Mumbai’s Healthcare – Looking Back for its Future

written for Health Action's 25th Anniversary special issue

When Health Action emerged on the scene 25 years ago Mumbai’s public healthcare system was one of the most robust in the country delivering near universal access healthcare not only to Mumbaikars but also to many from across the country and many other neighbouring countries. But post nineties the neoliberal economic reforms had adverse consequences for the public health sector. Since then this primacy of Mumbai’s public healthcare system has unfortunately withered away and today it stands at the cross roads neglected and undernourished.

This situation also generally applies to public healthcare across the country wherein public health commitment in the budgets under the Minimum Needs Program post 6th Five Year Plan which had seen substantial increases and peaked around 1988 to 1.5% of GDP saw a reversal and over the last 25 years have been hovering around 1 percent of GDP despite political commitments during the UPA decade of reaching 3% of GDP. While NRHM may have brought in a bit more resources and some improvements the public healthcare services are nowhere close to in its reach and access of what it was 25 years ago. With huge global changes where an increasing number of countries from amongst developing countries are investing towards establishing universal access to healthcare, there is no reason why India should lag behind. In India we have a strong civil society build up towards demanding universal access to basic healthcare. Jan Swasthya Abhiyaan and its various state level initiatives amongst others have actively been pushing for right to healthcare and now with a new government at the helm it is an opportune moment to push harder for right to healthcare. Even the pages of Health Action over the years have discussed this and advocated for appropriate changes. Here we discuss briefly how the public health services of Mumbai have been decimated over the last two decades.

The present status of public health services in Mumbai, as also countrywide, is both unacceptable and unpardonable. For a city which is India’s financial capital and contributes over one-third of all national taxes, the healthcare deal for the Mumbaikar is unjust. This must change in the coming years. For this to happen the Brihan Mumbai Municipal Corporation (BMC) would have to more than double its health budget. Mumbai may have the wealth that any world class city has (percapita income over Rs. 2 lakhs per year) but its public health doesn’t match up. Filth, malnutrition, communicable diseases, life-style diseases, sanitation, hygiene and environmental health are all close to the bottom of comparable cities globally. Public health facilities are under-financed, lack human resources and are in a state of disrepair.

A peep into history tells us that the situation was not always like this. Infact right upto 1991 public health and healthcare services were quite robust with the BMC spending between 25 to 35 percent of its budget on healthcare (see Table 1). Until then most Mumbaikars, the poor, the middle classes and even the rich (for super specialty care) used the public health system ranging from health posts and dispensaries to maternity homes, hospitals and teaching hospitals.  This was possible because a reasonable proportion of budgetary allocations were made, most staff was in position, medicines and diagnostics were adequately provided for, even though there was overcrowding and wait lists. The tertiary hospitals of the BMC and the state government were leaders in the country and were endowed with the most recent medical technologies and equipment.

From 1991 with the new economic policy under structural adjustment reforms the funding for healthcare contracted to an unbelievable level of 15% of that of BMC’s total budget by 1995 and since then has been on a downward slide bottoming at 8.8 percent of the budget in 2012-13. The new economic policies also brought in health insurance and the rising incomes of the middle classes facilitated often by employers buying health insurance cover for organized sector employees leading to their migration to the private health sector. The consequence of this was that the aggressive voice of the middle classes disappeared from the public health system making it a health system for the poor. And anything meant for the poor becomes a poor system as it gets neglected.

Post nineties we saw the public healthcare system in Mumbai deteriorate. The declining commitment of resources (Table 1) was the first blow. This created shortages of supplies like medicines and diagnostic consumables, inadequate maintenance, embargo on new recruitments, and curtailment of new investments for setting up additional public facilities to cater to an increasing population of the city. All this contributed to affecting the credibility of the public health system. In the meanwhile the private health sector began to boom under the liberalized economy, as also corporates entered in a big way setting up hospital and diagnostic chains. At the same time with health insurance being opened up most employers and middle class professionals opted for health insurance and the latter facilitated migration of the middle classes to the private health sector. This was the second blow to the public health system. Before the turn of the new millennium public health services introduced user charges for most services under the World Bank sponsored health sector reforms project and this alienated the poor patients too. This was the third blow. With persistent under-financing leading to deteriorating quality of public health services the staff, especially doctors and nurses, had to face the angst of the patients and this led to widespread frustration within the system. With the private health sector expanding rapidly doctors and nurses from the public system found new opportunities and began to exit from public hospitals and dispensaries. This was the final blow, the proverbial last straw that broke the camel’s back.

