stir the emotions and guilt of the middle classes. He does this indeed very successfully.

The first episode deals with the burning issue of sex selection which has created a gender disaster in India. The child sex ratio over the last four decades has witnessed a rapid descent leading to a huge deficit of the girl child in Indian society. Aamir Khan has captured this social disaster very well with powerful cases being brought into our drawing rooms that shame us and overwhelm us with guilt and tears. (Dil pe lagegi as Aamir tells us). The daughter aversion depicted through the cases are indeed a very powerful exposure of the social ills linked to patriarchy but two very powerful by products of this message will cause more harm than good.

The first is the use of the term female feticide. Yes female feticide should not happen but the actual problem is sex selection facilitated by the use of medical technologies by medical professionals. The second is the undue emphasis on abortions and relating it to killings. The two taken together is not only an emotional trap but also fodder for the right wing enthusiasts. I am afraid the womens’ right to abortion comes under threat by projecting such a stance. Aamir and his research team perhaps lack the expertise to vet such sensitivities – the program development when tackling such sensitive social issues, and I believe the forthcoming ones would be even more so, needs consultation and debate with appropriate experts/activists who have devoted their lives to these issues.

Fortunately the column in HT refrains from discussing feticide and abortion and looks more at female discrimination within our social customs and mores. Again the views of Aamir in this column are well appreciated but like the TV show the column too has failed to take head on the root cause of this malevolence.

While there may still be a lot of social acceptance for sex-selection in our patriarchal world, the real perpetrators of this crime (yes it’s a crime today because there is a law that prohibits sex-selection and sex-determination) is the medical profession. Neither the TV show nor the column deals with the role of medical professionals as being central to this heinous issue. The complete absence of ethics in medical practice and the unfettered commercialization of medical care is the root cause for the deficit of girls we face today. If the doctors learn to say NO then the problem will be taken care of substantially. I say substantially because the misuse of medical technology is only one, though the overwhelming axis of the problem. The other axis is the post-birth discrimination and elimination of girls which also needs to be dealt with through social action.

The humungous documentation through sting operations by the two journalists from Jaipur was shown on the TV program and I think that is the real target for action. While I have no problems with writing letters to a chief minister, and why only Rajasthan – the sting operations were across 8 to 10 states, the focus of the larger public action must be on the medical profession. Doctors have to be booked like they did in South Korea.

Finally something about the audience also made me uncomfortable. There was no significant participation from the audience except for the emotional expression of tears which have been used impactfully by the program designers. To me things looked staged, even the few contributions of the external audience, like the comment on Salman Khan. I guess creating the drama around this program is part of the strategy but it could obviate away from the main cause and the proposed action.

UHC Conference on HLEG April11-12, 2012

The UHC Conference in Delhi was a good pitch for the HLEG recommendations and very useful and insightful debate happened amongst a wide array of stakeholders. The discussions were good but there was one glaring deficit. I think the most problematic issue with HLEG report is that the Ministries of Health have been sidelined, both at the Centre and in States. The central problem is that even if the Planning Commission accepts it lock stock and barrel (which apparently it is not as we see differences with the Steering Committee Report and what may finally come into the 12th Plan) the Health Ministries get alienated and being the implementers of healthcare programs the latter are often at variance with the Planning Commission. The HLEG has also fallen into the same trap and despite reasonably good and broadly acceptable recommendations they are not going to be accepted because of not taking the Health Ministries fully into confidence. The role of Health Ministries have been marginal at best in developing the HLEG recommendations. The April 11-12 consultation on UHC in Delhi precisely suffered from that deficiency. An opportunity to get Ministries of Health on board was lost. The presence of secretaries from two states was only a consolation and there was no significant engagement with the Union Ministry of Health either. So it is not surprising that the grapevine is ripe with stories of the disjunct between the Planning Commission and the Ministry of Health on 12th Plan lines of action. So a lot of useful effort of HLEG is going to be wasted. During the 8th-10th Plan periods on various working groups of the PC I had raised this issue of sidelining the Ministry of Health in developing the trajectories of the Plans for health but these have been ignored and that is the reason after the 10th Plan I have turned down requests to be on any committees.
The above trajectory of the role being played by the Planning Commission seems to be across the board - the recent mess up with the Railways budget, which for the first time was influenced by the Planning Commission is a case in point; the Planning Commission wants to take it in the direction of privatization. These dangerous trends within the Planning Commission need to be monitored and countered.

Response to articles in Mint on Universal Access to Healthcare

In the "State of Healthcare" (23-2-12) you end by saying that the government must embrace the idea of health as a public good. I would add to this healthcare also as a public good. This is the key to universal access to healthcare. The High Level Expert Group on Universal Healthcare Coverage was appointed by the Planning Commission with great fanfare raising the expectation of the people that the government was serious about universal access to healthcare. It worked hard for over a year and a huge amount of resources were spent in research, meetings, consultation, background papers etc.. A reasonable report emerged as a result and now an internal coterie of the same Planning Commission is rejecting it and pitching for a larger scale private sector initiative in healthcare. This is no surprise. I have been on working groups of the Planning Commission in the 8th , 9th , and 10th Five Year Plans. We worked hard and came up with our reports and background papers but our esteemed planners did what they always do - ignore all that work and do what they had already decided. So 11th and 12th Plans I turned down being on any such working groups or committees.

When the HLEG Report came out I had a positive feeling that this time there was some serious intent but as you have reported in today's Mint the universal access story has been nixed. So history does repeat itself and ever so often! We at the Medico Friend Circle and Peoples Health Movement have been debating on universal access to healthcare for over three years and a lot of very useful literature has emerged on how to operationalize such a universal access healthcare system, how to finance it, its governance and management, it human resource requirements etc. (see www.mfcindia.org for a wide range of literature and debates ). The HLEG took all this on board - they attended the mfc meetings and consultations and invited mfc and PHM members to their consultations to contribute in the development of the HLEG report. When the report was finally ready and despite some differences with it, many of us felt that the time had come when we could stop dreaming about universal access to healthcare and that the journey had begun towards realizing it. But alas our planners have forced us back to dreaming.

If we look at global performance all developing countries which saw rapid economic growth in the last two decades have made the transition to universal access to healthcare - Brazil, Mexico, Malaysia, Thailand, Sri Lanka, Venezuela etc. Why has India not seen this transformation? The answers are not difficult to seek - complete lack of political will towards public good, unwillingness on part of our bureaucracy to make structural changes, inability of our taxation system to net in all revenues due to the treasury because of poor tax administration and too many concessions and deductions to business and trade, and the private healthcare business' overpowering dominance of the health economy.

So here we stand on a threshold once again. The HLEG report is an opportunity to bring in the change. Will the Planning Commission, the PMO and the Ministry of Health recognize healthcare as a public good and take on board HLEG recommendations to implement during the 12th Plan period?