So looking forward to the future of public healthcare in Mumbai we actually need to look back into its history and revive the public health system we had and we were proud of. We would have to return to an expenditure level of atleast 25% of the BMC budget and this will help improve the healthcare facilities, bring back the doctors and nurses and also the patients from all classes. The middle classes who have migrated to insurance based financing and the use of the private health sector are not very happy with either. They get a raw deal, are subject to irrational therapies, malpractices and frauds. Healthcare is a public good and we need to re-establish that. For this we have to go back to the time when Health Action started and rebuild the public health system from where we left it 25 years ago. Infact, Health Action is one of the few magazines that has recorded the ups and downs of the public healthcare system, among other health issues, and discussed options of how to change the situation for the better. Mumbai has the resources and can take the lead to show that we can get back on the path towards universal access to a good quality of public healthcare services. The rest of the country will follow. And Health Action will be a witness to the changes we want to see.

Table 1: BMC’s Health Expenditure Trends 1960-61 to 2013-14 Rs. Crores

Year	Health Expenditure	Total BMC Expenditure	Percent Health
1960-61	5.46	15.84	34.45
1970-71	16.85	53,52	31.48
1980-81	50.98	187.29	27.22
1985-86	93.19	360.63	25.84
1990-91	187.63	760.85	24.66
1995-96	294.48	1913.37	15.39
2000-01	467.81	3175.14	14.73
2005-06	660.6	4902.91	13.47
2010-11	1156.77	12666.66	9.13
2011-12	1493.24	15223.52	9.81
2012-13 RE	1826.66	20687.50	8.83
2013.14 BE	2508.62	27578.67	9.10

Expenditures include revenue and capital. Source BMC budget documents various years

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)

Universal Access to Healthcare – How to Drive the 12th Plan

Universal access to healthcare implies that everyone gets equitable access to healthcare and there is no discrimination whatsoever, especially discrimination based on the capacity to pay. Worldwide countries which have established universal or near universal access have clearly demonstrated that public financing of healthcare is critical to realize this. However delivery of health services need not be only in public domain.

For instance Canada, which has the best and most equitable healthcare system in the world assures full access to everyone without the need to make any payment at the point of care. Health Canada, a public Corporation pools all resources and is a single payer for all healthcare services. While most hospitals are run by governments in Canada, private hospitals are also given access to these resources when citizens access them. And for out-patient care most providers in Canada are private providers who are contracted in by Health Canada on pre-agreed fee for services. The NHS in UK is very similar and Brazil, Venezuela, Mexico close to emulating these models. On the other hand there are examples like Sweden, Sri Lanka, Cuba which are completely state run systems which provide universal access to healthcare. Thailand is the most recent entrant into this club and I think we have a lot to learn from the Thai experience because the structure of the healthcare system in India and Thailand historically has been very similar.

In India the NRHM affords us a great opportunity to change the way the healthcare system works in India. NRHM talks about architectural corrections, public-private partnerships and the UPA backs this with a political commitment of providing upto 3% of GDP to realize universal access to healthcare. But so far the UPA and NRHM have failed because the required political backing to make radical changes and shake up the healthcare system has not been forthcoming. So what needs to be done to realize universal access to healthcare? To begin with:

• equating directive principles with fundamental rights through a constitutional amendment

• incorporating a National Health Act (similar to Canada Health Act) which will organize the present healthcare system under a common umbrella organization as a public-private mix governed by an autonomous national health authority which will also be responsible for bringing together all resources under a single-payer mechanism

• generating a political commitment through consensus building on right to healthcare in civil society

• development of a strategy for pooling all financial resources deployed in the health sector

• redistribution of existing health resources, public and private, on the basis of standard norms (these would have to be specified) to assure physical (location) equity

As an immediate step, within its own domain, the State should undertake to accomplish the following:

• Allocation of health budgets as block funding, that is on a per capita basis for each population unit of entitlement as per existing norms. This will create redistribution of current expenditures and reduce substantially inequities based on residence. Local governments should be given the autonomy to use these resources as per local needs but within a broadly defined policy framework of public health goals

• Strictly implementing the policy of compulsory public service by medical graduates from public medical schools, as also make public service of a limited duration mandatory before seeking admission for post-graduate education. This will increase human resources with the public health system substantially and will have a dramatic impact on the improvement of the credibility of public health services

• Essential drugs as per the WHO list should be brought back under price control (90% of them are off-patent) and/or volumes needed for domestic consumption must be compulsorily produced so that availability of such drugs is assured at affordable prices and within the public health system

• Local governments must adopt location policies for setting up of hospitals and clinics as per standard acceptable ratios, for instance one hospital bed per 500 population and one general practitioner per 1000 persons. To restrict unnecessary concentration of such resources in areas fiscal measures to discourage such concentration should be instituted.

• The medical councils must be made accountable to assure that only licensed doctors are practicing what they are trained for. Such monitoring is the core responsibility of the council by law which they are not fulfilling, and as a consequence failing to protect the patients who seek care from unqualified and untrained doctors. Further continuing medical education must be implemented strictly by the various medical councils and licenses should not be renewed (as per existing law) if the required hours and certification is not accomplished

• Integrate ESIS, CGHS and other such employee based health schemes with the general public health system so that discrimination based on employment status is removed and such integration will help more efficient use of resources. For instance, ESIS is a cash rich organization sitting on funds collected from employees (which are parked in debentures and shares of companies!), and their hospitals and dispensaries are grossly under-utilised. The latter could be made open to the general public

• Strictly regulate the private health sector as per existing laws, but also an effort to make changes in these laws to make them more effective. This will contribute towards improvement of quality of care in the private sector as well as create some accountability

• Strengthen the health information system and database to facilitate better planning as well as audit and accountability.

Infact the NRHM clearly articulates the need for architectural correction. Such restructuring will be possible only if:



 The healthcare system, both public and private, is organized under a common umbrella/framework as discussed above

 The financing mechanism of healthcare is pooled and coordinated by a single-payer system

 Access to healthcare is organized under a common system which all persons are able to access without any barriers

 Public finance of healthcare is the predominant source of financing

 The providers of healthcare services have reasonable autonomy in managing the provision of services

 The decision-making and planning of health services is decentralized within a local governance framework

 The healthcare system is subject to continuous public/community monitoring and social audit under a regulated mechanism which leads to accountability across all stakeholders involved



The NRHM Framework one way or another tries to address the above issues but has failed to come up with a strategy which could accomplish such an architectural correction. The framework only facilitates a smoother flow of resources to the lower levels and calls for involvement of local governance structures like panchayat raj institutions in planning and decision making. But the modalities of this interface have not been worked out and hence the local government involvement is only peripheral. The 12th Plan will need to focus on developing such modalities to bring in the structural changes.



In order to accomplish the restructuring that we are talking about the following modalities among others would need to be in place:



 All resources, financial and human, should be transferred to the local authority of the Health District (Block panchayats)

 The health district will work out a detailed plan which is based on local needs and aspirations and is evidence based within the framework already worked out under NRHM with appropriate modifications

 The private health sector of the district will have to be brought on board as they will form an integral part of restructuring of the healthcare system

 An appropriate regulatory and accreditation mechanism which will facilitate the inclusion of the private health sector under the universal access healthcare mechanism will have to be worked out

 Private health services, wherever needed, both ambulatory (FMP) and hospital, will have to be contracted in and appropriate norms and modalities, including payment mechanisms and protocols for practice, will have to be worked out

 Undertaking detailed bottom-up planning and budgeting and allocating resources appropriately to different institutions/providers (current budget levels being inadequate new resources as suggested in the paper will also have to be raised)

 Training of all stakeholders to understand and become part of the restructuring process

 Developing a monitoring and audit mechanism and training key players to do it

The above is not an exhaustive list but certainly critical issues to be addressed under the 12th Plan strategy. Further the most important challenge would be reining in the completely as yet unregulated private health sector. Where the private health sector is concerned it functions completely on supply-induced demand which fuels unnecessary procedures, prescriptions, surgeries, referrals etc.. leading to its characterization as an unethical and mal-practice oriented provisioning of healthcare. This has huge financial implications on households, inflating costs of healthcare, spiraling indebtedness and pauperization and being responsible for the largest OOPs anywhere in the world.



The challenges across the country differ due to different levels of development of the public and private health sectors in the states. For instance a state like Mizoram, a small and hilly state, already has an excellent primary healthcare system functioning with one PHC per 7000 population and one CHC per 50000 population and since it has virtually no private health sector the demand side pressures are huge and hence the public health system delivers. Each PHC has 2 to 3 doctors on campus available round the clock with 15 – 20 beds which are more or less fully occupied and 95% of deliveries happen in public institutions. So Mizoram has indeed realized the Bhore dream. The problem in Mizoram is that there are very few specialists available and hence higher levels of care become problematic – the CHCs are however run by MBBS doctors who have received some additional trainings. Mizoram does not have a medical college but it does have reservations in other state medical colleges. While the state cannot provide tertiary care it has a budget to send people elsewhere to seek such care. And Mizoram does this with 2.7% of its NSDP and has the best health outcomes in India. In some sense Mizoram is like Sri Lanka – a statist model. There are few other states in India which can do a Mizoram because they too do not have a significant private health sector but to do that they have to demonstrate the political will of Mizoram.



Even though extremely successful Mizoram cannot be the national model because the reality across most other states is very different, the reality of an entrenched private health sector which is unethical and unregulated. The private health sector has to be reined in and this can only happen with a strong political will which declares healthcare to be a public good and which takes on the private sector to get organized under public mandate. Under NRHM sporadic efforts towards this end are being undertaken in the name of public-private-partnerships like Chiranjeevi in Gujarat, Yeshasvani in Karnataka, Arogya Rakshak in AP, Rajiv Gandhi Hospital in Raichur (Karnataka Govt and Apollo Hospitals) etc. They may have achieved limited success but then healthcare systems cannot be built by segmenting it into programs and one-off initiatives like PPPs. There have to be serious efforts at building a comprehensive healthcare system and it goes without saying that given India’s political economy of healthcare the private sector will have to be a significant partner in this process. So states have to think beyond the Chiranjeevis and Yeshasvanis and learn from the recent experiences of Thailand, Mexico and Brazil to invest in an organized healthcare system, and with a booming economy resources will not be a constraint.



So the challenge for the 12th Plan is enormous demanding huge restructuring of the healthcare system in the country through strong regulatory mechanisms both for the public and private sectors, education of professionals in ethics of practice, pushing the politicians for creating a strong political will to make healthcare a public good as well as generate and commit adequate resources to realize universal access. The restructuring of the healthcare system and its financing strategy, given the price advantage of India and economies of scale it offers, will actually reduce nearly by half the healthcare spending in the country and reduce substantially the household burden to access healthcare. Calculations I have done show that for universal access to healthcare across India we need less than 3% of GDP provided we show the political will to shift healthcare from the domain of the market to the category of a public good. This will indeed do a lot of public good!

Ravi Duggal / rduggal57@gmail.com

Perspective Paper for Health Financing session for MFC 2010 Annual Meet

The health financing strategy of any country is critical for the character and nature of the health system that evolves in that country. If we look at countries where citizens have universal access to healthcare then it is clearly evident that public finance is the predominant mode for provision of healthcare services. Thus in such countries between 45 to 80 percent of health expenditure is accounted for by publicly generated sources like taxes and social insurance. Examples of such countries include all OECD countries with the exception of USA. These include Canada, UK, Sweden, Germany, Japan, Australia, Italy etc.. A number of developing countries too have moved towards universal or near universal access to healthcare for their populations. These include Sri Lanka, Thailand, Malaysia, Brazil, Costa Rica, Cuba, Chile, Mexico etc..

When countries move closer towards universal access through predominantly public financing a very clear shift in out-of-pocket payments take place – from being predominant they become insignificant. Mexico and Thailand are the most recent examples of this trajectory. Similarly when countries reduce public financing for healthcare then OOPs increasingly account for a larger share and inequities start surfacing. Sri Lanka, because of a budgetary crunch is facing this kind of crises and its predominantly tax financed system is under threat, especially so because World Bank is now coming with its classical prescriptions of the government limiting its role to primary care or selective care and allowing the private sector to take charge of the rest and that too in a scenario in Sri Lanka where the private sector has been very weak and unregulated and most of it is anyway government doctors doing legally permitted private practice.

In contrast most developing countries of Africa and Asia have levels of public financing which is under 40% of total health expenditure and this constrains public financing in provision of healthcare and puts a larger burden on households to pay directly for accessing healthcare most of the time. WHO has estimated that 5.6 billion people, mostly the poor, across the world spend out-of-pocket to seek healthcare for over half their healthcare needs and this is often financed through debt or sale of assets. And this is also often one of the primary causes for poverty in such countries. Table 1 provides very clear evidence at the global level of the linkages between income, public financing of healthcare, level of health expenditure and health outcomes.


Table 1: Linkages between income, level of health expenditure, source of Health Financing and health outcomes


While public financing is critical to healthcare access and equity, what Table 1 also tells us is that in order to have a reasonable level of public finance commitment to healthcare we also need adequate revenues accruing to the public exchequer. Thus tax:gdp ratios also become a critical element for public financing of healthcare. Again most countries which have universal or near universal healthcare access have tax:gdp ratios which are above 30%, that is of the total income of that country the government is able to net in over 30% of it as tax revenues. The latter is critical for social sector expenditures because in most countries around 10% of GDP goes towards what we call non-development expenditures like public administration, law and order, defense, governance structures etc.. And most developing countries usually have a tax:gdp ratio of between 10-15%. Thus if 10% goes to non-development spending then what is left for social sectors is grossly inadequate. Thus if we have to meet the globally accepted norm of 5% GDP for health and 7% GDP for education then a tax:gdp ratio closer to 30% becomes critical.

However tax:gdp ratios are closely linked to the structural dynamics of the larger economy, and often political will with a strong social-democratic leaning is the underlying determinant for realizing reasonable levels of revenues for governance. Thus a sense of public good must prevail strongly within governance structures. Thus countries which have high tax:gdp ratios also have a social democratic character and therefore commit larger resources to the social sector or public goods and are able to achieve reasonable levels of equity in access to basic social and economic needs. The schematic in Figure 1 demonstrates the above political economy and its criticality for health financing, universal access and equity.

Figure 1: The Importance of Healthcare as a Public Good with Public Financing



Thus what we conclude from the above is that a healthcare system which has universal access as its goal will emerge only when healthcare is recognized primarily as a public good and consequently receives the necessary resources from public sources.

The other problematic that confronts us in the understanding of health systems and financing is the provision of healthcare. This is an arena of conflict and debate with people taking strong sides in favour of the public or private sectors. The crux of the debate and conflict is that the supporters of private sector criticize the public system for its inefficiency, red-tape, callousness, and mindset and attitude problems. The supporters of public sector blame the private sector as being exploitative and profit-oriented, unethical, and inducing unnecessary demand. Both are correct as well as wrong. Correct because the descriptors mentioned above are indeed quite common and wrong because if the public sector is inefficient then the contrary that the private sector is efficient may not be always true or if the private sector is exploitative that does not mean the public sector is unexploitative and so on. Most countries providing universal access have overcome these problems through organization of systems and regulation. That is the healthcare system is modeled around the financing strategy and the latter is used as the fulcrum to organize, regulate and control. Thus it does not matter whether the provider of services is from the public sector or from the private sector. The financing mechanism which is under public domain defines in detail the structure and nature of services needed and develops a payment or buying mechanism of those services which are regulated and audited. There is no fixed formula across countries. While we see that financing mechanisms tend to be very similar across countries – mostly a combination of two or three modalities, provision of services is much more varied with different kinds of a public private mix, mostly a consequence of their historical position. Thus for example when UK adopted the NHS, the hospital system was largely public owned and hence hospitals under NHS are overwhelmingly in public sector. In contrast ambulatory care was mostly in the private sector and hence the ambulatory care system under NHS devised a mechanism to contract in private providers through a capitation payment system. Similarly when Canada adopted its Health Canada Act hospitals were equally owned by public and private sector and hence under Health Canada there are hospital providers both in public and private sector. The key here is that the healthcare system is organized, regulated and controlled through a financing mechanism which is managed publicly irrespective of whether services are provided privately or publicly.

If India has to move towards a universal access healthcare system it will have to adopt the above principles though its structures and mechanisms may be different. That is India will have to organize, restructure, regulate and control the healthcare system through a publicly mandated financing mechanism which would be some mix of a social insurance and tax based system, similar perhaps to Thailand’s financing strategy. But given India’s historical position the larger challenge would be the provision of healthcare, especially the reining in of the huge private sector in both ambulatory and hospital services. I say that this is a larger challenge because no country in the world which has achieved universal access to healthcare was in a historical position like India, that is having a completely dominating private health sector which is also completely unregulated and lacks ethics in practice.

So what are the options for India? Not an easy question to answer. India spends around Rs. 3000 per capita on healthcare which is around 6% of its GDP. Huge indeed but of this only Rs.450 comes from the public exchequer or a mere 15%. Of the rest 96% is out-of pocket and only about 4% is insurance. The 15% of the expenditure which goes to the public sector accounts for 15% ambulatory care and 55% hospital care and the 85% of private expenditure takes care of 85% ambulatory care and 45% of hospital care. The public sector is plagued with a severe human resources problem especially doctors and nurses as well as supplies and maintenance which has led to a virtual collapse of the public health system over the last decade and a half, though in the last 5 years the NRHM has put in substantial efforts to try and revive atleast the rural public health system. Their efforts have not been very successful as the above said problems continue to plague the public health system and somewhere the health financing strategy in the public sector is to blame because the demands at the unit level where care is delivered are not used as the basis of developing the financing framework but some age old top-down mechanism which is not only ad hoc but bureaucratically suffocating.

In the urban areas while more resources are committed, especially for the hospital sector, the problems of human resources, supplies and maintenance are probably more severe because the numbers using the urban public health system are huge unlike the rural public health system which has very low levels of utilization. This shows that urban health systems, especially from the perspective of the poor have a large demand but it remains unfulfilled again because of a poor and inadequate financing strategy. Overcrowding in hospitals because of a lack of a robust primary care system in urban areas and consequently a lack of a referral system creates havoc with the urban healthcare system rendering it ineffective and inefficient as well as financially unsound. Hospital systems are best served with a global budgeting strategy which implies that funds are allocated on the basis of effective costing of services which are translated into per bed cost for effective delivery of care and budget levels thus determined. This does not happen in India and hence the urban health care system in India fails to deliver despite its high level of utilization atleast in numbers.

Where the private health sector is concerned it functions completely on supply-induced demand which fuels unnecessary procedures, prescriptions, surgeries, referrals etc.. leading to its characterization as an unethical and mal-practice oriented provisioning of healthcare. This has huge financial implications on households, inflating costs of healthcare, spiraling indebtedness and pauperization and being responsible for the largest OOPs anywhere in the world.

So the challenge is huge demanding huge restructuring of the healthcare system in the country through strong regulatory mechanisms both for the public and private sectors, education of professionals in ethics of practice, pushing the politicians for creating a strong political will to make healthcare a public good as well as generate and commit adequate resources to realize universal access. The restructuring of the healthcare system and its financing strategy, given the price advantage of India and economies of scale it offers, will actually reduce nearly by half the healthcare spending in the country and reduce substantially the household burden to access healthcare. Calculations I have done show that for universal access to healthcare across India we need less than 3% of GDP provided we show the political will to shift healthcare from the domain of the market to the category of a public good. This will indeed do a lot of public good!

rduggal57@gmail.com